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HomeMy WebLinkAboutThe Waterfront Hotel, LLC - Hilton - PCH Beach Resolts - Hyatt - 2015-12-21 Dept ID ED 15-37 Page 1 of 2 Meeting Date 12/21/2015 GO CITY OF HUNTINGTON REACH REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 12/21/2015 SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A Wilson, City Manager PREPARED BY: Ken Domer, Assistant City Manager Kellee Fritzal, Deputy Director, Business Development SUBJECT: Approve and authorize execution of two Memorandum of Understandings regarding Beach Use/Activities with PCH Beach Resorts, LLC (Hyatt) and The Waterfront Hotel LLC (Hilton/Parcel C) Statement of Issue It is recommended that the City Council approve the attached Memorandums of Understanding (MOU) for the Hyatt and Hilton/Parcel C The MOU's will memorialize the City's and Successor Agency's current enforceable Agreements, including the Amended and Restated Development Agreement (1998), Development and Disposition Agreement (1988), and the current leases with the hotels that will be eliminated with the sale of the properties Financial Impact Through the adoption of the MOU's, the City will receive $500,000 one-time revenue for the General Fund The payment is a continuation of the Parcel C extension payment for revenue from the third hotel for a two-year period Recommended Action A) Approve and authorize the Mayor and City Clerk to execute the "Memorandum of Understanding Regarding Beach Uses/Activities" with The Waterfront LLC for the Hilton/Parcel C, and, B) Approve and authorize the Mayor and City Clerk to execute the "Memorandum of Understanding Regarding Beach Uses/Activities" with PCH Beach Resorts LLC for the Hyatt Alternative Action(s) Do not approve the MOU's and direct staff accordingly Analysis Due to the elimination of redevelopment in California, the Successor Agency was required to dispose of Agency-owned properties Two of the properties that are required to be sold are the lease-hold interest in the Hyatt and Hilton/Parcel C properties These properties were a redevelopment project, commencing in 1988, and had numerous Agreements and Implementation Plans for the overall redevelopment of the site The City also entered into a Development Agreement with the properties for various City requirements Due to the sale of the properties (in an earlier City Council action), the leases and Development Agreements will be eliminated, however, there is desire to continue the Beach Use/Activities xB -263- Item 24. - 1 Dept ID ED 15-37 Page 2 of 2 Meeting Date 12/21/2015 portions of the Agreements The goal of the MOU's is to maintain the ocean-oriented, visitor- serving commercial facilities on the City's Beach Property so the hotels can have assurance of maintaining the existing ocean views The MOU's have the following elements o Term is for 30 years o City's Downtown Specific Plan, Local Coastal Permit, and Measure C requirements must be adhered to o City should not eliminate beach parking spaces o Continues the cooperation between Hotels and City's Specific Events regarding consent for special events in front to the hotels ■ 30 days notice regarding events o Continuation of the Beach Use payments with annual CPI increases As stated, these requirements are currently being implemented by staff through other Agreements that will be eliminated due to the sale of the properties Environmental Status Not Applicable Strategic Plan Goal Improve quality of life Attachments) 1) "Memorandum of Understanding Regarding Beach Uses/Activities" with The Waterfront LLC for the Hilton/Parcel C 2) "Memorandum of Understanding Regarding Beach Uses/Activities" with PCH Beach Resorts LLC for the Hyatt Item 24. - 2 HB -264- ATTACHMENT # 1 MEMORANDUM OF UNDERSTANDING RE BEACH USES/ACTIVITIES This Memorandum of Understanding re Beach Uses/Activities (the "MOU") is dated for reference purposes only as of the 21 day of December, 2015 (the "Agreement Date"), and is being entered into by and between the City of Huntington Beach, a California charter city ("City"), and The Waterfront Hotel, LLC, a California limited liability company ("WH") RECITALS This MOU is entered into with reference to the following facts A City is the owner in fee of a portion of that certain real property located in the City of Huntington Beach, California, and bounded on the north by the right-of-way line for Pacific Coast Highway, on the west by an imaginary line extending southward from the westerly side of the intersection of Pacific Coast Highway and Twin Dolphin Drive to the mean high tide line of the Pacific Ocean, on the south by the mean high tide line of the Pacific Ocean, and on the east by an imaginary line extending southward from the westerly side of the intersection of Pacific Coast Highway and Beach Boulevard to the mean high tide line of the Pacific Ocean (such portion hereinafter referred to as the "City Beach Property") B For a period of years prior to the Agreement Date WH has been the ground lessee of two (2)parcels of real property located at 21100 Pacific Coast Highway, on the inland side of Pacific Coast Highway across from the City Beach Property (1)the "Hilton Parcel," which consists of approximately 3 60 acres of land area on which the existing Waterfront Hilton Beach Resort Hotel (the "Existing Hotel") is situated, and (2) "Parcel C," which consists of approximately 3 63 acres of land area on which uses incidental to the Existing Hotel were formerly constructed and on which WH is currently preparing to construct an addition to the Existing Hotel consisting of approximately one hundred fifty-two (152)net new guestrooms, an additional ballroom, meeting rooms,restaurant,and ancillary facilities (the "Hotel Addition") The Successor Agency to the former Redevelopment Agency of the City of Huntington Beach ("Successor Agency") and WH are currently negotiating with respect to a purchase and sale agreement which, if it is approved and executed, will provide for WH to acquire Successor Agency's leased fee interest in the Hilton Parcel and Parcel C (collectively, the "Property") The date on which WH acquires fee title to the Property is referred to herein as the "Effective Date" C The Existing Hotel and the Hotel Addition(collectively,the"Expanded Hotel") are and will be ocean-onented, visitor-serving commercial facilities designed to take full advantage of the existing ocean views across the City Beach Property D Pursuant to the California Coastal Act of 1976, as amended(Public Resources Code Section 30000, et�Leq), City has prepared and the California Coastal Commission has certified a Local Coastal Plan (as amended, the "LCP") for that portion of the City of Huntington Beach that is located within the Coastal Zone, including the City Beach Property On January 19, 1981,the City Council of City adopted Resolution No. 4954 adopting the LCP in the form of the Coastal Element of the City's General Plan The LCP has subsequently been 12-17-15 V4 amended prior to the Effective Date, including without limitation through the City Council's adoption of Resolution No 5147 on August 2, 1982, Resolution No 5267 on May 16, 1983, and Resolution No. 5341 on January 3, 1984. The LCP, as so amended through the Effective Date, is a public record, a copy of which is available for inspection at the office of the City Clerk at the City of Huntington Beach, 2000 Main Street, Huntington Beach, California 92648. E The LCP requires "Preservation of as much beach sand area as possible in order to accommodate future levels of beach attendance" (LCP, Section 2.3 ) The LCP further establishes as a policy the "increased numbers of hotel/motel rooms and restaurants in the Coastal Zone." (Id , at section 3 3 ) The LCP designates the entire City Beach Property for recreational use in which the "principal permitted uses are limited to open sand areas, beach related recreational activities, and under certain conditions, parking lots, concessions and camping " (Id , at Figure 9.11 and section 9 2 5 )The LCP further"prohibit(s) development of permanent above-ground structures on the beach sand area"on the City Beach Property with the exception of lifeguard towers and other public safety facilities, public restrooms and beach concession stands when located immediately adjacent to paved parking or access areas, fire rings, volleyball nets, bike trails, bike support facilities, and handicapped access. Finally,the LCP "prohibit(s) expansion of parking facilities that would result in the loss of recreational sand area " (Id , at Section 9 5.1 ) F On October 10, 1983,the City Council of City adopted Resolution No- 5308 a, b, and c, approving and adopting the Downtown Specific Plan (as amended, the "Specific Plan") for the implementation of the LCP The City Beach Property is located in District 7 (formerly District 11) of the Specific Plan, which is designated for beach-related open space and recreational uses District 7 "is intended to preserve and protect the sandy beach area within the (Downtown] Specific Plan boundaries while allowing parking and auxiliary convenience uses." (Specific Plan, Section 4 13 ) Pursuant to the Specific Plan,the only uses and structures permitted on the City Beach Property are access facilities,basketball courts,beach concession stands at intervals no closer than one thousand (1,000) feet and limited to two thousand five hundred (2,500) square feet per building,bicycle and jogging trails and support facilities, fire rings, lifeguard towers, and other structures necessary for health or safety, paddleboard courts, surface parking lots, or public transit facilities that will not result in the loss of recreational sand areas,provided that any tiered parking shall be designed so that the top of the structures including walls, etc , are located a minimum of one foot below the maximum height of the adjacent bluff, park offices, playground equipment, public restrooms,public dressing rooms or showers, shoreline construction that may alter natural shoreline process (such as groins, cliff retaining walls, pipelines, and outfalls that are designed to eliminate adverse impacts on local shoreline sand supply), and volleyball net supports. G Section 612(b) of the City Charter provides in part that, subject to certain exceptions set forth therein, "no road, building over three thousand square feet in floor area nor structure costing more than $161,000.00 [as adjusted per CPI increases occurring after January 1, 2011] may be built on or in any park or beach or portion thereof now or hereafter owned or operated by the City unless authorized by the affirmative votes of at least a majority of the total membership of the City Council and by the affirmative vote of at least a majority of the electors voting on such proposition at a general or special election " (the"Measure C Development Restriction") 12-17-15 V4 -2- H. City and WH desire to ensure the long-term use of the City Beach Property for beach-related uses consistent with the LCP, Specific Plan, and Measure C Development Restriction(collectively,the"City Beach Property Land Use Restrictions"),to promote the development and operation of high-quality visitor-serving commercial uses on the Property, and to provide a long-term source of revenue to City to enhance City's implementation of the LCP and Specific Plan or for other public purposes as determined by City in its sole discretion. COVENANTS- Based upon the foregoing Recitals, which are incorporated into this MOU by this reference, and for good and valuable consideration,the receipt and sufficiency of which is agreed to by both parties, City and WH agree as follows 1 Term of MOU. The term of this MOU (the"Terra") shall commence on the Effective Date and shall terminate on the thirtieth(301h) anniversary of the Effective Date. If the Effective Date does not occur by December 31, 2016, this MOU shall automatically be null and void ab inwo 2 Limitations on Improvements/Structures City covenants not to construct or maintain or permit to be constructed or maintained any improvements or structures on the City Beach Property excepting only the following access facilities, basketball courts,beach concession stands at intervals no closer than one thousand(1,000) feet and limited to two thousand five hundred (2,500) square feet per building, bicycle and jogging trails and support facilities, fire rings, lifeguard towers, and other structures necessary for health or safety, paddleboard courts,parking lots and public transit facilities that will not result in the loss of recreational sand area and that will not extend above the existing grade of the adjacent stretch of Pacific Coast Highway, park offices,playground equipment,public restrooms,public dressing rooms or showers, shoreline construction that may alter natural shoreline process (such as groins, cliff retaining walls, pipelines, and outfalls that are designed to eliminate adverse impacts on local shoreline sand supply), volleyball net supports, and pedestrian overcrossing(s) of Pacific Coast Highway. 3 Beach Parking During the Term of this MOU City covenants, for the benefit of PCH and the Property,to maintain and operate on the City Beach Property beach parking that is accessible to the public and with substantially the same number of available spaces that existed as of September 21, 1998 4 Prohibited Uses of City Beach Property In addition to the provisions set forth in Paragraph 2 and 3, during the Term of this MOU City covenants that none of the following uses shall be allowed on the City Beach Property without the prior written consent of WH, which consent shall not be unreasonably withheld, conditioned, or delayed. If City delivers a written notice to WH requesting that WH consent to any such use, City's notice provides a complete statement of the type, nature, and duration of the proposed use and the terms and conditions governing such proposed use, and City's notice states in bold letters at the outset of the notice that WH's failure to respond within ten(10) days after receipt of the notice by either granting or withholding WH's consent will be deemed to constitute WH's consent to the proposed use, it shall be deemed that WH has consented to the proposed use. WH's consent to one proposed use, 12-17-15 va -3- for the duration proposed by City, shall not be deemed to constitute consent to the same or similar use at a subsequent time In the event WH withholds its consent to a proposed use, City and WH shall meet and confer to attempt to resolve any WH's objections and concerns The uses subject to this Paragraph 3 are the following 4.1 Camping, 42 Overnight parking of recreational vehicles, 43 Sale, or exhibition for the purpose of sale, of cars, motorcycles, go-karts, boats,personal watercraft, recreational vehicles or other similar equipment, and 44 Events and/or structures that would unreasonably obstruct the view of the ocean from the Existing Hotel or the Expanded Hotel or any of the courtyards on the Property, or would materially alter the local beach environment 5. Prior Notice to WH and Consultation With Respect to Certain Uses of City Beach Property In addition to the provisions set forth in Paragraphs 2, 3 and 4, during the Term of this MOU City covenants that none of the following uses shall be allowed on the City Beach Property without City first giving thirty (30) days prior written notice to WH 5 1 Events which generate noise, such as, but not limited to, racing or operation of cars, motorcycles, go-karts, boats, personal watercraft, recreational vehicles or other similar equipment, use of amplified music, or use of a public address systems (except when used in conjunction with normal police or marine safety functions), 52 Sale of food or beverages, or rental or sale of any products or services, other than those sales or rentals conducted on the premises of the beach concession stands within the City Beach Property, 53 Events, meetings, gatherings, competitions, tournaments, or contests where the observation of same is not free and open to the general public or which does not primarily involve entertainment, sports or recreational activities; 54 Events which unduly restrict the access to or use of the pedestrian overcrossing(s) constructed over Pacific Coast Highway at the Property or that unreasonably restrict access through the parking lot to the beach from such pedestrian overcrossing(s); 5.5 Events which, together with staging, storage, support services and anticipated parking generated by such events, occupy more than 33% of the City Beach Property; 56 Events which occur in excess of five consecutive days in duration or in excess of a total of thirty (30) days per year, and 57 Tents, balloons, flags, bleachers, seating, scaffolding or other temporary structures which unreasonably impede the view of the ocean or sand from the Existing Hotel or the Hotel or any of the courtyards on the Property 12-17-15 va -4- City has established a procedure to approve all specific events on the beach The City shall provide written notice to WH and permit WH to consult with City's Specific Events Committee not less than thirty(30) days prior to the Committee's consideration of approval of a permit for potential uses or activities on the City Beach Property. WH may appeal any permit approved by the Specific Events Committee to the City Manager by filing the appeal in writing within ten(10) days after the approval of the permit by the Specific Events Committee. If a specific event permit is appealed, the Specific Events Committee shall not issue the permit until such time as the City Manager has acted on the appeal. 6 WH Payments In consideration of City's agreement to enter into and perform its obligations set forth in this MOU, for each calendar year during the Term of this MOU WH shall pay to City, in advance, the sum of One Thousand Seven Hundred Six Dollars and Sixty-Six Cents ($1,706.66)per year, with such amount to be prorated for any partial calendar year based upon the number of days in such partial calendar year and with such amount to be adjusted upward as of January 1, 2017, and each January 1"thereafter as provided herein(the "Adjustment Dates"), with such sum payable in advance on the first day of each such year The annual adjustment shall be calculated upon the basis of the Consumer Price Index for the Los Angeles-Riverside-Orange County region(All Urban Consumers--All Items)published from time to time by the United States Department of Labor(the "CPI"). The CPI published and in effect on September 30, 2015, shall be considered the "Base Year Index" At each Adjustment Date, the consideration otherwise due shall be adjusted by the percentage increase, if any, between the Base Year Index and the CPI published and in effect ninety (90) days preceding the Adjustment Date In no event shall the consideration payable on any Adjustment Date be less than the consideration required to be paid during the year immediately preceding such Adjustment Date notwithstanding the fact that the CPI may, as of some Adjustment Date,be less than the CPI as of the previous Adjustment Date or the Base Year Index When the amount of the adjusted consideration is determined, and at least thirty (30) days prior to the date payment for the next year is due, City shall give WH written notice of the amount of the adjusted consideration indicating how the new figure was computed If at any Adjustment Date the Consumer Price Index shall not exist in the same format as recited herein, City and WH shall agree to substitute any official index published by the Bureau of Labor Statistics or successor or similar governmental agency as may then be in existence and which is most nearly equivalent to the Consumer Price Index Should City and WH be unable to mutually agree as to any such substitute index prior to the date such agreement is required in order to properly and timely comply with this Paragraph 6, determination of the proper substitute index shall be determined by arbitration conducted in accordance with the then-prevailing commercial arbitration rules of the American Arbitration Association or its successor. In addition to the foregoing, in consideration of City's agreement to enter into and perform its obligations set forth in this MOU, within five (5)business days after the Effective Date WH agrees to make a one-time payment to City of Five Hundred Thousand Dollars ($500,000); provided,however,that WH shall be entitled to a credit against said $500,000 payment obligation to the extent of the amount of any payment made by PCH Beach Resort, LLC,to City pursuant to the second paragraph of Paragraph 6 of that certain Memorandum of Understanding Re Beach Uses/Activities which may be entered into by and between City and PCH Beach Resort, LLC, (such that City will receive only one such $500,000 payment, not two, and not more than$500,000) 12-17-15 va -5- 7 Binding on Successors and Assigns This MOU shall be for the benefit of and binding upon any successors and assigns of WH. As used herein, the term"WH" shall be deemed to refer to any successor-in-interest to WH's fee title to the Property during the Term, including subsequent successors to the initial successor-in-interest. 8. No Conveyance of Property Interest in City Beach Property. Notwithstanding any other provision set forth in this MOU to the contrary,this MOU is not intended and shall not be interpreted to constitute the sale, lease, exchange, transfer, or disposal of City's title or interest in and to the City Beach Property. 9 Severability. If any term, covenant, or condition of this MOU or the application thereof to any person, entity, or circumstance shall,to any extent, be invalid and unenforceable, the remainder of this MOU or the application of such term, covenant, or condition to persons, entities, or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term, covenant, and condition of this MOU shall be valid and enforceable to the fullest extent permitted by law. 10. Notices. All notices or other communication provided for under this MOU shall be in writing, and shall be delivered personally, via facsimile or email,by reputable overnight mail equivalent carrier, or sent by registered or certified mail,return receipt requested,postage prepaid, addressed to the person to receive such notice or communication at the following address and shall be effective upon delivery or refusal to accept delivery To City: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Manager Email: fred wilson@surfcity_hb org (with copy to City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Email. Michael. ag tesna,surfcitY hb.org To WH: The Waterfront Hotel, LLC c/o The Mayer Corporation 8951 Research Drive Irvine, CA 92618 Attn: RJ Mayer Phone: 949-8091 Fax: 949-988-7176 Email: rU@ a. ey rcorp.com (with copy to:) Rutan&Tucker, LLP 611 Anton Boulevard, 14t`Floor Costa Mesa, CA 92626 12-17-15 va -6- Jeffrey M Oderman, Esq. Phone 714-641-5100 Fax: 714-546-9035 Email: joderman@rutan com Notice of change of address shall be given by written notice in the manner set forth in this Paragraph. Notices sent by email and facsimile shall be deemed received upon successful transmission. 11. No Waiver. No waiver by either party of any default by the other party under this MOU shall be implied from any omission or delay by the non-defaulting parry to take action on account of the default if the default persists or is repeated Any waiver of any covenant,term, or condition contained in this MOU must be in writing Any such express written waiver shall not be construed as a waiver of any subsequent breach of the same covenant,term, or condition, nor shall it affect any default other than the default expressly made the subject of the waiver. Any such express waiver shall be operative only for the time and to the extent stated in the waiver The consent or approval by a party to or of any act by the other party shall not be deemed to waive or render unnecessary consent or approval to or of any subsequent act 12 Third Parties Not Benefited. This MOU is made for the sole benefit of City and WH and its successors and assigns of WH. No other person or entity shall have or acquire any rights of any nature under or by reason of this MOU. IN WITNESS WHEREOF,the parties have executed this MOU as of the dates set forth next to their respective signatures below [Signatures on Next Page] 12-17-15 V4 -7- «City». CITY OF 4TIN ON ACH Dated ��'��'�S 201 By Its ayo ATTEST: By � �. Its ity Clerk APPROVED TO FORM By Its City Atto y "WH" THE WATERFRONT HOTEL, LLC, a California limited liability company By Waterfront Development, Inc a California rp tion, its Managing Member Dated. �,Z -,Z..z.., , 2016—_ B R ert L ayer, Jr, President 12-17-15 V4 -8- ATTACHMENT #z- MEMORANDUM OF UNDERSTANDING RE BEACH USES/ACTIVITIES This Memorandum of Understanding re Beach Uses/Activities (the "MOU") is dated for reference purposes only as of the 21 day of December, 2015 (the "Agreement Date"), and is being entered into by and between the City of Huntington Beach, a California charter city ("City"), and PCH Beach Resort, LLC, a California limited liability company ("PCH") RECITALS. This MOU is entered into with reference to the following facts A. City is the owner in fee of a portion of that certain real property located in the City of Huntington Beach, California, and bounded on the north by the right-of-way line for Pacific Coast Highway, on the west by an imaginary line extending southward from the westerly side of the intersection of Pacific Coast Highway and Twin Dolphin Drive to the mean high tide line of the Pacific Ocean, on the south by the mean high tide line of the Pacific Ocean, and on the east by an imaginary line extending southward from the westerly side of the intersection of Pacific Coast Highway and Beach Boulevard to the mean high tide line of the Pacific Ocean (such portion hereinafter referred to as the "City Beach Property"). B PCH is the ground lessee of that certain real property located at 21500 Pacific Coast Highway, on the inland side of Pacific Coast Highway across from the City Beach Property (the "Property"), on which PCH owns and operates the Hyatt Regency Huntington Beach Resort and Spa(the "Hotel") The Successor Agency to the former Redevelopment Agency of the City of Huntington Beach("Successor Agency") and PCH are currently negotiating with respect to a purchase and sale agreement which, if it is approved and executed, will provide for PCH to acquire Successor Agency's leased fee interest in the Property. The date on which PCH acquires fee title to the Property is referred to herein as the"Effective Date " C. The Hotel provides ocean-oriented, visitor-serving commercial facilities designed to take full advantage of the existing ocean views across the City Beach Property. D Pursuant to the California Coastal Act of 1976, as amended(Public Resources Code Section 30000, et sec ), City has prepared and the California Coastal Commission has certified a Local Coastal Plan(as amended,the "LCP") for that portion of the City of Huntington Beach that is located within the Coastal Zone, including the City Beach Property On January 19, 1981,the City Council of City adopted Resolution No 4954 adopting the LCP in the form of the Coastal Element of the City's General Plan The LCP has subsequently been amended prior to the Effective Date, including without limitation through the City Council's adoption of Resolution No 5147 on August 2, 1982, Resolution No 5267 on May 16, 1983, and Resolution No 5341 on January 3, 1984 The LCP, as so amended through the Effective Date, is a public record, a copy of which is available for inspection at the office of the City Clerk at the City of Huntington Beach, 2000 Main Street, Huntington Beach, California 92648 E. The LCP requires "Preservation of as much beach sand area as possible in order to accommodate future levels of beach attendance " (LCP, Section 2 3.)The LCP further establishes as a policy the"increased numbers of hotel/motel rooms and restaurants in the 12-17-15 V4 Coastal Zone " (Id , at section 3 3 ) The LCP designates the entire City Beach Property for recreational use in which the "principal permitted uses . are limited to open sand areas, beach related recreational activities, and under certain conditions,parking lots, concessions and camping " (Id , at Figure 9 11 and section 9 2 5 )The LCP further"prohibit(s) development of permanent above-ground structures on the beach sand area"on the City Beach Property with the exception of lifeguard towers and other public safety facilities, public restrooms and beach concession stands when located immediately adjacent to paved parking or access areas, fire rings, volleyball nets, bike trails, bike support facilities, and handicapped access Finally,the LCP "prohibit(s)expansion of parking facilities that would result in the loss of recreational sand area " (Id , at Section 9 5 1.) F On October 10, 1983,the City Council of City adopted Resolution No- 5308 a, b, and c, approving and adopting the Downtown Specific Plan(as amended,the "Specific Plan") for the implementation of the LCP. The City Beach Property is located in District 7 (formerly District 11) of the Specific Plan, which is designated for beach-related open space and recreational uses District 7 "is intended to preserve and protect the sandy beach area within the (Downtown] Specific Plan boundaries while allowing parking and auxiliary convenience uses" (Specific Plan, Section 4 13 ) Pursuant to the Specific Plan,the only uses and structures permitted on the City Beach Property are access facilities, basketball courts, beach concession stands at intervals no closer than one thousand (1,000) feet and limited to two thousand five hundred(2,500) square feet per building, bicycle and jogging trails and support facilities, fire rings, lifeguard towers, and other structures necessary for health or safety, paddleboard courts, surface parking lots, or public transit facilities that will not result in the loss of recreational sand areas,provided that any tiered parking shall be designed so that the top of the structures including walls, etc , are located a minimum of one foot below the maximum height of the adjacent bluff,park offices,playground equipment, public restrooms,public dressing rooms or showers, shoreline construction that may alter natural shoreline process(such as groins, cliff retaining walls,pipelines, and outfalls that are designed to eliminate adverse impacts on local shoreline sand supply), and volleyball net supports G Section 612(b) of the City Charter provides in part that, subject to certain exceptions set forth therein,"no road, building over three thousand square feet in floor area nor structure costing more than$161,000 00 [as adjusted per CPI increases occurring after January 1, 2011] may be built on or in any park or beach or portion thereof now or hereafter owned or operated by the City unless authorized by the affirmative votes of at least a majority of the total membership of the City Council and by the affirmative vote of at least a majority of the electors voting on such proposition at a general or special election. " (the "Measure C Development Restriction") H. City and PCH desire to ensure the long-term use of the City Beach Property for beach-related uses consistent with the LCP, Specific Plan, and Measure C Development Restriction(collectively, the "City Beach Property Land Use Restrictions"), to promote the development and operation of high-quality visitor-serving commercial uses on the Property, and to provide a long-term source of revenue to City to enhance City's implementation of the LCP and Specific Plan or for other public purposes as determined by City in its sole discretion. 12-17-15 V4 -2- COVENANTS: Based upon the foregoing Recitals, which are incorporated into this MOU by this reference, and for good and valuable consideration,the receipt and sufficiency of which is agreed to by both parties, City and PCH agree as follows 1 Term of MOU The term of this MOU (the"Term") shall commence on the Effective Date and shall terminate on the thirtieth(30t') anniversary of the Effective Date If the Effective Date does not occur by December 31, 2016,this MOU shall automatically be null and void ab znztzo 2 Limitations on Improvements/Structures City covenants not to construct or maintain or permit to be constructed or maintained any improvements or structures on the City Beach Property excepting only the following access facilities,basketball courts, beach concession stands at intervals no closer than one thousand (1,000) feet and limited to two thousand five hundred (2,500) square feet per building,bicycle and jogging trails and support facilities, fire rings, lifeguard towers, and other structures necessary for health or safety, paddleboard courts, parking lots and public transit facilities that will not result in the loss of recreational sand area and that will not extend above the existing grade of the adjacent stretch of Pacific Coast Highway, park offices,playground equipment, public restrooms, public dressing rooms or showers, shoreline construction that may alter natural shoreline process (such as groins, cliff retaining walls, pipelines, and outfalls that are designed to eliminate adverse impacts on local shoreline sand supply), volleyball net supports, and pedestrian overcrossmg(s) of Pacific Coast Highway 3. Beach Parkin. During the Term of this MOU City covenants, for the benefit of PCH and the Property,to maintain and operate on the City Beach Property beach parking that is accessible to the public and with substantially the same number of available spaces that existed as of September 21, 1998 4 Prohibited Uses of City Beach Property In addition to the provision set forth in Paragraph 2 and 3, during the Term of this MOU City covenants that none of the following uses shall be allowed on the City Beach Property without the prior written consent of PCH, which consent shall not be unreasonably withheld, conditioned, or delayed If City delivers a written notice to PCH requesting that PCH consent to any such use, City's notice provides a complete statement of the type,nature, and duration of the proposed use and the terms and conditions governing such proposed use, and City's notice states in bold letters at the outset of the notice that PCH's failure to respond within ten (10) days after receipt of the notice by either granting or withholding PCH's consent will be deemed to constitute PCH's consent to the proposed use, it shall be deemed that PCH has consented to the proposed use PCH's consent to one proposed use, for the duration proposed by City, shall not be deemed to constitute consent to the same or similar use at a subsequent time In the event PCH withholds its consent to a proposed use, City and PCH shall meet and confer to attempt to resolve any PCH's objections and concerns. The uses subject to this Paragraph 4 are the following. 12-17-15 va -3- 4.1 Camping; 42 Overnight parking of recreational vehicles; 4.3 Sale, or exhibition for the purpose of sale, of cars, motorcycles, go-karts, boats, personal watercraft, recreational vehicles or other similar equipment; and 44 Events and/or structures that would unreasonably obstruct the view of the ocean from the Hotel or any of the courtyards on the Property, or would materially alter the local beach environment 5. Prior Notice to PCH and Consultation With Respect to Certain Uses of City Beach Property In addition to the provisions set forth in Paragraphs 2, 3 and 4, during the Term of this MOU City covenants that none of the following uses shall be allowed on the City Beach Property without City first giving thirty (30) days prior written notice to PCH- 5 1 Events which generate noise, such as,but not limited to, racing or operation of cars, motorcycles, go-karts,boats, personal watercraft, recreational vehicles or other similar equipment, use of amplified music, or use of a public address systems (except when used in conjunction with normal police or marine safety functions), 52 Sale of food or beverages, or rental or sale of any products or services, other than those sales or rentals conducted on the premises of the beach concession stands within the City Beach Property, 53 Events, meetings, gatherings, competitions, tournaments, or contests where the observation of same is not free and open to the general public or which does not primarily involve entertainment, sports or recreational activities, 54 Events which unduly restrict the access to or use of the pedestrian overcrossing(s) constructed over Pacific Coast Highway at the Property or that unreasonably restrict access through the parking lot to the beach from such pedestrian overcrossing(s), 5.5 Events which, together with staging, storage, support services and anticipated parking generated by such events, occupy more than 33% of the City Beach Property, 56 Events which occur in excess of five consecutive days in duration or in excess of a total of thirty (30) days per year; and 57 Tents, balloons, flags, bleachers, seating, scaffolding or other temporary structures which unreasonably impede the view of the ocean or sand from the Hotel or any of the courtyards on the Property City has established a procedure to approve all specific events on the beach City shall provide written notice to PCH and permit PCH to consult with City's Specific Events Committee not less than thirty (30) days prior to the Committee's consideration of approval of a permit for potential uses or activities on the City Beach Property PCH may appeal any permit approved by the Specific Events Committee to the City Manager by filing the appeal in writing within ten 12-17-15 va -4- (10) days after the approval of the permit by the Specific Events Committee If a specific event permit is appealed, the Specific Events Committee shall not issue the permit until such time as the City Manager has acted on the appeal 6 PCH Payments In consideration of City's agreement to enter into and perform its obligations set forth in this MOU, for each calendar year during the Term of this MOU PCH shall pay to City, in advance,the sum of Eleven Thousand Eight Hundred Eighty-One Dollars and Seventy-Three Cents ($11,881 73)per year, with such amount to be prorated for any partial calendar year based upon the number of days in such partial calendar year and with such amount to be adjusted upward as of January 1, 2017, and each January Vt thereafter as provided herein (the "Adjustment Dates"), with such sum payable in advance on the first day of each such year The annual adjustment shall be calculated upon the basis of the Consumer Price Index for the Los Angeles-Riverside-Orange County region(All Urban Consumers--All Items)published from time to time by the United States Department of Labor(the "CPI") The CPI published and in effect on September 30, 2015, shall be considered the "Base Year Index " At each Adjustment Date, the consideration otherwise due shall be adjusted by the percentage increase, if any, between the Base Year Index and the CPI published and in effect ninety(90) days preceding the Adjustment Date In no event shall the consideration payable on any Adjustment Date be less than the consideration required to be paid during the year immediately preceding such Adjustment Date notwithstanding the fact that the CPI may, as of some Adjustment Date, be less than the CPI as of the previous Adjustment Date or the Base Year Index. When the amount of the adjusted consideration is determined, and at least thirty (30) days prior to the date payment for the next year is due, City shall give PCH written notice of the amount of the adjusted consideration indicating how the new figure was computed If at any Adjustment Date the Consumer Price Index shall not exist in the same format as recited herein, City and PCH shall agree to substitute any official index published by the Bureau of Labor Statistics or successor or similar governmental agency as may then be in existence and which is most nearly lequivalent to the Consumer Price Index Should City and PCH be unable to mutually agree as to any such substitute index prior to the date such agreement is required in order to properly and timely comply with this Paragraph 6, determination of the proper substitute index shall be determined by arbitration conducted in accordance with the then-prevailing commercial arbitration rules of the American Arbitration Association or its successor In addition to the foregoing, in consideration of City's agreement to enter into and perform its obligations set forth in this MOU, within five (5) business days after the Effective Date PCH agrees to make a one-time payment to City of Five Hundred Thousand Dollars ($500,000);provided, however,that PCH shall be entitled to a credit against said $500,000 payment obligation to the extent of the amount of any payment made by The Waterfront Hotel, LLC,to City pursuant to the second paragraph of Paragraph 6 of that certain Memorandum of Understanding Re Beach Uses/Activities which may be entered into by and between City and The Waterfront Hotel, LLC, on or about the Agreement Date of this MOU (such that City will receive only one such$500,000 payment, not two, and not more than$500,000) 7 Binding on Successors and Assi ns This MOU shall be for the benefit of and binding upon any successors and assigns of PCH As used herein, the term"PCH" shall be deemed to refer to any successor-in-interest to PCH's fee title to the Property during the Term, including subsequent successors to the initial successor-in-interest 12-17-15 V4 -5- 8 No Conveyance of Property Interest in City Beach Property. Notwithstanding any other provision set forth in this MOU to the contrary, this MOU is not intended and shall not be interpreted to constitute the sale, lease, exchange, transfer, or disposal of City's title or interest in and to the City Beach Property 9 Severabilrty. If any term, covenant, or condition of this MOU or the application thereof to any person, entity, or circumstance shall, to any extent,be invalid and unenforceable, the remainder of this MOU or the application of such term, covenant, or condition to persons, entities, or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term, covenant, and condition of this MOU shall be valid and enforceable to the fullest extent permitted by law. 10 Notices All notices or other communication provided for under this MOU shall be in writing, and shall be delivered personally, via facsimile or email, by reputable overnight mail equivalent carrier, or sent by registered or certified mail, return receipt requested,postage prepaid, addressed to the person to receive such notice or communication at the following address and shall be effective upon delivery or refusal to accept delivery: To City. City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn City Manager Email fred wilson�a surfcity-hb org (with copy to City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn. City Attorney Email: Michael atesnsurfcity-hb org To PCH: PCH Beach Resort, LLC c/o The Mayer Corporation 8951 Research Drive Irvine, CA 92618 Attn- RJ Mayer Phone: 949-8091 Fax 949-988-7176 Email Kjkmayercorp com (with copy to:) Rutan&Tucker, LLP 611 Anton Boulevard, 14th Floor Costa Mesa, CA 92626 Jeffrey M Oderman, Esq Phone. 714-641-5100 Fax- 714-546-9035 Email ,odermankrutan com 12-17-15 V4 -6- Notice of change of address shall be given by written notice in the manner set forth in this Paragraph Notices sent by email and facsimile shall be deemed received upon successful transmission. 11. No Waiver No waiver by either party of any default by the other party under this MOU shall be implied from any omission or delay by the non-defaulting party to take action on account of the default if the default persists or is repeated Any waiver of any covenant, term, or condition contained in this MOU must be in writing. Any such express written waiver shall not be construed as a waiver of any subsequent breach of the same covenant, term, or condition, nor shall it affect any default other than the default expressly made the subject of the waiver Any such express waiver shall be operative only for the time and to the extent stated in the waiver The consent or approval by a party to or of any act by the other party shall not be deemed to waive or render unnecessary consent or approval to or of any subsequent act. 12. Third Parties Not Benefited This MOU is made for the sole benefit of City and PCH and the successors and assigns of PCH. No other person or entity shall have or acquire any rights of any nature under or by reason of this MOU. IN WITNESS WHEREOF, the parties have executed this MOU as of the dates set forth next to their respective signatures below [Signatures on Next Page] 12-17-15 va -7- L City55 CITY O HUN G N CH Dated. ' oho , 2015 By Its: Wayjr ATTEST By: It ,C,rty Clerk Get APPROVE TO F B . Its City Attorney PCH BEACH RESORT, LLC By. Grand Resort, LLC, a California limited liability company, its Managing Member By- RLM Management, Inc., a California corporation, Manager Dated: /-Z - ,Z 2, , 201 By- Its al an 12-17-15 va -8-