HomeMy WebLinkAboutTae Il Kim and Abdelmuti Development Company - 1994-09-20 4
REQUEST FOR DEVELOPMENT AGICY ACTION
APPROVED BY CITY COUNCIL
En 94-4a
Date: 5eotember 19. 1�24
cr r ox-RX
Submitted to: Honorable Chairman and Redevelopment Agency Members
Submitted by: Michael T. Uberuaga, Executive Directo�
Prepared by: Barbara A. Kaiser, Redevelopment Directo
Subject: Approval of Lease Between Tae H Kim and Abdelmuti Development
Company for Office Space in Oceanview Promenade
(Main-Pier Redevelopment Project Area)
Consistent with Council Policy? [x] Yes [ ] New Policy or Exception
Statement of Issue, Recommendation, Analysis, Funding Source, Alternative Actions, Attachments:
STATEMENT OF ISSgIE:
The Owner Participation Agreement with the Abdelmuti Development Company rewires the
Agency to subsidize the difference, if any, between the Guaranteed Rental Rate and what is
achieved for the office space of the second floor and one half of the third floor of the
Oceanview Promenade located at Main Street and Pacific Coast Highway. Agency written
approval is required for all leases. _
RECOMMENDED AGENCY ACTION:
Approve the lease between TAE IL KIM and Abdelmuti Development Company as
summarized in the Basic Lease Provisions (Attachment No. 1).
ANALYSIS_;
On May 29, 1991, the Redevelopment Agency entered into an Owner Participation Agreement
(OPA) with Abdelmuti Development Company (Participant) for the development of a three
story 42,000 square foot mixed use development. On November 4, 1991, the Agency approved
the First Amendment (Attachment No. 2) to the original OPA calling for the addition of a 6,000
square foot fourth story as well as providing for a Guaranteed Rental Rate for a portion of the
office space.
RAA ED 94-44 •
September 19, 1994
Page Two
Bgck&rQ11nd.
On December 11, 1990, the city's Community Development Department determined that the
existing building at 101 Main Street was "unsafe to occupy" due to the loosening and falling of
bricks from the facade, and was therefore, vacated and closed. At that time, the property owner
revived old plans that called for the rehabilitation of the existing two-story structure.
Allowing the property owner to proceed with rehabilitation would prevent the City/Agency from
receiving the street and plaza dedications and setbacks as already provided across the street on
the Pierside Pavilion project. Further, the owner would be permitted to retain the existing non-
conforming second story apartment uses. Therefore, the Agency directed staff to negotiate an
agreement with the property owner that would provide for construction of a new building,
eliminate the residential use on the upper floors, provide ground Floor retail uses, and yet be an
economically viable plan for the Participant to develop.
The Council/Agency and staff's first preference was to have commercial on at least the second
story. Many were hopeful that one or more Ocean view restaurants could be lured to this prime
location. However, the Participant's beliefs would not allow an establishment that would serve
alcohol. Having ruled out residential and commercial uses on the upper stories, the City
Council settled upon office as a compromise use.
Downtown Office-Use-Analysis:
The development of office space in the downtown is critical to redevelopment's long term goals
of creating a balance of uses that will complement each other and prove to be economically
viable on a year around basis.
The development of visitor-serving commercial (e.g., shops, dining, entertainment, theaters,
hotels) has been the primary goal of downtown redevelopment. If Huntington Beach's climate
were warm and summer like all twelve months of the year, these uses would likely survive on
their own just by means of the city's great beaches drawing millions of people year round.
In reality, six to nine months of the year the weather is less than ideal and many of the
businesses that thrive in the summer months find it difficult to survive in the off season months.
Developing a mix of complimentary uses such as office and multi-family residential provides a
population base to patronize these commercial uses on a year round basis. The office population
that will patronize the restaurants and shops at lunch time during the week is key to the
economical survival for many businesses in the off season. The residential base provides a year
round population that will primarily patronize the downtown in the evenings and on the
weekends. In the case of the subject lease TAE IL KIM will be employing approximately six
people, with more to be hired, all bound to patronize the downtown at lunch and after work.
RAA ED 94-44 • •
September 19, 1994
Page Three
Office marketing studies in 1991 and to somewhat of a lesser extent today, conclude that Orange
County, in general, has simply been over saturated with office space (especially in the vicinity
of the airport). Most studies, prior and current, concluded that downtown Huntington Beach is
not a convenient location for office uses due to its distance from the freeway.
However, we are hoping to be a draw for those business owners that live in, or near,
Huntington Beach or prefer our coastal village environment. With the ever increasing
advances in technology (computers and facsimile machines connected by modem through the
telephone lines), many businesses do not rely on personally calling on clients on a day to day
basis. Huntington Beach could serve this niche in the market.
Should we prove to be wrong on all accounts there is an escape clause in the OPA which allows
the Agency to convert the office space to residential after which time the Agency would no
longer be required to subsidize the office space. in that case, the Agency is required to pay
those additional construction costs needed to convert the second and third floors to a residential
use.
Q11aranteed Rental Rate:
In exchange for developing office instead of residential the following financial assistance was
negotiated:
Section 201(8) of the OPA reads as follows:
Differential Rent Payment: In the event City or Agency requires upper-floor commercial use,
the Agency will pay the difference, if any, between the rent that Participant is entitled to
achieve based on the approved rental agreements for the second floor and one-half of the third
floor-commercial units and the "Guaranteed Rental Rate", defined on a triple net basis as One
Dollar and Fifty-five Cents ($1.55) per square foot as adjusted on an annual basis by the
Consumer Price Index or "CPI". The triple net charges are the prorated costs for property
taxes, insurance and maintenance.
The Agency is therefore obligated to guarantee a minimum lease rate of $1.55 for all of the
square footage on the second floor and one half of the third floor:
2nd floor 14,518 SF
112 of 3rd floor 6&2 SF
Total 20,600 SF
RAA ED 94-443
September 19, 1994
Page Four
Agency staff is currently in active negotiations to amend Agency obligations. It is anticipated
that an amendment to the OPA will be before the Agency in October, and may include Agency
payment of the: office subsidy starting in January, 1995. Under the terms previously discussed,
the Agency obligation could be a subsidy of .30 cents ($1.55 - $1.25 = .30 cents)/square foot
towards a minimum base rate, with CPI increases beyond the first year for the three year initial
term of the lease. This amount is estimated at $1,460.
Gty1Asency_Benetits:
The City and Redevelopment Agency in return have collected fees for building permits, traffic
impact fees and parking in-lieu fees in excess of$117,000 (plus $13,000 in school fees). Once
the parcel has been totally reassessed it is anticipated the value will have increased by more than
3 million dollars creating an increase of the Agency's tax increment by $44,000 per year.
The total construction cost for the project was approximately 4.3 million dollars. The
participant paid the first 1.3 million dollars with the Agency loaning the balance of 3.0 million
at an interest rate of 7% fully amortized over 15 years. In addition to repayment of the
principal loan of$3 million, the Agency will be paid $1.85 million in interest payments.
Additionally, the Oceanview Promenade project with its award winning traditional
Mediterranean design, wide sidewalks and plaza areas complements the Pierside Pavilion
project, while completing the gateway to the downtown.
FUNDING SOURCE:
After negotiations are complete, any necessary funds will be taken from the Main-Pier Project
Area Fund Balance.
ALTERNATIVE ACTION:
Deny approval of the TAE IL KIM lease and direct Abdelmuti Development Company to seek
another tenant.
ATTACHMENTS:
1) Base Lease Provisions
2) First Amendment to OPA Dated November 4, 1991
MTU/BAK/KBB:jw
ma9444.doc
Attachment No. 1
OFFICE SPACE LEASE
BASIC LEASE PROVISIONS
The foregoing Basic Lease Provisions are presented here and
represent the agreement 'of the parties hereto, subject' to further
definition and elaboration in the Additional Lease Provisions and
elsewhere in this Lease. In the event of any conflict between any
Basic Lease Provision and the balance of this Lease, the latter
shall control.
1. Tenant' s Name: TAE IL KIM
2 . Premises, including Floor, Suite No. and Rentable Area:
Third Floor, Suite H3, 1, 071 rentable square feet.
3. Estimated Commencement Date: September 1, 1994.
4. Lease Term: Three (3) years and one three (3) year option.
5. Basic Annual Rent: $16, 065.00 payable at $1, 338.75 per nth,
6. Rent Commencement Date: October 15, 1994 . AS-
7. Space Plan Approval Date: N/A.
8. Security Deposit: $1,338.75; payable upon execution of Lease.
9 . Prepaid Rent: $1,338.75; payable on execution of Lease.
10. Broker(s) : None
11. Address for Payments and Notices:
To Landlord: Abdelmuti Development Company
C/o Jack' s Surf & Sport
113 Main Street
Huntington Beach, CA 92648
Attn: Mike Abdelmuti
Tel. : (714) 536-6567
To Tenant: Tae I1 Kim
Tel. .
12 . Minimum Coverage for Comprehensive General Liability Policy:
$2, 000, 000 .00 combined single limit.
13 . Addendum: An Addendum consisting of None _ (if no Addendum
is attached, insert the word none) numbered paragraphs is
attached to and forms a part of this Lease.
14 . Lease Execution: In witness whereof the parties hereto have
executed this Lease, consisting of the foregoing provisions
- REQUElkT FOR CITY COUN / '
REDEVEL MENT AGENCY ACTION RH 91-75
November 4, 1991
Date
Submitted to: Honorable Mayor/Chairman & City Council/Redevelopment Agency Members
Submitted by: Michael T-.-Uberuaga, City Administrator/Chief Executive Officer `
Prepared by: Barbara A. Kaiser. Deputy City Administrator/Economic Development
First Amendment to the Owner Participation Agreement between Abdelmuti
Subject: Development Company and the Redevelopment Agency of the City of
Huntington Beach/Main-Pier Redevelopment Project Area
Consistent with Council Policy? DQ Yes { j New Policy or Exoeption R4. 0 02.1
Statement of Issue, Recommendation,Analysis. Funding Source, Ahe air , "U-NCtL
-- - a- � -
STATEMENT O1E ISSUE: . P4
Transmitted for City Council/Redevelopment Agency consideration is t1iiea I -",— �
Amendment to the Owner Participation Agreement with Abdelmuti Development Company
previously approved on May 28, 1991. The original Agreement provides for-the Agency to
assist Abdelmuti Development Company in the development of a new three-story building,
consisting of approximately 18,000 square feet of new eommercial/retail on the ground
floor, and a total of approximately 24,000 square feet of office use on the second and third
floors. The proposed Amendment calls for the development of a four--story building
consisting of 17,140 square feet of new com merciaUre tail on the ground floor. and a total
of 30,920 square feet of office use on the second, third, and fourth floors - for a total of
49,060 square feet.
RECOMMENDATION:
Staff recommends the following actions be taken:
1) Conduct a joint public hearing on the First Amendment to the Owner Participation
Agreement; and
2) Adopt City Council Resolution No. L 3Z4 and Agency Resolution No. _ -Ot/- r
authorizing the execution and implementation of the First Amendment to the Owner
Participation Agreement between the Redevelopment Agency and Abdelmuti
Development Company.
ANALYSES:
On May 28, 1991, the Redevelopment Agency entered into an Owner Participation
Agreement (OPA) with Abdelmuti Development Company ("Participant") for the
development of a new three-story building, consisting of approximately 18,000 sf of new
commercial/retail on the ground floor, and a total of approximately 24,000 sf of office use
on the second and third floors.
r
On July 12, 1991, the Participant submitted plans illustrating a proposed four-
5-building, totaling 48,433 sf. Staff and Agency members expressed concerns about the
following items:
* The addition of a fourth floor and the resulting height;
* The size and Nation of the plaza at the corner of Main Street and Pacific Coast
Highway;
* The use of the 10' dedications at either side of the building;
Responsibility for providing required parking in excess of 42,000 sf; and
* The layout of access corridors for the upper stories.
During a Redevelopment study session on September 30, 1991, the Agency gave staff
informal direction as to the issues outlined above. Staff and the Agency Special Counsel
have drafted the attached First Amendment to the OPA, incorporating language that
accurately reflects the agreed upon design changes.
Under California Redevelopment Law, the Redevelopment Agency is authorized to provide
certain types of assistance directed at supporting and promoting private sector
investments in Redevelopment Project Areas. The salient points of the Agreement are
outlined in the attached 33433 Report prepared by the. Agency's economic consultant,
Keyser Marston Associates, Inc. A summary of the changes incorporated into the First
Amendment to the OPA are listed below:
a) The Participant agrees to construct ground floor retail space of approximately
17,140 sf, and second, third & fourth floor office space totaling approximately
30,920 sf, for a total building area of approximately 48,060 square feet.
b) The Participant will remove all (5) proposed parkin, spaces onsite and provide upgraded
site improvements from the back of the building to the property line.
c) Participant shall pay 50% of the offsite parking in--lieu fee of Twelve Thousand
($12,000) per space for all square footage in excess of 42,000 sf per code. As proposed,
the Participant will be required to pay in-lieu fees for the additional 6,000 sf of office
being constructed at a rate of four spaces per 1,000 sf, equaling 24 spaces at $6,000
per space, totaling $144,000.
d) Participant shall not provide any parking onsite for the project.
e) Participant shalt construct a plaza at the corner of Main Street and Pacific Coast
Highway of no less than 1,000 sf in size.
f) Participant shall not encroach into 10' dedication on Pacific Coast Highway for the
purpose of constructing pedestrian or upper story access, but rather to be preserved for
future development, therefore. any stairways in this vicinity will need to be
internalized.
On October 24, 1991, the Design Review Board (DRB) reviewed Abdelmuti's site plans,
elevations, colors. materials, and a scaled-down model of the proposed project. The
DRB stated that the roof line, as illustrated in the submitted plans, encroached into
the 10' dedication and would need to be either eliminated or redesigned so there would
be no encroachment into the 10' dedication.
g) Participant shall provide internal corridor circulation for upper story office uses.
On October 10, 1991, the Redevelopment Committee reviewed and supported these
changes to the First Amendment to the OPA as outlined above.
SING SOURCE=
There is no significant fiscal impact as a result of the recommended action.
ALIERNATIYE ACTIONS:
1) Continue action on the OPA and related resolutions to allow for additional review time.
21 Direct staff to further negotiate specific points of the agreement with the developer.
1) Health & Safety Code Report 33433
2) First Amendment to OPA
3) Redevelopment Agency Resolutions
4) Staff Report dated May 28, 1991
S) City Council Resolutions
b) Site Map
MTU/BAK/KBB:ls
9771r
•r
ATTACHMENT " N
FIRST AMENDMENT TO
OWNER PARTICIPATION AGREEMENT
BY AND BETWEEN
THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
AND ABDELMUTI DEVELOPMENT COMPANY
THIS FIRST AMENDMENT ("First Amendment") is entered into
this - day of It 1991, by and between THE
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (the
"Agency") and ABDELMUTI DEVELOPMENT COMPANY (the "Participant") .
R E C I T A it $
WHEREAS, the Agency and the Participant entered into an
Owner Participation Agreement, dated May 28, 1991 (the "OPA") ,
a copy of which is on file as a public record with the City
Clerk of the City of Huntington Beach and which is incorporated
herein by reference; and
WHEREAS, the Agency and the Participant agree that it is in
their mutual best interest that the proposed project be
expanded;
NOW, THEREFORE, the Agency and the Participant do hereby
agree to amend the OPA as follows:
Section i . Amend Section 201(3) , Project Design; Design
and Construction Costs, to read as follows :
S . .
Participant shall at his cost design and construct the
Project pursuant to the Scope of Development
(Attachment No. 4) as a four-story building totaling a
maximum of 48, 437 square feet with an approximately
18,000 square foot commercial/retail ground floor area
and with high quality office/commercial on the second,
third and fourth stories. Agency, at its sole -
discretion, may determine to change the use of all or
a portion of the second, third and fourth stories from
office/commercial to residential, or in the event of a
transfer of the Participant ' s interest to an
individual or entity that is no closer in familial _
relationship than that of the third degree as that
term would be defined under the California Probate
Code, to a restaurant commercial use (provided that in
the event such a change occurs , the access to the
second and third stories shall remain at the back of
the building) . In the event Agency later determines
to require a change from office/commercial use, the
b
r .
Agency will pay those additional construction costs
needed to convert the second, third or fourth floors
to a residential or restaurant use.
&action '2. Amend Section 201(6) , Excess Parking Costs and
Provision of Parking Spaces, to read as follows :
6 . FXCe&s RoXISi ng Costs and Provision of Earking Spaces.
There shall be no on-site parking for the Project.
Participant shall pay fifty percent (50%) of the
offsite parking in-lieu fee of Twelve Thousand Dollars
($12,000) or Six Thousand Dollars ($6,000) per space
necessary due to the increase in size of the proposed
Project from 42, 000 square feet to 48,000 square
feet . The additional 6, 000 square feet of office
space requires four (4) parking spaces per 1, 000
square feet, pursuant to the Huntington Beach
Municipal Code, for a total of twenty-four (24) spaces
at Six Thousand Dollars ($6,000) per space which
equals One Hundred Forty-Four Thousand Dollars
($144 ,000) to be paid on or before issuance of a
certificate of occupancy. In exchange for this, the
Participant will provide upgraded site improvements
from back of the building to the property line at the
same quality as the plaza area located at the corner
of Main Street and Pacific Coast Highway (i .e. , pavers
rather than asphalt) . Agency shall pay any additional
costs necessary to provide offsite parking for the
Project ("Excess Parking Costs" ) . The determination
of the necessity for and location of additional
offsite parking for any commercial uses on the Site
shall be at the sole discretion of the Agenoy and the
City. in the event, however, that Agency authorizes
upper-story residential uses on the Site, Agency shall
be responsible for providing full code--required
parking for all residential units on the Site, with
the parking spaces to be located off of the site and
within the block bounded by Main Street , Pacific Coast
Highway, Fifth Street, and Walnut Avenue. Such
parking spaces shall be reserved for the free and
exclusive use of the occupants of the residential
units on the Site. Such obligation shall run in
perpetuity and shall be evidenced by a recorded
covenant or other document reasonably satisfactory to
Participant which runs with the land and benefits the
Site and burdens- the parcel(s) on which the parking. is
to be located. Such covenant or other similar
document may provide for Participant and the Site to
bear the cost of maintaining and repairing the
reserved parking for the Site after the initial
completion of construction, provided that the cost to
7788u/2460/009 -2-
Participant shall not exceed the reasonable cost of
maintaining and repairing at-grade surface parking
_ spaces .
Sect inn Amend Section 201(8) , Differential Rent
Payment, to read as follows :
8. In the event City or
Agency requires upper--floor commercial use, the Agency
will pay the difference, if any, between the rent that
Participant is entitled to achieve based on the
approved rental agreements for the second floor and
one-half of the third floor commercial units and the
"Guaranteed Rental Rate" , defined on a triple net
basis as one Dollar and Fifty-five Cents ($1. 55) per
square foot as adjusted on an annual basis by the
Consumer Price Index or "CPI" as defined herein (the
"Differential Rent Payment") . In determining the
third floor Differential Rent Payment pursuant to the
approved rent a l__Qq reementeL for the third floor, all.
rents shall be an the_AoengY abl pa tY he
Differentia DiffeCential Rente t based a cunt
ace y o insure the -half of tbe j� average
per a uare oo amount is brow h to uarante—ecT-
CPI s all mean the United States
Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for Urban Sage Earners -and
clerical Workers, Los Angeles-Anaheim- Riverside
Average, Bub--Group, "All Items" (1982/84mlOO) . As an
alternative to the CPI adjustment, at the sole
discretion of the Agency, the Agency may require that
the Guaranteed Rental Rate be determined utilizing the
appraisal method set out in Attachment No . 12 attached
hereto and incorporated herein by this reference. In
no event shall the Guaranteed Rental Rate be decreased
below the Guaranteed Rental Rate then in effect as a
result of the appraisal or appraisals conducted
pursuant to Attachment No . 12 . In the event that the
Guaranteed Rental Rate is established by an appraisal
or appraisals conducted pursuant to Attachment No. 12,
such Guaranteed Rental Rate shall remain in effect for
a period of three (3) year period, and the Guaranteed
Rental Rate shall be adjusted on an annual basis by
the CP1, or by the appraisal method set forth in
Attachment No. 12 if so elected by Agency, in the
manner get forth in this Section 201, paragraph 8 .
The Differential Rent Payment term shall commence with
the issuance of the Certificate of occupancy for the
second and third floor space and terminate on
January 1, 2017. The City/Agency shall have the
option of leasing any vacant second or third floor
office space at the Guaranteed Rental Rate. subject
to the Agency' s right to change the use pursuant to
subparagraph 3 above, Participant shall lease the
7788u/2460/009 -3-
Fourth floor office space for an amount egual to the
Guaranteed Rental Rate. Any business affiliated with
the Participant ( including, but not limited to,
Abdelmuti Development Company and/or Jacks Surf &
Sport) must pay a minimum of $1. 55 per square foot.
Agency shall have the right to approve all leases of
second and third story space. Failure to obtain
Agency written approval of a lease for the second or
third floor shall result ' in a lose of the right to
obtain the Differential Rent .Payment as described in
this Paragraph 8 of Section 201 .
Section A. Amend Section II of Attachment No . 4 (Scope of
Development) , Participant ' s Responsibilities, to read as
follow$ :
II . pART1CIPANT-S RESPONSIDILI_=:
The Participant shall develop the Site with a
four-story building totaling approximately 48,437
square Feet. The ground floor shall consist of
approximately 16,000 square feet of commercial/retail
and approximately 30,DOO total square feet of office
on the second, third and fourth floors .
The Participant shall be responsible for all on--site
improvements relating to the development of the Site
in accordance with the terms and schedules as set
forth in this Agreement as the same may be amended
from time to time.
Section 5 . This First Amendment and the provisions of the
OPA which remain in effect collectively constitute the "Amended
OPA. " The Amended OPA integrates all of the terms and
conditions of agreement between the parties, and supersedes all
negotiations or previous agreements between the parties with
respect: to the subject matter hereof .
f,S ion _fi . Each of the parties hereto warrants and
represents to the other that it has the full power and
authority to enter into and execute this First Amendment, that
all authorizations and approvals required to make this First
Amendment binding upon such party have been obtained, and that
the person or persons executing this First Amendment on behalf
of such parties has been fully authorized to do so.
7788u/2460/009 -4-
The effective date of this First Amendment shall be the
date of execution by the Agency.
19 REDEVELOPMENT AGENCY OF THE CITY
OF HUNTINGTON BEACH
By:
Chairman
ATTEST:
Secretary
APPROVED AS TO FORM:
stradling, Yocca, Carlson & Rauth,
Special Counsel to the Agency
Agency Counsel
ABDELMUTI DEVELOPMENT COMPANY, a
California general, partnership
By:
Ahmad Abdelmuti, General
Partner
"Participant"
7788u/2450/009 -5-