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HomeMy WebLinkAboutSurf City Partners, LLC - 2021-11-02 2000 Main Sheet. Huntington Beach,CA 92648 City of Huntington Beach l PF7Des�n,' - No� File #: 22-141 MEETING DATE: 3/1/2022 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Sean Joyce, Interim City Manager PREPARED BY: Ursula Luna-Reynosa, Director of Community Development Subject: Approve and authorize a First Amendment to the Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC for 21 Main Street at the Huntington Beach Pier Statement of Issue: The City Council is requested to authorize execution of a First Amendment to the Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC. The ENA establishes duties and obligations related to the negotiation of a lease agreement for 21 Main Street. The purpose of the First Amendment is to expand the property area beyond the pier concession building to include the pier restroom building and adjacent area that sits directly across from the site. Financial Impact: There is no financial impact associated with this request. Successful negotiations will culminate to a draft lease with Surf City Partners, LLC and submitted to City Council for consideration. The rental rate and projected lease revenues will be provided for City Council deliberations. Recommended Action: Approve and authorize the Mayor and City Clerk to execute the "First Amendment Exclusive Negotiating Agreement Between City of Huntington Beach and Surf City Partners, LLC' to expand the property area to include the pier restroom building and surrounding area as part of the 21 Main Street property description. Alternative Action(s): Do not approve the recommended action and direct staff accordingly. Analysis: On September 7, 2021, Council directed staff to prepare an Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC (SCP) for an approximately 800 square foot concession building located at 21 Main Street on the Huntington Beach Pier. On November 2, 2021, Council City of Huntington Beach Page 1 of 2 Printed yyo�n� 2124/2022 C=NPluwa'LP75.d' File #: 22-141 MEETING DATE: 3/1/2022 approved the ENA, which commenced good-faith negotiations between the City and SCP, intended to culminate in a mutually acceptable lease that will set forth the terms and conditions for improving the site as a restaurant; including design, financing, construction, and operation of the project. SCP's proposal reimagines the existing retail concession space into a full-service restaurant. The ENA provides an opportunity to analyze the feasibility of the project by exploring code requirements related to the change of use and proposed remodel. SCP has obtained feedback from regulatory agencies regarding its proposed project. To accomplish the desired seating capacity, which affects projected revenues, additional area is need to accommodate food storage. SCP is requesting to utilize the pier restroom building located directly across the site to accommodate the restaurant's restroom requirements and to add additional square footage (approximately 450 square feet) to the restroom building for ancillary food storage space. Per Council commentary during the September 7, 2021 study session, staff supports the expansion of the site as long as all code requirements are satisfied. SCP has offered to improve and maintain the public restrooms, which would be memorialized as part of the lease. Since the property description included in Exhibit A of the ENA did not include this expanded area, the City Attorney's office has concluded that an amendment to the ENA is required for the additional restroom area to be considered in lease negotiations. Please refer to Attachment 1 for the First Amendment which includes a revised Exhibit A showing the expanded property area. Following the amendment, SCP will continue to work to secure requisite approvals for the project and negotiate lease terms. The draft lease will be submitted to the City Council for consideration at a future City Council meeting. In the interim, the current tenant, Let's Go Fishing, continues its month-to-month tenancy. Environmental Status: Pursuant to CEQA Guidelines Section 15378(b)(5), organizational or administrative activities of governments that will not result in direct or indirect physical changes to the environment, do not constitute a project. If negotiations are successful, a lease agreement will be brought forward for City Council consideration and an environmental assessment will be conducted at that time. Strategic Plan Goal: Economic Development & Housing Attachment(s): 1. First Amendment to the ENA 2. ENA 3. November 2, 2021 RCA and Minutes 4. September 7, 2021 RCA and Minutes City of Huntington Beach Page 2 of 2 Printed on 2/24/2022 oowe,E= Lea,s;ar" FIRST AMENDMENT EXCLUSIVE NEGOTIATION AGREEMENT 13ETWEEN CITY OF HUNTINGTON BEACH AND SURF CITY PARTNERS, LLC This First Amendment to Exclusive Negotiation Agreement [ENAj is made by and between the City of Huntington Beach. a municipal corporation and serving in its capacity as Lessor (the "Lessor"), and Surf City Partners. LL.C. a California limited liability company (the "Proposed Lessee"), hereinafter jointly referred to as the (the "Parties"). RECITALS WI-II3IZFAS. the Lcssor and Proposed Lessee previously entered into an LNA dated November 2, 2021 for the purpose ofnegotiating, for a set period of time, and to refrain from negotiating with others, the development of a proposed lease for the use and occupancy of real property commonly referred to as 21 Main Street(the"Property") on the I hintington Beach Pier. WHEREAS, the f'NA established milestones and specified activities related to rcpurposing the Property. which includes the entire interior of the concession space with some adjacent exterior outdoor dining area, for a new restaurant business Mid the future cxccution of a Lease; and, WHEREAS, Proposed Lessee has been conducting due diligence and receiving feedback from regulatory agencies to determine the feasibility of the proposed project and desires to establish a project of higher quality by expanding certain area of the Property to also include the pier restroom building and surrounding, outdoor area. NOW. THLREFORE. 'Il If.? PAIt'fILS AGREE TO AMEND THE I NA AS I'OLLOWS: Exhibit A shall be replaced by Exhibit A-I and incorporated herein by this reference (the "Property') and shall include approximately an 800 square feet concession with some adjacent exterior outdoor dining area, as well as the public restroom building and adjacent area located direct]\, across from the concession space. I I WITNESS WHEREOF, Lessor and Proposed Lessee have executed this First Amendment which shall be effective as of the day and year set next to the Mayor's signatures below (`Effective Date"). Proposed Lessee: Lessor: SURF CITY PARTNERS,LLC,a California CITY OF HUNTINGTON BEACH,a municipal limited liability company corporation of the State of California By: By 1e ma, M naging Member Mayor M Date: �7_ Date: 3- 1 1 -L` ATTEST By �/L-Robin E7 is u,City erk REVIEWED AND APPROVED: 3 Date: By 5M � Se oyce, Interim i Manager INITIATED AND APPROVED: Dale: �� ���� By VWML I_ uw�,_ Ursula Luna-Reynosa Community Development Director Date: APPROVED AS TO FORM: By ichael E. Gates,City Attorney Dat EXHIBIT A - 1 PROPERTY DESCRIPTION 21 Main Street 1r r • Approximatety 800 SF of indoor building space Potential outdoor space adjacent to building Restrooms and potential storage area EXCLUSIVE NEGOTIATION AGREEMENT BETWEEN CITY OF HUNTINGTON BEACH AND SURF CITY PARTNERS, LLC This Exclusive Negotiation Agreement [ENA] is made by and between the City of Huntington Beach, a municipal corporation and serving in its capacity as Lessor (the "Lessor"), and Surf City Partners, LLC, a California limited liability company (the "Proposed Lessee"), hereinafter jointly referred to as the (the "Parties"), for the purpose of negotiating, for a set period of time, and to refrain from negotiating with others, the development of a proposed lease. RECITALS WHEREAS, the Lessor leases real property commonly referred to as 21 Main Street on the Huntington Beach Pier, shown on Exhibit A and incorporated herein by this reference (the "Property"). The Property is approximately 800 square feet and is located in the Downtown Specific Plan (DTSP) and Coastal Overlay District; WHEREAS, Lessor desires to explore the possibility of repurposing a certain area of the Property, including the entire interior of the concession space with some adjacent exterior outdoor dining area, to include a new restaurant business; and WHEREAS, on May 26, 2021, the Lessor released a Request for Qualifications (RFQ) to solicit interest from potential concessionaires with a proven track record of operating a successful business; and WHEREAS on September 7, 2021, the Huntington Beach City Council selected Surf City Partners, LLC, a local team with hospitality and franchise experience comprised of Jeff Bergstna (Design/Construction/Maintenance), Keith Bohr (Government Approvals), Paul Motenko (Restaurant Food and Beverage/Operational Systems), and Sharon and Adam Go (Restaurant Systems/Recruitmcnt/Training), based on their expertise, qualifications and unique concept of a "locals" eatery named Huntington's which would, subject to additional approvals, provide high quality comfort food and beverages, outdoor dining, surf line views, and occasional live music, incorporated herein by this reference (the "Project"); and WHEREAS, the Parties desire to enter into an Exclusive Negotiation Agreement (the "ENA") for a set period of time, and to refrain from negotiating with others, the development of a proposed lease for the use and occupancy of the Property (the "Lease"). The Parties acknowledge and agree that this ENA in itself does not obligate the Proposed Lessee to acquire or the Lessor to convey the Property, does not grant the Proposed Lessee the right to develop the Project, and does not obligate the Proposed Lessee or the Lessor to pursue or complete any activities or costs to develop the Project, except for the preliminary analysis and negotiations contemplated by this ENA; and 236 WHEREAS, during this process, Lessor will also be acting in the capacity as a Charter City and nothing in this ENA shall limit, waive, or otherwise impair the authority and discretion of the City, including the City's Police, Fire, Community Services, Planning, Building, and Engineering departments or divisions. WHEREAS, the Parties agree that the purpose of this ENA is to provide broad parameters on which the Parties will negotiate in good faith for a set amount of time detailed in the timeline, attached as Exhibit B and incorporated herein by this reference (the "Performance Timeline"), and, in the end, possibly execute a Lease. NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: ARTICLE I: 'PERM Unless terminated earlier, as set forth herein, including Exhibit B, this ENA shall be in effect for a period of three hundred and sixty-five (365)days commencing upon the Effective Date hereof, and will end 365 days later or until the effective date of an approved Lease, whichever occurs first ("Term"). Unless continuing obligations exist pursuant to this ENA, once the term expires neither party shall have any further rights against or liability to the other under this ENA. The City Manager or designee may extend the time to complete the milestones identified in the Performance Timeline in his or her sole discretion. In no event shall such extensions result in the Term being extended by more than 365 days without amending the Term herein pursuant to City Council approval. ARTICLE 11: EXCLUSIVITY Lessor hereby agrees that during the term of this ENA, and so long as Proposed Lessee is conducting due diligence and negotiating in good faith toward the drafting, submission and execution of all approvals, including a Lease(and all other associated and necessary documents), Lessor shall not negotiate with any other person or entity regarding the Property. ARTICLE III: DUTIES OF LESSOR 3.1 During the term, Lessor and its staff shall be available to meet with the Proposed Lessee to discuss the Project for the Property and any other matters pertaining to the renovation of the Property at mutually agreed upon times and dates. Lessor will negotiate in good faith, including not unreasonably rejecting any submissions, the terms and conditions of proposed Lease with the Proposed Lessee. In addition, Lessor will, to the extent possible: a. Advocate and cooperate with outside government and regulatory agencies to advance the Proj ect; b. Provide timely access to all public records, reports, studies, plans, permits, in its possession, related to the Property and the pier; c. Assist with access to the Property and coordination with the existing tenant; and, 2 237 d. Authorize Proposed Lessee to apply and submit for permits and entitlements. At the Lessor's sole discretion, Lessor maintains the right to be a co-applicant on permit submittal. 3.2 Lessor Discretion. Nothing in this ENA shall obligate the Lessor to exercise its discretion regarding the Property or Project in any particular manner. Proposed Lessee acknowledges that execution of this ENA by the Lessor does not constitute approval by the City of any entitlements, permits or any other regulatory requirements, known or unknown and in no way limits any authority of the City to act, or refrain from acting, including exercise of the City's regulatory authority, or any discretionary or non-discretionary actions of the City. Proposed Lessee acknowledges that approval, conditional approval, or denial of entitlements and/or the entering into a Lease is within the sole and exclusive discretion of the City without limitation by or consideration of the terms of this ENA. Lessee hereby acknowledges that in general, the Lessor does not make any commitment to any particular Project before it completes review including committing to planning and zoning approvals by contract; and that the Lessor makes no representation regarding the ability or willingness of the City to approve entitlements or a Lease, nor any representation regarding the imposition of any mitigation measures or other conditions of approval. In addition, the Proposed Lessee acknowledges that the State of California,acting by and through the California State Lands Commission, leases the Property to the City of Huntington Beach. In addition to the proposed lease, there are other regulatory agencies that require additional entitlements including the California Coastal Commission and that any approval by the City does not bind any other agency. ARTICLE IV: DUTIES OF PROPOSED LESSEE 4.1 Proposed Lessee will provide to Lessor, in a timely manner, all requested information related and/or necessary to complete this ENA phase and if successful, entering into a Lease. Information includes but is not limited to a draft Project Schedule of Performance with milestones to be included as an Exhibit to the Lease. The Schedule of Performance will outline timing associated with major tasks and milestones commencing with submittal of an application for Building Permit and ending with a Certificate of Occupancy, among other things. 4.2 Proposed Lessee will provide to Lessor a Site Plan and architectural renderings of the proposed Project. The Site Plan and architectural renderings shall include a well- defined architectural concept for the Property showing interior and exterior areas, elevations, signage, and architectural character of the proposed Project. However, notwithstanding submission by the Proposed Lessee as set forth herein, no such Site Plan or architectural renderings shall be deemed final until regulatory approvals and approval of the Lease. Such approval is at the sole discretion of the City. 4.3 Proposed Lessee will provide sample menus including pricing of food items 3 238 for breakfast, lunch and dinner, as well as hours of operation. 4.4 Proposed Lessee will work to secure Project funding and exhibit evidence of funding commitments upon execution of the Lease. 4.5 Proposed Lessee will provide an updated pro forma and description of proposed improvements. 4.6 Proposed Lessee shall undertake such due diligence as is necessary to determine the suitability of the Property for the Project, including but not limited to alcohol sales, parking, outdoor dining, outdoor display of goods, ADA compliance, and other building and health department requirements. Proposed Lessee shall conduct due diligence activities it deems necessary to provide the Lessor with sufficient information to determine the feasibility of developing the Project on the Property and shall be responsible for the costs of all such studies, surveys and investigations. 4.7 The Proposed Lessee, at its sole cost, shall be responsible for obtaining all land use entitlements and other governmental approvals from the City, and other entities as may be necessary for the Proposed Lessee's contemplated use on the Property. The Lessor shall cooperate with the Proposed Lessee's efforts to obtain such entitlements. Prior to submitting any applications to the City or other governmental entities, the Proposed Lessee shall submit to the Lessor the design and architecture of the Project, including the conceptual plans, elevations, the exterior design and layout and any other information that the Proposed Lessee intends to submit as part of its entitlement application. In the exercise of its reasonable discretion, the Lessor shall respond to the Proposed Lessee's written request for approval of conceptual plans within ten (10) business days of the Proposed Lessee's request therefor or the items submitted for approval shall be deemed approved. If the Lessor disapproves of the items submitted, it shall specifically state the reasons for such disapproval. The Proposed Lessee shall not submit any applications for entitlements until the Lessor has approved the conceptual plans and application materials. The Proposed Lessee shall provide to the Lessor, for its approval, any changes to the Project during the entitlement process and the Proposed Lessee shall not agree to any such changes unless previously approved by the Lessor. ARTICLE V: LEASE AGREEMENT The Parties agree to negotiate in good faith the terms, conditions, issues and topics to be included in the Lease. The terms, conditions, issues and topics to be included in the Lease shall include, but are not limited to, the following: 5.1 Term of the Lease including commencement date, extensions, rent and adjustments, and security deposit. The Lease will also include terms and conditions for termination of the Lease by either Party. 5.2 The terms and conditions for the operation and management of the Property by the Proposed Lessee, including a lease guaranty and assignment restrictions. 4 239 5.3 Requirement that Proposed Lessee shall operate and manage the Property in compliance with all federal, state and local equal opportunity standards. 5.4 Right of the Lessor to oversee and inspect the operations and management of Proposed Lessee to determine compliance with the provisions of the Lease. 5.5 Lessor oversight of all work done on the Property and that the work will be of the highest quality and standard. ARTICLE VI: TERMINATION Either Party may terminate this ENA if there is a material breach of the ENA. Material breach includes, but is not limited to, failure by either Party to negotiate in good faith and to use their reasonable efforts to negotiate the terms and conditions of the Lease. If a Party believes the other party is in breach, the aggrieved Party will provide notice to the other Party and request that both Parties negotiate in good faith, with ten (10) business days to cure. If the Lessor is the aggrieved Party and Proposed Lessee does not cure such default, the Lessor may terminate the ENA. If the Proposed Lessee is the aggrieved Party and the Lessor does not cure, neither party shall have any further rights against or liability to the other under this ENA. Proposed Lessee and Lessor may, at any time, mutually agree to terminate this ENA. 6.1 Termination by Lessor. Lessor shall have the right to terminate this ENA in the event that: a. The proposed Project is not approved. b. If the proposed Project is determined by Lessor, within reasonable discretion, to be infeasible or Proposed Lessee fails to meet the milestones in accordance with the critical milestones identified in the Performance Timeline. c. Any substitution of an individual of Surf City Partners, LLC without express written consent of the Lessor. 6.2 Termination by Proposed Lessee. Proposed Lessee shall have the right to terminate this ENA in the event that: a. Proposed Lessee determines that the Property is infeasible to undertake the proposed Project. b. Proposed Lessee fails to secure necessary entitlement approvals. ARTICLE VII: COMPLIANCE WITH FEDERAL AND STATE LAW Execution of a Lease by the Lessor shall be subject to compliance with all Federal and State laws and regulations including but not limited to the California Environmental Quality Act (California Public Resources Code § 2100 et seq.). The Proposed Lessee hereby agrees to 5 240 provide all reasonable assistance to the Lessor necessary for the City to carry out its obligations under CEQA. The costs of consultants, attorneys, engineers, appraisers, and other third party services undertaken by the City in considering and preparing any CEQA-required analysis or document shall be paid by the Proposed Lessee. ARTICLE XIII: NONDISCRIMINATION The Proposed Lessee shall not discriminate against nor segregate any person, or group of persons on account of race, color, creed, religion, sex, marital status, national origin, ancestry, handicap or sexual preference, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property in the formulation of the Lease or after its execution, nor shall the Proposed Lessee establish or permit any such practice or practices of discrimination or segregation in the selection, location, number, use or occupancy of Proposed Lessees, lessees, sub-Proposed Lessees, sub-lessees or vendees of the land. The Lease shall contain all applicable statutory covenants. ARTICLE IX: MUTUAL CONFIDENTIALITY To the extent permitted by applicable law, the Parties shall maintain all information concerning this ENA and any pending or subsequent negotiations between the Parties as confidential, disclosing information only to those individuals and representatives as designated by the other Party, provided that such individuals acknowledge and agree to maintain the confidentiality of such information. Proposed Lessee agrees and acknowledges that the Lessor is a public agency and is subject to the California Public Records Action (Gov. Code 6250 et. seq.) (the "Act"). Lessor agrees to inform Proposed Lessee of any requests for information related to this ENA or the Project pursuant to the Act not less than 3 days prior to the release of information. ARTICLE X: CITY COUNCIL APPROVAL Proposed Lessee understands and agrees that any proposed Lease or other binding agreement(s)contemplated in this ENA, must be reviewed,considered, and approved at a public meeting before the City Council of the City of Huntington Beach. Further, this ENA does not convey any property rights, or any right to develop and/or lease the Property. While the City's staff may recommend approval of the Project, the City Council shall have the sole discretion to approve or disapprove. ARTICLE XI: MISCELLANEOUS PROVISIONS 11.1 Governing Law. This ENA shall be governed by and construed and enforced in accordance with the laws of the State of California.Therefore, any action brought by either Party in connection with this ENA shall be conunenced and maintained in any proper jurisdiction located in Orange County, California. 11.2 Entire Agreement. This ENA constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes any and all prior agreements and 6 241 understandings between the Parties. There are no agreements or understandings between the Parties and no representations by either Party to the other as an inducement to enter into this ENA. Notwithstanding anything provided herein to the contrary, whether expressed or implied, the Lessor shall have no obligation to enter into a Lease with the Proposed Lessee and neither the Lessor, its representatives, staff or agents have made any promises to the Proposed Lessee other than to exclusively negotiate a Lease for the Property in good faith with the Proposed Lessee during the Exclusive Negotiating Period. No statements of the Lessor, its representatives or its officers, members, staff or agents as to future obligations shall be binding upon the Lessor unless and until such statements are memorialized in a Lease that has been approved by the City. 11.3 Assignment. The Proposed Lessee's may not transfer or assign any or all of its rights or obligations hereunder to any other person or entity without the written consent of the Lessor which may be withheld at its sole discretion. 11.4 No Warranty as to Site/Improvement Conditions. No warranty or representation of any kind is made by Lessor with respect to the condition of the Property or any improvements thereon. 11.5 Conflicts of Interest. The Parties to this ENA have read and are aware of the provisions of Section 1090 et seq. and Section 87100 et seq. of the California Government Code and related regulations and rulings relating to conflict of interest as well as the Conflict of Interest Code of the City. All parties hereto agree that they are unaware of any financial or economic interest of any public officer or employee of Lessor/City relating to this ENA. Notwithstanding any other provision of this ENA, it is further understood and agreed that if such a financial interest does exist at the inception of this ENA, Lessor may immediately terminate this ENA by giving written notice thereof. 11.6 Notices. Any notice which is required or which may be given hereunder may be delivered, mailed or emailed to the other Party to be notified, as follows: PROPOSED LESSEE: Jeff Bergsma Surf City Partners, LLC 221 Main Street, Suite S Huntington Beach, CA 92648 (949) 877-9542 jeff@teamdesignhb.com LESSOR: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attention: Community Development Director With a Copy to: City Attorney 11.7 Counterparts. This ENA may be executed in counterparts, each of which when so executed shall be deemed an original, and all of which, together, shall constitute one and the 7 242 same instrument. 11.8 Attorney tees. In the event that either party brings action or proceeding against the other party to enforce or interpret any of the conditions or provisions of this ENA, the prevailing party shall NOT be entitled to recover any attorney's fees and expenses and court costs associated with such action or proceeding. [END OF TEXT; SIGNATURES ON FOLLOWING PAGEI 8 243 IN WITNESS WHEREOF, Lessor and Proposed Lessee have executed this ENA which shall be effective as of the day and year set next to the Mayor's signature below ("Effective Date"). Proposed Lessee: Lessor: SURF CITY PARTNERS, LLC, a California CITY OF HUNTINGTON BEACH,a municipal limited liability company corporation of the Stale of California o By: By " � Jeff B r ana ng Member Mayor Date: t P/z 7 �j Date: /112121 A'17LST By Robin Estenislau, City Clerk REVIEWED AND APPROVED: Date: /11���� f By Oliver Chi, City Manager INITIATED AND APPROVED: Date: ( A4OZ.00Z,1 � n By Q- Ursula Luna-Reynosa Community Development Director Date: 1 0. ?T 2I APPROVED AS TO FORM: By Michael E. Gates, City Attorney ate: 9 244 EXHIBIT A PROPERTY DESCRIPTION 21 Main Street X' -i 1 I I 1 I 1--- I r b Approximately 800 SF of indoor building space i---j Potential outdoor space adjacent to building `- NEVJ SNFL� SU.V.DING . _ HXl$T. RR IQ 245 EXHIBIT B PERFORMANCE TIMELINE 11 246 EXHIBIT B PERFORMANCE TIMELINE Milestone Responsible Party Target Date 1 Proposed Lessee to submit preliminary project description Proposed Lessee Within 30 days of Effective Date and plans to Lessor for review Within 30 days of submittal of preliminary project 2 Lessor to approve preliminary project description and plans Lessor description and plans Proposed Lessee to consult with Regulatory Authority and other permitting agencies(ABC,CCC,and Health within 30 days of Lessor's approval of preliminary 3 Department)to make best faith efforts to obtain written Proposed Lessee p ) project description and plans feedback on preliminary project description and plans Proposed Lessee to schedule meeting with Lessor to review 4 feedback from Regulatory Authority and other permitting Proposed Lessee/ Wiihin 15 days of Lessor's approval of preliminary Lessor project description and plans agencies Lessor to determine if requisite changes based on feedback 5 from Regulatory Authority and other permitting agencies is Lessor Within 15 days of meeting to review Regulatory feasible;if not,Lessee needs to revise plans to make feasible Authority and other permitting agencies'feedback or ENA terminates If feedback from Regulatory Authority and other permitting 6 agencies is feasible,then Proposed Lessee to revise project Proposed Lessee Within 15 days of Lessor determining that project is description and plans and submit application to Regulatory feasible lAuthority 7 Regulatory Authority to schedule public hearing;if permits Regulatory Authority Within 35 days of application being deemed complete denied(after exhausting due process)then ENA terminates If Regulatory Authority approves permits,Proposed Lessee 8 to submit CDP application to the CCC;if COP denied then Proposed Lessee within 7 days of Regulatory Authority approving ENA terminates permits If CDP approved,Proposed Lessee to submit CD's to 9 Regulatory Authority;if unable to secure permits then ENA Proposed Lessee Within 112 days of the CCC approving CDP terminates 10 Provide sample menu with prices and updated pro forma to Proposed Lessee Within 14 days of the CCC approving CDP Lessor 11 Lessor to approve sample menu and pro forma Lessor Within 7 days of receipt 12 Lessor to provide draft term sheet to Proposed Lessee Lessor Within 14 days of approval of menu and pro forma 13 Proposed Lessee to respond to draft term sheet Proposed Lessee Within 7 days of receipt 14 Lessor and Proposed Lessee to agree to draft term sheet Proposed Lessee/Lessor within 21 days of Proposed Lessee's response 15 Proposed Lessee to provide construction timeline,budget, Proposed Lessee Within 28 days of agreement on term sheet and proposed method of financing 16 Lessor to provide draft lease agreement Lessor Within 14 days of receipt of construction timeline 17 Proposed Lessee to respond to draft lease agreement Proposed Lessee within 14 days of receipt Lessor and Proposed Lessee to agree to final lease Proposed Lessee/ 18 Within 21 days of Proposed Lessee's response agreement Lessor 19 Proposed Lessee to provide evidence of financing Proposed Lessee Within 7 days of agreement on lease agreement 20 CC consideration of lease agreement at public meeting Lessor Within 28 days of CCC approval of CDP or submittal of evidence of financing,whichever occurs LAST Provide State Lands Commission with copy of lease 21 Lessor Within 7 days of CC approval agreement for review and approval Proposed Lessee/ Within 14 days of State Lands Commission approval Lessor 22 Execute Lease Agreement and commence construction of lease or Issuance of building permit,whichever occurs LAST 247 7K��i_�S C:9Z f4AJ o v ti-- fYl'Pre[� City of Huntington Beach File #: 21-787 MEETING DATE: 11/2/2021 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Oliver Chi, City Manager PREPARED BY: Ursula Luna-Reynosa, Director of Community Development Subject: Approve and authorize execution of an Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC for 21 Main Street at the Huntington Beach Pier Statement of Issue: The City Council is requested to authorize execution of an Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC for a concession building located at 21 Main Street on the Huntington Beach Pier. The purpose of the ENA is to establish duties and obligations related to the negotiation of a lease agreement for the site. Financial Impact: There is no financial impact associated with this request. If a new lease is drafted with Surf City Partners, LLC, staff will submit it to City Council for consideration and will include the rental rate and the projected lease revenues that would be deposited into the General Fund (1000100.43095) Beach Concessions account. Recommended Action: Approve and authorize the Mayor and City Clerk to execute the "Exclusive Negotiating Agreement Between City of Huntington Beach and Surf City Partners, LLC' to negotiate the terms of a lease agreement for 21 Main Street. Alternative Action(s): Do not approve the recommended action and direct staff to reissue a Request for Qualifications or a Request for Proposals for 21 Main Street that includes an expanded area to be defined by the Council. Analysis: On September 7, 2021 , Council directed staff to prepare an Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC (SCP) for an approximately 800 square foot concession building located at 21 Main Street on the Huntington Beach Pier. If approved, the ENA will commence good-faith negotiations between the City and SCP, intended to culminate in a mutually acceptable lease that will set forth the terms and conditions for improving the site as a restaurant concept, including; design, City of Huntington Beach Pagel of 3 Printed on 10/27/2021 powerl.'N$LeBistar^ File #: 21-787 MEETING DATE: 11/2/2021 financing, construction, and operation of the project. The purpose of the ENA is to guide the process of negotiations through establishment of exclusive rights, negotiation timelines, development objectives, limitations, and responsibilities. Based on Council's direction at the September 7, 2021 meeting, staff and SCP have structured terms and conditions for the negotiations in the ENA (Attachment 1). Key points of the ENA are summarized below: • The exclusive negotiating period is for a term not to exceed 365 days with critical milestones and off-ramps scheduled within the term. The City and SCP will conduct due diligence, secure entitlements, and negotiate the terms and conditions of a mutually-acceptable lease. • SCP will submit requisite development applications, plans and documents necessary to secure discretionary approvals for the project, consistent with the response to the RFQ. • SCP shall be solely responsible for all costs associated with preparation of requisite plans and documents. • The ENA establishes a schedule of performance with milestones. • The ENA does not obligate either party to enter into any particular agreement. It does not commit the City to lease the site or grant discretionary approvals. SCP is proposing a unique concept of a "locals" eatery named Huntington's which would offer high quality comfort food and beverages (fine wines, locally crafted beers and libations), outdoor dining, surf line views, and occasional live music. The proposal reimagines the site with an eatery open for breakfast, lunch and dinner and two mobile retail carts; one for fishing pole rentals and the sale of bait and tackle, and the other for the sale of coffee, hot chocolate and bottled water. The approximate budget for improvements to the site is $532,000 with projected sales for year one through three between $1.5 and $2.75 million. The project, as it is envisioned, would require entitlement approvals consistent with the Downtown Specific Plan (DTSP) and Coastal Zone given the intensification of the use and scope of improvements to the property. A site plan and elevation of the current proposal is included as Attachment 2. An ENA will provide an opportunity to analyze the feasibility of pursuing the project while addressing various issues related to the change of use and proposed remodel. Planning approvals needed include a Conditional Use Permit from the Zoning Administrator, review by the Design Review Board for the building's design, colors, signage and materials, a Coastal Development Permit processed and approved by the Coastal Commission, and any applicable zoning requirements related to outdoor dining, parking, alcohol and outdoor sales, as well as a public view analysis. Requirements by Building & Safety, the Orange County Health Care Agency, and Alcohol Beverage Control would also need to be met. Further, the State Land Commission must approve the lease as the City leases the pier from the State. Upon the securing of requisite approvals and negotiating lease terms, the lease will be submitted to the City Council for consideration at a future City Council meeting. In the interim, the ENA will allow the current tenant, Let's Go Fishing, to continue its month-to-month lease and operations rather than leaving the concession vacant during this period. Let's Go Fishing has expressed their desire to remain at the site as long as possible until a lease with SCP is approved, and staff will work with them during this period to keep them informed of the new lease status and to ultimately facilitate a City of Huntington Beach Page 2 of 3 Printed on 1012712021 gowed' Legistar1° File #: 21-787 MEETING DATE: 11/2/2021 smooth transition. Environmental Status: Pursuant to CEQA Guidelines Section 15378(b)(5), organizational or administrative activities of governments that will not result in direct or indirect physical changes to the environment, do not constitute a project. If negotiations are successful, a lease agreement will be brought forward for City Council consideration and an environmental assessment will be conducted at that time. Strategic Plan Goal: Economic Development & Housing Attachment(§): 1. Exclusive Negotiating Agreement 2. Current Site Plan and Elevation 3. September 7, 2021 RCA and Minutes City of Huntington Beach Page 3 of 3 Printed on 1 012 7/2 0 21 p WerAWA Legistar'° Council/PFA Regular Minutes November 2, 2021 Page 10 of 17 22. 21-773 Approved and authorized execution of a Reinstatement and Second Amendment to Site Access Agreement between the City and Chevron Environmental Management Company (EMC) to conduct environmental work for City-owned property located at 18477 Beach Boulevard A motion was made by Carr, second Delgleize to approve and authorize the Mayor and City Clerk to execute the "Reinstatement and Second Amendment to Site Access Agreement' between the City of Huntington Beach and Chevron Environmental Management Company (EMC). The motion carried by the following vote: AYES: Peterson, Bolton, Delgleize, Carr, Posey, Moser, and Kalmick NOES: None 23. 21-786 Approved and authorized execution of Professional Services Contracts for On- Call Construction Management and Engineering Services with Arcadis, U.S., Inc., Ardurra, Inc., Berg & Associates, Inc., Dudek, Psomas, RMA Group, Inc., Totum Corp, and Wallace & Associates, Inc. A motion was made by Carr, second Delgleize to approve and authorize the Mayor and City Clerk to execute a $2,000,000 "Professional Services Contract Between the City of Huntington Beach and Arcadis, U.S., Inc., for On-Call Construction Management and Engineering Services;" and, approve and authorize the Mayor and City Clerk to execute a $2,000,000 'Professional Services Contract Between the City of Huntington Beach and Ardurra, Group, Inc., for On-Call Construction Management and Engineering Services;" and, approve and authorize the Mayor and City Clerk to execute a $2,000.000 "Professional Services Contract Between the City of Huntington Beach and Berg & Associates, Inc., for On-Call Construction Management and Engineering Services," and, approve and authorize the Mayor and City Clerk to execute a $2,000,000 'Professional Services Contract Between the City of Huntington Beach and Dudek, for On-Call Construction Management and Engineering Services;" and, approve and authorize the Mayor and City Clerk to execute a $2,000,000 "Professional Services Contract Between the City of Huntington Beach and Psomas, for On-Call Construction Management and Engineering Services;" and, approve and authorize the Mayor and City Clerk to execute a $2,000,000 "Professional Services Contract Between the City of Huntington Beach and RMA Group, Inc., for On-Call Construction Management and Engineering Services;" and, approve and authorize the Mayor and City Clerk to execute a $2,000,000 "Professional Services Contract Between the City of Huntington Beach and Totum Corporation, for On-Call Construction Management and Engineering Services;" and, approve and authorize the Mayor and City Clerk to execute a $2,000,000 "Professional Services Contract Between the City of Huntington Beach and Wallace & Associates Consulting, Inc., for On-Call Construction Management and Engineering Services." The motion carried by the following vote: AYES: Peterson, Bolton, Delgleize, Carr, Posey, Moser, and Kalmick NOES: None 24. 21-787 Approved and authorized execution of an Exclusive Negotiating Agreement(ENA) with Surf City Partners, LLC for 21 Main Street at the Huntington Beach Pier 251 Council/PFA Regular Minutes November 2, 2021 Page 11 of 17 A motion was made by Carr, second Delgleize to approve and authorize the Mayor and City Clerk to execute the "Exclusive Negotiating Agreement Between City of Huntington Beach and Surf City Partners, LLC" to negotiate the terms of a lease agreement for 21 Main Street. The motion carried by the following vote: AYES: Bolton, Delgleize, Carr, Posey, Moser, and Kalmick NOES: Peterson 25. 21-793 Authorized execution of documents for permanent highway and temporary construction easements to Caltrans for Transportation Improvement Project State Route 1 — PCH and Main Street A motion was made by Carr, second Delgleize to authorize the Mayor to execute "Easement Deed Highway" "Certificate of Occupancy and Receipt of Relocation Information" "Right of Way Contract' and "Right of Entry Form" for the transfer of property rights for the subject project easements. The motion carried by the following vote: AYES: Peterson, Bolton, Delgleize, Carr, Posey, Moser, and Kalmick NOES: None 26. 21-804 Adopted Ordinance No. 4236 approving Zoning Map Amendment No. 20-002 (Gisler Residential — 21141 Strathmoor Lane) Approved for introduction 10/19/2021, Vote: 6-0-1 (Peterson-Absent) A motion was made by Carr, second Delgleize to adopt Ordinance No. 4236, "An Ordinance of the City of Huntington Beach Amending the Huntington Beach Zoning and Subdivision Ordinance to Rezone the Real Property Located at 21141 Strathmoor Lane from Public-Semipublic (PS) to Residential Low Density (RL) (Zoning Map Amendment No. 20-002.)" (Attachment No. 3) The motion carried by the following vote: AYES: Peterson, Bolton, Delgleize, Carr, Posey, Moser, and Kalmick NOES: None 27. 21-805 Adopt Ordinance No. 4237 amending Huntington Beach Municipal Code Chapter 10.12 relating to speed limits on Atlanta Avenue between Huntington Street and Beach Boulevard Approved for introduction 10/19/2021, Vote: 6-0-1 (Peterson-Absent) A motion was made by Carr, second Delgleize to adopt Ordinance No. 4237, "An Ordinance of the City of Huntington Beach Amending Chapter 10.12.080 of the Huntington Beach Municipal Code Relating to Speed Limits." The motion carried by the following vote: AYES: Peterson, Bolton, Delgleize, Carr, Posey, Moser, and Kalmick NOES: None 252 AGPIO-Z)VED 6 - nEns� /-s I _ City of Huntington Beach �t� 'eN' � � NECon AAJEkA iuIIScIQFCIn 'Prtp_J� 77) REii"/VA/(,PEA/ 1t/H7L6_ V Afi),9? NEEp71sf'17 d kr�> File #: 21-653 MEETING DATE: 9/7/2021 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Oliver Chi, City Manager PREPARED BY: Ursula Luna-Reynosa, Director of Community Development Subiect: Authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC for 21 Main Street at the Huntington Beach Pier Statement of Issue: The City Council is requested to authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC (Ruby's), in a form approved by the City Attorney, for a concession building located at 21 Main Street on the Huntington Beach Pier. The purpose of the ENA is to establish duties and obligations related to the negotiation of a lease agreement for the site. Financial Impact: There is no financial impact associated with this request. If a new lease is executed with Ruby's, staff will return to City Council for approval, which will include the rental rate and the projected lease revenues that would be deposited into the General Fund (1000100.43095) Beach Concessions. Recommended Action: Authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC, in a form approved by the City Attorney, to negotiate the terms of a lease agreement for 21 Main Street. Alternative Action(s): Do not approve the recommended action and direct staff to enter into an ENA with either Let's Go Fishing & Surf City Snack Bar LLC (current lessee) or Surf City Partners, LLC, which are the remaining two responsive and qualified concessionaires that have submitted a proposal to lease 21 Main Street. Analysis: Background city of Huntuvion Beach Page 1 of 5 Pnntec on 911r2021 x 495 LegM1 ,' File #: 21-653 MEETING DATE: 9/7/2021 The Huntington Beach Pier is one of the most recognizable landmarks on the west coast and serves as an attractive destination for visitors and locals. The Pier also features an estimated 800 square foot concession building located at 21 Main Street and has been in operation since 2009. The site is also in the Downtown Specific Plan (DTSP) and Coastal Zone. Currently, the concession is operated by Let's Go Fishing & Surf City Snack Bar LLC (dba Let's Go Fishing), which offers fishing supplies, snacks, and souvenirs. Let's Go Fishing initially entered into a five-year lease agreement with the City on November 16, 2009. The lease also included a five-year extension ending on November 2019, which has been exercised by the tenant. In anticipation of the lease expiring at that time, the City released a Request for Proposals (RFP) to identify a qualified and responsive operator in April 2019. The City Council authorized a 6-month lease agreement with Let's Go Fishing in November 2019, followed by a month-to-month term. Due to the stressors caused by the COVID-19 pandemic, the City also granted a 90-day extension in June 2020. Under this extended lease agreement, Let's Go Fishing's current base rent is 5950/month or 10.5% of gross receipts, whichever is higher. Lease payments are currently in excess of 550,000 per year. RFQ Results On May 26. 2021 , the City released a Request for Qualifications (RFD) to solicit qualifications from potential concessionaires with a proven track record of operating a successful business of similar nature and scale. Additionally, respondents were asked to demonstrate their financial capacity and articulate a vision to enhance the pier experience for visitors. Submittal requirements included a cover letter, tax returns, income statement and balance sheet, audited financial statements, a description of the proposed use of the property, and biographical information of the principals. The City received submittals from the following four entities: • Let's Go Fishing & Surf City Snack Bar LLC (current lessee) • Ruby's Hospitality Group, LLC • Surf City Partners. LLC • Armijo Enterprises Staff and the National Development Council (NDC), the City's independent economic advisor, conducted a preliminary review of the proposals. Armijo Enterprises was disqualified due to lack of financial capacity and failure to submit current and historical financial information. The remaining three entities moved onto the second round of review and submitted additional information, which included a pro forma, a description of any proposed improvements to the property, and a construction timeline and costs. Below is a summary of the proposals received. • Let's Go Fishing & Surf_ City Snack Bar LLC - Marian Johnson is the sole member of this LLC, which has been operating at the concessionaire site since 2009. Current offerings include pre- packaged foods, ice cream, chips and other beach related merchandise, in addition to bait and tackle items. Ms. Johnson expressed interest in growing her business by creating additional revenue streams through the sale of hot foods (pizza, nachos, tacos and hot dogs), ice cream and Icee drinks; the provision of a coffee bar with pastries, bagels and muffins: and expanded City of Huntington Beacn Page 2 of 5 Printed on 9/1/2021 �,e..;W Lec.s;a C. File #: 21-653 MEETING DATE: 9/7/2021 offerings of pole rentals, pier fishing classes and fishing-themed birthday parties/events. A budget of 528,500 was proposed for upgrading and remodeling the inside and outside of the building with an approximate timeline of 12-17 weeks to complete the improvements. Projected sales for the first three years are estimated at $435,000-5635,000 based on 100-110 sales per day at an average of 512-16 per sale and assumes 15% growth per year with a net profit margin of 13-20% (not inclusive of the owner's salary). • Ruby's Hospitality Group, LLC - In 2018, Ruby's Diner entered into a Chapter 11 bankruptcy process to reorganize its obligations and ownership. In November 2020, Casbure Management, LLC acquired the master franchise rights and formed Ruby's Hospitality Group, LLC. The principal owners include: Casbure Management, LLC (affiliate of West 5'h Street Partners); Todd Spector, an individual, Eric Kurtzman, an individual; and Joe Micatrotto, an individual. The proposed concept from the new owners of the Ruby's brand includes constructing an adapted version of the classic Ruby's Diner that utilizes a walk-up window for guest service and a modified menu to streamline operations and conform to existing space limitations. The projected budget for improvements is approximately 5520,000 with plans to open within 12-14 weeks of receiving permits. Projected sales for the first three years range from S1 .1 - 51.4 million with a 4-9% net profit margin. Proposed rent includes a base rent figure of S90.000 annually with percentage rent to be determined but preference would be for a long-term, flat rent structure. The owners would pay the cost of all improvements and guarantee the lease. • Surf City_Partners.,.LLC - This local team with hospitality and franchise experience includes Jeff Bergsma (Design/Construction/Maintenance), Keith Bohr (Government Approvals), Paul Motenko (Restaurant Food and Beverage/Operational Systems), and Sharon and Adam Go (Restaurant Systems/Recruitment/Training). The concept is a "locals" eatery named Huntington's which would offer high quality comfort food and beverages (fine wines, locally crafted beers and libations), outdoor dining, surf line views, and occasional live music. The eatery would be open for breakfast, lunch and dinner with an estimated check average of 522.62, 90-minute table turns, a 130 person occupancy (49 inside & 81 patio), and 340 days of operation. Additionally, there would be two mobile retail carts for fishing pole rentals, the sale of bait and tackle, and the sale of coffee, hot chocolate and bottled water. The projected budget for improvements is 5532,000 with a project timeline of approximately seven months (four months for permit approval process and three months for construction) with the goal of opening by May 2022. Projected sales for year one are S1.5 million with an increase of 66% in year two (52.5 million) and another increase of 10% in year three (52.75 million) with a 5-8% net profit margin. Proposed annual base rent is 5180,000 which is 7% of sales based on the year two revenue assumption. Preliminarily, the cost of improvements is proposed to be financed using a one million dollar loan commitment with a 10- year term at 5% interest. Assessment of Qualifications Staff and NDC performed an analysis (Exhibit 1 ) of the submitted proposals and on August 11, 2021 , a summary of the top three finalists was presented to the City's Economic Development Committee (EDC). While all three respondents offered compelling visions and demonstrated experience City of Hun,ing;on Beach Page 3 of 5 Primed on 911/2021 70::e�i!eqs:ar°• File #: 21-653 MEETING DATE: 9/7/2021 operating successful businesses, the feasibility and viability of the concepts varied greatly with respect to their degrees of risk for failure. After careful consideration of each proposal, including a review against industry standards and entitlement requirements, the EDC recommended Ruby's for the concession space. Ruby's desire to revitalize the brand and relaunch this iconic burger chain with a fresh take offers the return of a beloved, community and family-oriented amenity that has strong brand recognition at the Huntington Beach pier. Although the new ownership entity was recently formed, the principals have extensive experience and strong financial assets, which depict a high-level of competency to implement a successful business operation. Additionally, the lease revenue proposed is almost double the existing rent, and the site will be enhanced without triggering major entitlements. Ruby's was a favorite for its location, prices and retro-style, and its reopening in close proximity to its original location will provide locals and visitors with a memorable and nostalgic pier experience. Let's Go Fishing offers the lowest risk to the City and is a profitable, established and successful business with a proven record. The proposal is similar to the products and services currently offered with comparable annual revenues and minor improvements to the building. If there is desire to maintain the status quo with a concessionaire that sells fishing supplies and convenience store items, the City Council could alternatively select Let's Go Fishing. Surf City Partners offers the highest proposed revenue potential by completely reimagining the site. This proposal is also the most ambitious with required entitlement approvals (i.e., coastal commission, parking, outdoor dining for 81 seats, ABC license for alcohol sales) given the intensification of the use and scope of improvements to the property. Upon review, the construction timeline and revenue projections appear aggressive with revenue highly dependent on sales during the summer months and 40% of sales derived from alcohol (typical restaurant 20-30%). Additionally, because improvements are anticipated to be funded using debt, this proposal is riskier than the other two finalists should actual revenue be lower than anticipated. However, if there is a desire to create a unique dining establishment on the Pier, the City Council could alternatively select Surf City Partners. Exclusive Negotiating Agreement Given the EDC's consideration of each proposal and its recommendation of Ruby's, staff is seeking Council authorization and direction for the City Manager to execute an ENA with Ruby's for 180 days to negotiate the terms of a lease agreement, establish duties and obligations between the parties, and conduct due diligence. Approval of an ENA does not obligate the City to enter into a lease agreement. A lease of the site will require separate City Council approval. An ENA will provide an opportunity to analyze the feasibility of pursuing the project while addressing various issues related to the change of use and proposed remodel. Such lease terms and obligations include the following: • Use, Term, Rent, Minimum Days/Hours of Operation. Maintenance. etc. • Design of Building Plans • Approvals including a Conditional Use Permit from the Zoning Administrator, Review by the Design Review Board for the building's design, colors, signage and materials, a Coastal Development Permit processed and approved by the Coastal Commission, and any applicable requirements related to outdoor dining, parking, and outdoor sales City of'Huntington Beach Page 4 of 5 Printed on 9111202; �+.&ZW Legicar- File #: 21-653 MEETING DATE: 9/7/2021 • Establishment of a Schedule of Performance and Entitlement Milestones Additionally, this ENA period will allow the current tenant, Let's Go Fishing, to continue its lease and operations while Ruby's obtains all necessary permits rather than leaving the concession vacant during this period. Environmental Status: Pursuant to CEQA Guidelines Section 15378(b)(5), organizational or administrative activities of governments that will not result in direct or indirect physical changes to the environment, do not constitute a project. If negotiations are successful, a lease agreement will be brought forward for City Council consideration and an environmental assessment will be conducted at that time. Strategic Plan Goal: Economic Development & Housing Attachment(s): 1. Request for Qualifications 2. Memorandum by NDC Ci:y of Huntington Beach Page 5 of 5 Printed on SM22021,. City Council/ Public Financing Authority ACTION AGENDA September 7, 2021 30. 21.M Authorized and directed the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC for 21 Main Street at the Huntington Beach Pier Recommended Action: Authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with , in a form approved by the City Attorney, to negotiate the terms of a lease agreement for 21 Main Street. Approved as amended to negotiate an ENA with Surf City Partners and allow Let's Go Fishing to remain open while under negotiations. Approved 6-1 (Peterson-No) PUBLIC HEARING 31. 21-633 Cancelled Advertised Public Hearing Item 21-633 authorizing City staff to apply for the Orange County Enhanced Mobility for Seniors and Disable Grant Program (EMSD) ADMINISTRATIVE ITEMS 32. 21-588 Approved American Rescue Plan Act (ARPA) Spending Plan Review and Allocation Recommended Action: Approve the proposed ARPA funds spending plan for Huntington Beach, and direct staff to prepare the necessary budget appropriate documents to facilitate the adopted program. Approved 7-0 33. 21-626 Provided Direction to Staff Regarding the Pier Plaza Art A-Faire Events at Pier Plaza Recommended Action: A) B) Direct staff to issue an RFQ to identify the most qualified arts and craft fair operators and return to City Council with a proposed operator and promotional agreement for consideration. Approved 5-1-1 (Peterson— No; Delgleize— Abstain) 34. 21-666 Approved formation of a 2021 Charter Revision Committee to conduct a review of the Huntington Beach City Charter 258 CITY OF HUNTINGTON BEACH ' INTERDEPARTMENTAL COMMUNICATION TO: Honorable Mayor and City Council Members SUBMITTED BY: Sean Joyce. Interim City Manager PREPARED FROM: Ursula Luna-Reynosa, Director of Community Development DATE: March 1, 2022 SUBJECT: SUPPLEMENTAL COMMUNICATION FOR ITEM 23 (22.141) - Approve and authorize a First Amendment to the Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC for 21 Main Street at the Huntington Beach Pier This communication is being provided to correct the vote count reflected at the top of Attachment #3 to the March 1, 2022 staff report The vote count at the top of the November 2, 2021 staff report is shown as 7-0 approved and it should be 6-1 as reflected below in the minutes. 21-787 Approved and authorized execution of an Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC for 21 Main Street at the Huntington Beach Pier A motion was made by Carr, second Deigleize to approve and authorize the Mayor and City Clerk to execute the "Exclusive Negotiating Agreement Between City of Huntington Beach and Surf City Partners, LLC" to negotiate the terms of a lease agreement for 21 Main Street The motion carried by the following vote AYES: Bolton, Delgleize, Carr, Posey. Moser and Kalmick NOES: Peterson xc Michael Gates, City Attorney Robin Estamslaa, City Clerk SUPPLEMENTAL Executive Team COMMUNICATION MW&V Dale. / /Z Z agenda Item No. 3/1/2022 21 Main Street First Amendment - Exclusive Negotiating Agreement Between City and Surf City Partners, LLC i HUNTINGTON BEACH • CALIFORNIA 21 Main Street - Background May 26,2021-City released RFQ for an approximate 800 SF pier concession building. September 7,2021-Council directed staff to prepare an ENA with Surf City Partners. LLC(SCP). November2,2021-Council approved the ENA,which commenced good-faith negotiations intended to culminate in a mutually acceptable lease. SUPPLEMENTAL wa'lVlMUM',CATION MeebN ruts. 6`// /•2�i 1 Agenda ltem No.- 99( '2.� — /!] 3/1/2022 21 Main Street - ENA SCP's proposal reimagines the existing retail concession space into a full-service restaurant with outdoor dining. ENA provides an opportunity to analyze the feasibility of the project by exploring code requirements related to the change of use and proposed remodel. SCP has obtained preliminary feedback from regulatory agencies regarding its proposed project. Request to Expand Property Area r 2 3/1/2022 Replacement of Exhibit A - Property Description Next Steps Per Council commentary during the September 70 Council study session, staff supports the expansion as long as all code requirements are satisfied. If City Council approves the First Amendment to the ENA to expand the property area, SCP will continue to work to secure requisite approvals for the project and negotiate lease terms. Draft lease will be submitted to the City Council for consideration at a future meeting. . •- 3 3/i/zozz Thank You. Questions? _ o a Switzer, Donna From: Casanova, Kriss Sent: Tuesday, March 1, 2022 149 PM To: Switzer, Donna Subject: FW: Item No. 23: Surf City Partners ENA Amendment Attachments: Cox Castle Letter to HBCC re 21 Main Street ENA Amendment.pdf Vig said to include as supplemental. Thanks! From: Matsler, Sean <SMatsler@coxcastle.com> Sent: Tuesday, March 1, 2022 9:37 AM To: CITY COUNCIL<city.council@surfcity-hb.org> Cc: Gates, Michael <Michael.Gates@surfcity-hb.org>; Luna-Reynosa, Ursula <ursula.luna-reynosa@surfcity-hb.org>; Casanova, Kriss<Kriss.Casanova@surfcity-hb.org>; Joe Micatrotto <joemicatrotto@kairocusa.com>; Joyce, Sean <Sea n.Joyce@surfcity-h b.org> Subject: Item No. 23: Surf City Partners ENA Amendment Mayor Delgleize and Honorable Members of the City Council: This Firm represents Ruby's Hospitality Group, LLC with respect to the 21 Main Street Exclusive Negotiating Agreement (ENA). The City Council's prior decisions on this issue were marred by procedural and legal irregularities, as set forth in Ruby's September 27, 2021 objection letter, which I have re-attached for reference. Tonight, Surf City Partners LLC is asking the City Council to amend the ENA in a way that exacerbates these irregularities. The attached March 1, 2022 letter from our Firm strongly cautions against such action, instead recommending that the City hit "reset" on this flawed process and circulate a new RFQ or RFP. Thank you for your consideration and for your service. Best, Sean SUPPLkmEN 1 AL COMMUNICATION Sean Matsler Meeft DWe; 311 I2Z IdCOX CASTLE NICHOLSON �genwftfn►o.: a3 � Cox,Castle&Nicholson LLG 3121 Michelson Drive Ste 200 Irvine CA 92612 1 direct: 949.260.4652 mobile: 714.330.0797 main: 949.260.4600 fox: 949.260.4699 smatsler@coxcastle.com ward bio website This communication is intended only for the exclusive use of the addressee and may contain information that Is orrvdeged or confidential If you are not the addressee,or someone responsible for delivering this document to the addressee,you may not read,copy or distribute it Any unauthorized drsseminanon,distribution or copying of this communication Is strii prohibited If you have received this communication in error,please call us promptly and securely dispose of t ThanK you 2 W COX CASTLE Cos. icheIo Nicholson LL0 L� [' 3 12 1 Michelson Uriac.son 200 N I C r 1 O L S O N P ne.949 204California 12-5678 0. I':949.260.d600 F:949.2(i0A699 Senn slatsler 949.260.4652 smatsleri_icosenct le.corn Pile No. 089675 March 1. 2022 VIA ELECTRONIC MAIL jCITY.00UNCIL@SURFCITV-H13.0RGj Mayor Barbara Delaleize and Honorable Members of the City Council City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: First Amendment to the Exclusive Neaotiatine Agreement for 21 Main Street Mayor Delgleize and Honorable Members of the City Council: This Firm represents Ruby's Hospitality Group. LLC with respect to the 21 Main Street Exclusive Negotiating Agreement (ENA). As you know. Ruby's has a long-standing and cherished association with the City of E luntington Beach and its iconic pier. Ruby's proudly served locals and visitors alike from its diner at the end of the pier between 1996 and 2021. Ruby's actively pursued the opportunity to develop and operate a restaurant at 21 Main Street pursuant to the City's May 2021 request for qualifications (RFQ)- Unfortunately. despite its unanimous selection as the recommended operator by the Cit•'s Economic Development Committee and the City's independent consultant. the City Council elected to proceed with an ENA with Surf City Partners. LLC (Surf' City) on September 7. 2021. Ruby's submitted the attached letter dated September 27. 2021 objecting to that outcome on multiple grounds and highlighting various procedural and legal questions surrounding the selection of Surf City. That letter is incorporated herein by reference and Ruby's concerns remain unresolved. Tonight. the Council will consider whether to make its already-flawed decision worse by amending the Surf City ENA to further deviate from the original RI-Q. As set forth in the attached September 7 letter, the City's direction in the original RFQ contemplated that the restaurant .would tit within the existing 830-square foot "Let's Go Fishing' building. Surf City ignored that limitation. instead proposing the installation of 81 outdoor dining seats in an enclosed patio outside the building as well as the placement of two sales kiosks on the pier. The enclosed patio enabled Surf City to assume alcohol sales in its pro forma. making its revenue projections look more attractive by comparison to Ruby's and others who assumed that alcohol would not be allowed. Neither Ruby's nor the other applicants were notified that the City Council would accept input and weigh factors outside of the RFQ. www.coxcastle.com Los Angeles I Orange County I San Francisco March 1, 2022 Page 2 Now Surf City desires to further expand the leasable property area beyond the pier concession building and its surrounding area to include the pier restroom building. Surf City's ..scope creep" is best illustrated in the image below. Ruby's and other operators submitted proposals to the City for the area highlighted in yellow, which was consistent with the direction provided in the City's RFQ. Surf City originally submitted for the area in yellow Dius the area in red. We objected to that in the attached September 7 letter. Tonight, Surf City proposes to add the area in blue to the areas in yellow and red. For all we know, Surf City may lay claim to the entire pier next... J t t - t ' 7 O ppproaimatety 800 Si of indoor building space Potential outdoor space adjacent to owWin` llesnooms and potential storage area The City has a fiduciary obligation to maximize its limited public property for the greatest benefit of its citizens. No property in the City embodies the sanctity of this obligation more than the Huntington Beach Pier. Tonight, Ruby's respectfully asks the City to hit the "reset" button on the 21 Main Street lease process. It can do so in three-steps. First, the Council should reject Surf City's proposed ENA Amendment as being wholly inconsistent with the original RFQ for all the reasons set forth in this letter and Ruby's attached September 7 letter. Second, staff should be directed to broadly circulate a new RFQ or RFP calling for creative,revenue-generating restaurant operators to submit proposals that make full use of the pier concession building, its surrounding area, and the pier restroom building just as Surf City proposes to do. Third, the Council should weigh all the proposals on a true apples-to-apples basis and make an informed decision that best serves its constituents and the City's many visitors. March I, 2022 Page 3 Our suggested approach carries no downside for the City. None. After comparing all proposals. the City may well decide that Surf City's concept is the most compelling. Or it may discover value in other proposals.' Either way. this approach ensures that each applicant's complete vision. with real financial impacts. will be considered on a level playing field. Ruby's looks forward to working with the City as part of a fair process that will be in the Citv's best interest. Sincerely. Sean Matsler ofCOX. CASTLE R NICI-IOLSON LLP cc: Sean Joyce. City Manager Michael Gates. City Attornev Kriss Casanova. Economic Development Manager Ursula Luna-Reynosa, Director ofComnumity Development Joe Micatrotto, Ruby's Hospitality Group. LLC 039675\14577314z1 ' BY way of example Surf Citys RFQ response projected that 40%ol sales revenue would be generated from alcohol. nearl- double the average in the Citv according Cite staff. Ruby's assumed no alcohol revenue in light of its original walk-up restaurant concept. Given the opportunity to create a private dining patio suitable I-or alcohol sales.however. Rubv's sales would substantially increase as oould its corresponding rent payment to the City. hU6YS September 27, 2021 VIA ELECTRONIC MAIL 1CITY.COUNCIL©S1JRFCITY-HB.ORG1 Mayor Kim Carr and Honorable Members of the City Council City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: Exclusive Neeotiating Agreement for 21 Main Street Mayor Carr and Honorable Members of the City Council: As principals of Ruby's Hospitality Group, LLC and stewards of Ruby's long tradition in Southern California,we are deeply concerned about the City Council's September 7,2021 decision with respect to the 21 Main Street Exclusive Negotiating Agreement(ENA). As discussed in this letter, we believe that the City Council would have reached a different conclusion had it followed the process established by its own professional staff and judged the RFQ responses from an 'apples-to-apples' perspective. We therefore respectfully request that this Council issue a Request for Proposals so each applicant's complete vision, with real financial impacts,can be considered on a level playing field. We believe this would allow the Council to make an informed decision about the best. most viable solution for the operation of 21 Main St. 1. Background On May 26, 2021, the City released a request for qualifications (RFQ) for potential operators of the approximately 930 square foot building located at 21 Main Street. The RFQ was notably not a request for proposals or a request for projects. Rather, the RFQ simply requested, among other information, three years of tax returns and audited financial statements, a year-to- date income statement and balance sheet, and biographical information of ownership and management. It was understood that the applicant selected to proceed with an ENA would thereafter be asked to provide a detailed financial offer(e.g., guaranteed base rent and percentage rent). Ruby's followed the City's directions and submitted its response to the request for qualifications. On July 16, 2021, City staff asked Ruby's to provide additional information, including a pro forma analysis of anticipated costs and sales projections for three years,a projected budget for improvements to the space, and a timeline to complete planned improvements. Again, the additional information requested did not call for proposals or projects. And again,Ruby's followed the City's directions and submitted the requested information. Mayor Carr and Honorable Members of the City Council September 27, 2021 Page 2 On August 25, 2021, Ruby's was informed by the City that it was selected as the recommended operator by the City's Economic Development Committee (EDC) and the City's independent consultant, National Development Council (NDC). Ruby's later learned that the EDC's decision was unanimous. As you can imagine, we were elated to be one step closer to returning Ruby's to its longtime home on the IJuntington Beach Pier. 2. September 7,2021 City Council Meeting What happened on September 7' remains something of a mystery to us. The Council's hearing on this matter began as expected: City staff explained that the purpose of its initial RFQ and its follow up information request was to employ"a very objective process"producing data the City Council could "compare," such as financial statements and resumes. Having received responses from four parties, both City staff and EDC recommended that the City proceed with an ENA with Ruby's. The purpose of the ENA would be to explore the financial and other terms of a potential relationship with Ruby's at 21 Main Street.' To that end,Agenda Item No. 30 was titled: "Authorize and direct the City Manager to execute an Exclusive Negolialing Agreement (ENA) with Ruby's Hospitality Group, LLCfor 21 tbfoin Street at the fluntington Beach Pier." To us(and our attorney), this sounded like a simple "up or down" vote on the Ruby's entity. It was after staff's presentation that the Council took an unexpected turn. Rather than considering the four applicants qualifications—as staff had intended—the Council's focus turned to each applicant's assumed financial proposal and physical development project. The exact criteria the City Council considered on September 7 was unclear. For example, the City Council entertained the possible development of the concession site outside of the existing 830-square foot building area, which was not contemplated in the RFQ. The Council also considered the use of ancillary kiosks and existing City restrooms, neither of which were part of the RFQ. Questions about entitlement (including Coastal Commission) risk and project feasibility did not weigh heavily on the decisionmakers, nor did the unmistakable fact that the comparison between Ruby's $90,000 rent and Surf City's$180,000 rent was an `apples-to-oranges' exercise(i.e. Ruby's plans contemplated only the announced 830 feet, no ancillary kiosks or existing City restrooms, and included a revenue-based rent making S90,000 a bare number, not the holistic rent number the City should consider). To our team, it felt like the Council was "jumping ahead" by weighing financial and other terms that were well beyond the scope of the RFQ, thereby creating an uneven playing field for all RFQ respondents The City Council's ultimate action to proceed with an ENA with Surf City raises significant procedural concerns. Neither Ruby's nor the other applicants were notified that the City Council would accept input and weigh factors outside of the RFQ (e.g., use of mobile retail kiosks and the privatization of approximately 1,500 square feet of existing public space, which allowed for alcohol sales). Had Ruby's been aware of these new factors,our response to the RFQ would have City staff specifically instructed Ruby's to omit rent figures and a lease term from the RFQ response on the basis that such matters were better suited for the ENA phase of the process. Mayor Carr and Honorable Members of the City Council September 27, 2021 Page 3 been different. The City may also have received other proposals from full-service restaurant owners newly interested in the opportunity to operate a sit-down restaurant on the Pier. Set forth below is a comparison of the Ruby's and Surf City RFQ responses as well as a list of questions/observations that show the decision by Council to move away from staffs and EDC's recommendation was made without a full appreciation of the opportunity to negotiate with Ruby's or another operator. As set forth in the conclusion of this letter, the only appropriate way for the City to proceed from here is to issue a new Request for Proposals- Ruby's Surf City Unanswered Questions Rent Ruby's followed City The NDC summary states City Economic staffs specific that rent would be Development Manager instructions not to submit $180.000 annually. Kriss Casanova and proposed base or several Councilmembers percentage rent figures, commented that Surf or to propose a defined City's proposal was lease term in its RFQ "high risk, high reward" response. City staff —this begs the question, indicated that such how big is the risk, and matters were better suited how likely is the reward? for the ENA phase of the For example, it is unclear process. However, as a how much, if any, of Surf placcholder, Ruby's pro City's $180,000 is forma assumed a guaranteed base rent and $90,000 annual rent with how much is percentage the ultimate base and rent. As a threshold percentage rent to be matter, the City has to negotiated as part of the understand the base and ENA. The$90,000 percentage rent from figure represents an each applicant in order to approximate eightfold fairly compare them to increase over the current one another. With $950/month base rent. respect to risk, the City's The City Council seems third-party consultant to have mistakenly (NDC) noted, Surf City's assumed that$90,000 "Proforrna sales revenues was Ruby's total & growth assumptions financial proposal to the submitted are aggressive City. and may not be attainable depending on final design and the allowable occupancy level." Mayor Carr and I lonorable Members of the City Council September 27, 2021 Page 4 Rub 's Surf City Unanswered Questions Alcohol None proposed in light of Projected that 40%of What if the Coastal the walk-up restaurant sales revenue would be Commission declines to concept. Given the generated from alcohol, approve Surf City's opportunity to create a nearly double the average proposed privatization of private dining patio in the City according City approximately 1,500 suitable for alcohol sales. staff'. square feet of existing however, Ruby's annual public space and the rent(as a percentage of attendant increase in sales)would substantially parking? Not only would increase. that eliminate 40%of the alcohol sales revenue, it would also eviscerate Surf City's total food sales assumptions. Space Per the City's direction in Proposed to exceed the Surf City's proposal the RFQ, the restaurant 830 square feet building raises public access would fit within the area with installation of concerns that the Coastal existing 830-square foot 81 outdoor dining seats, Commission is likely to building. use of the adjacent fixate upon. First, the restrooms, and placement Surf City proposal would of two sales kiosks on the privatize approximately pier. 'Total occupancy is 1,500 square feet of projected at 130 patrons existing public space on between 49 inside seats the Pier. It would also and 81 patio scats. require additional parking Commenting on the for its estimated 130 scope of Surf City's diners. And, given the proposed improvement feasibility concerns plans, City Economic expressed by NDC Development Manager regarding the space Kriss Casanova stated: needed to accommodate a "It's difficult to full service kitchen. the understand how(the) Surf City proposal may facility would be able to require building footprint accommodate a kitchen." expansion. Timing In order to expedite the I'otal project timeline is Given the coastal access entitlement process and estimated at seven issues implicated by the commence operations months consisting of four Surf City�pro osal e. ., Mayor Carr and Honorable Members of the City Council September 27, 2021 Page 5 Rubv's Surf City Unanswered Questions quickly, no modifications months for the permit privatization of public to the building's existing approval process and spaces, added parking footprint are proposed. three months for demand, potential Construction will construction. building footprint commence immediately expansion), those upon receiving proper familiar with the Coastal permits and construction Commission process is expected to be should be skeptical of the complete within 12-14 four-month entitlement weeks. schedule and the group's ability to begin operations in month eight.' The City's third- party consultant (NDC) recognized this fault in the Surf City proposal, concluding that: "entitlement eligibility for the designed use is unclear and may need to be significantly revised & scaled back in order to meet code requirements and attain permit approvals." In light of the significant procedural and legal questions surrounding the Council's selection of Surf City on September 7, we respectfully request that the Council immediately take the following steps: I. Do not commence ENA negotiations with Surf City. 2. Direct City staff to issue a Request for Proposals that accounts for all the information considered by the City Council at the meeting. This would include rent projections for both base rent and percentage rent as well more detail on the use of the site, timing of developmentloperations and regulatory/entitlement strategy. In a public statement following the September 7 hearing,Councilman Peterson stated plainly that"...there are many issues surrounding the proposal by[Surf City] that make this project unlikely to he approved by Coastal Commission and Building Department" Mayor Carr and Honorable Members of the City Council September 27, 2021 Page 6 Only through this will the City Council be able to compare all proposals on an `apples-to-apples' basis. 3. Consistent with the RFQ, the City Council should either(a) reject submissions that exceed the scope of the defined project (e.g., that go beyond the 830 square foot building); or (b) direct staff to include such parameters in a new Request for Proposals. At the September 7 hearing Mayor Carr stated "What we saw tonight was not what was (originally) presented. We were not told it was going to be two buildings." We agree. This decision is too important for the City to make on a Flawed premise. We look forward to working with the City as part of a fair process that will be in the City's best interest. cer To S e cc: Oliver Chi, City Manager Michael Gates, City Attorney Kriss Casanova, Economic Development Manager Ursula Luna-Reynosa. Director of Community Development Sean Matsler. Esq., Cox, Castle R Nicholson LL.P 099999UJ62467 3 2000 Main Street, Huntington Beach, CA City of Huntington Beach 92648 /hOP)TVED 6 _� File #: 21-787 MEETING DATE: 11/2/2021 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Oliver Chi. City Manager PREPARED BY: Ursula Luna-Reynosa. Director of Community Development Subject: Approve and authorize execution of an Exclusive Negotiating Agreement (ENA) with Surf City Partners. LLC for 21 Main Street at the Huntington Beach Pier Statement of Issue: The City Council is requested to authorize execution of an Exclusive Negotiating Agreement (ENA) with Surf City Partners. LLC for a concession building located at 21 Main Street on the Huntington Beach Pier. The purpose of the ENA is to establish duties and obligations related to the negotiation of a lease agreement for the site. Financial Impact: There is no financial impact associated with this request. If a new lease is drafted with Surf City Partners, LLC, staff will submit it to City Council for consideration and will include the rental rate and the projected lease revenues that would be deposited into the General Fund (1000100.43095) Beach Concessions account. Recommended Action: Approve and authorize the Mayor and City Clerk to execute the "Exclusive Negotiating Agreement Between City of Huntington Beach and Surf City Partners, LLC" to negotiate the terms of a lease agreement for 21 Main Street. Alternative Action(s): Do not approve the recommended action and direct staff to reissue a Request for Qualifications or a Request for Proposals for 21 Main Street that includes an expanded area to be defined by the Council. Analysis: On September 7, 2021 , Council directed staff to prepare an Exclusive Negotiating Agreement (ENA) with Surf City Partners, LLC (SCP) for an approximately 800 square foot concession building located at 21 Main Street on the Huntington Beach Pier. If approved, the ENA will commence good-faith negotiations between the City and SCP, intended to culminate in a mutually acceptable lease that will set forth the terms and conditions for improving the site as a restaurant concept, including; design, City of Huntington Beach Page 1 of 3 Printed on 2242022 File #: 21-787 MEETING DATE: 11/2/2021 financing, construction, and operation of the project. The purpose of the ENA is to guide the process of negotiations through establishment of exclusive rights, negotiation timelines, development objectives, limitations, and responsibilities. Based on Council's direction at the September 7, 2021 meeting, staff and SCP have structured terms and conditions for the negotiations in the ENA (Attachment 1). Key points of the ENA are summarized below: • The exclusive negotiating period is for a term not to exceed 365 days with critical milestones and off-ramps scheduled within the term. The City and SCP will conduct due diligence, secure entitlements, and negotiate the terms and conditions of a mutually-acceptable lease. • SCP will submit requisite development applications, plans and documents necessary to secure discretionary approvals for the project, consistent with the response to the RFQ. • SCP shall be solely responsible for all costs associated with preparation of requisite plans and documents. • The ENA establishes a schedule of performance with milestones. • The ENA does not obligate either party to enter into any particular agreement. It does not commit the City to lease the site or grant discretionary approvals. SCP is proposing a unique concept of a "locals" eatery named Huntington's which would offer high quality comfort food and beverages (fine wines, locally crafted beers and libations), outdoor dining, surf line views, and occasional live music. The proposal reimagines the site with an eatery open for breakfast, lunch and dinner and two mobile retail carts; one for fishing pole rentals and the sale of bait and tackle, and the other for the sale of coffee, hot chocolate and bottled water. The approximate budget for improvements to the site is $532,000 with projected sales for year one through three between $1.5 and $2.75 million. The project, as it is envisioned, would require entitlement approvals consistent with the Downtown Specific Plan (DTSP) and Coastal Zone given the intensification of the use and scope of improvements to the property. A site plan and elevation of the current proposal is included as Attachment 2. An ENA will provide an opportunity to analyze the feasibility of pursuing the project while addressing various issues related to the change of use and proposed remodel. Planning approvals needed include a Conditional Use Permit from the Zoning Administrator, review by the Design Review Board for the building's design, colors, signage and materials, a Coastal Development Permit processed and approved by the Coastal Commission, and any applicable zoning requirements related to outdoor dining, parking, alcohol and outdoor sales, as well as a public view analysis. Requirements by Building & Safety, the Orange County Health Care Agency, and Alcohol Beverage Control would also need to be met. Further, the State Land Commission must approve the lease as the City leases the pier from the State. Upon the securing of requisite approvals and negotiating lease terms, the lease will be submitted to the City Council for consideration at a future City Council meeting. In the interim, the ENA will allow the current tenant, Let's Go Fishing, to continue its month-to-month lease and operations rather than leaving the concession vacant during this period. Let's Go Fishing has expressed their desire to remain at the site as long as possible until a lease with SCP is approved, and staff will work with them during this period to keep them informed of the new lease status and to ultimately facilitate a City of Huntington Beach Page 2 of 3 Printed on 10/272021 gower1_%8 Legista'• File #: 21-787 MEETING DATE: 11/2/2021 smooth transition. Environmental Status: Pursuant to CEQA Guidelines Section 15378(b)(5), organizational or administrative activities of governments that will not result in direct or indirect physical changes to the environment, do not constitute a project. If negotiations are successful, a lease agreement will be brought forward for City Council consideration and an environmental assessment will be conducted at that time. Strategic Plan Goal: Economic Development & Housing Attachmentls►: 1 . Exclusive Negotiating Agreement 2. Current Site Plan and Elevation 3. September 7, 2021 RCA and Minutes City of Huntington Beach Page 3 of 3 Printed on 1 0/2 712 0 2 1 rowe$599 Leg,staC- ATTACHMENT # 1 EXCLUSIVE NEGOTIATION AGREEMENT BETWEEN CITY OF HUNTINGTON BEACH AND SURF CITY PARTNERS, LLC This Exclusive Negotiation Agreement [ENAJ is made by and between the City of Huntington Beach, a municipal corporation and serving in its capacity as Lessor(the "Lessor"), and Surf City Partners, LLC, a California limited liability company (the "Proposed Lessee"), hereinafter jointly referred to as the (the "Parties"), for the purpose of negotiating, for a set period of time, and to refrain from negotiating with others. the development of a proposed lease. RECITALS WHEREAS. the Lessor leases real property commonly referred to as 21 Main Street on the Huntington Beach Pier, shown on Exhibit A and incorporated herein by this reference (the "Property'). The Property is approximately 800 square feet and is located in the Downtown Specific Plan (DTSP) and Coastal Overlay District; WI-IEREAS, Lessor desires to explore the possibility of repurposing a certain area of the Property, including the entire interior of the concession space with some adjacent exterior outdoor dining area. to include a new restaurant business; and WHEREAS; on May 26, 2021, the Lessor released a Request for Qualifications (RFQ) to solicit interest from potential concessionaires with a proven track record of operating a successful business; and WHEREAS on September 7, 2021, the Huntington Beach City Council selected Surf City Partners, LLC, a local team with hospitality and franchise experience comprised of Jcf Bergsma (Design/Construction/Maintenance), Keith Bohr (Government Approvals), Paul Motenko (Restaurant Food and Beverage/Operational Systems), and Sharon and Adam Go (Restaurant Systems/Recruitment/-Training), based on their expertise, qualifications and unique concept of a "locals" eatery named Huntington's which would, subject to additional approvals, provide high quality comfort food and beverages, outdoor dining, surf line views, and occasional live music, incorporated herein by this reference (the "Project"), and WHEREAS. the Parties desire to enter into an Exclusive Negotiation Agreement (the ''ENA") for a set period of time, and to refrain from negotiating with others, the development of a proposed lease for the use and occupancy of the Property (the "Lease"). -rhe Parties acknowledge and agree that this ENA in itself does not obligate the Proposed Lessee to acquire or the Lessor to convey the Property, does not grant the Proposed Lessee the right to develop the Project, and does not obligate the Proposed Lessee or the Lessor to pursue or complete any activities or costs to develop the Project, except for the preliminary analysis and negotiations contemplated by this ENA; and WHEREAS, during this process, Lessor will also be acting in the capacity as a Charter City and nothing in this ENA shall limit, waive, or otherwise impair the authority and discretion of the City, including the City's Police, Fire, Community Services, Planning, Building, and Engineering departments or divisions. WHEREAS, the Parties agree that the purpose of this ENA is to provide broad parameters on which the Parties will negotiate in good faith for a set amount of time detailed in the timeline, attached as Exhibit B and incorporated herein by this reference (the `'Performance Timeline"), and, in the end, possibly execute a Lease. NOW. TFIEREFORE. THE PAR"TIES AGREE AS FOLLOWS: ARTICLE 1: TLRM Unless terminated earlier, as set forth herein, including Exhibit B, this ENA shall be in effect for a period of three hundred and sixty-five (365) days commencing upon the Effective Date hereof, and will end 365 days later or until the effective date of an approved Lease, whichever occurs first ("Term"). Unless continuing obligations exist pursuant to this ENA, once the term expires neither party shall have any further rights against or liability to the other under this ENA. The City Manager or designee may extend the time to complete the milestones identified in the Performance Timeline in his or her sole discretion. In no event shall such extensions result in the Term being extended by more than 365 days without amending the 'term herein pursuant to City Council approval. ARTICLE 11: EXCLUSIVITY Lessor hereby agrees that during the term of this ENA, and so long as Proposed Lessee is conducting due diligence and negotiating in good faith toward the drafting, submission and execution of all approvals, including a Lease (and all other associated and necessary documents), Lessor shall not negotiate with any other person or entity regarding the Property. ARTICLE III: DUTIES OF LESSOR I I During the term. Lessor and its staff shall be available to meet with the Proposed Lessee to discuss the Project for the Property and any other matters pertaining to the renovation of the Property at mutually agreed upon times and dates. Lessor will negotiate in good faith, including not unreasonably rejecting any submissions, the terms and conditions of a proposed Lease with the Proposed Lessee. In addition. Lessor will, to the extent possible: a. Advocate and cooperate with outside government and regulatory agencies to advance the Project; b. Provide timely access to all public records, reports, studies, plans, permits, in its possession, related to the Property and the pier; c. Assist with access to the Property and coordination with the existing tenant; and. I d. Authorize Proposed Lessee to apply and submit for permits and entitlements. At the Lessors sole discretion, Lessor maintains the right to be a co-applicant on permit submittal. 3.2 Lessor Discretion. Nothing in this ENA shall obligate the Lessor to exercise its discretion regarding the Property or Project in any particular manner. Proposed Lessee acknowledges that execution of this ENA by the Lessor does not constitute approval by the City of any entitlements, permits or any other regulatory requirements, known or unknown and in no way limits any authority of the City to act, or refrain from acting, including exercise of the City's regulatory authority, or any discretionary or non-discretionary actions of the City. Proposed Lessee acknowledges that approval, conditional approval, or denial of entitlements and/or the entering into a Lease is within the sole and exclusive discretion of the City without limitation by or consideration of the terms of this ENA. Lessee hereby acknowledges that in general, the Lessor does not make any commitment to any particular Project before it completes review including committing to planning and zoning approvals by contract; and that the Lessor makes no representation regarding the ability or willingness of the City to approve entitlements or a Lease, nor any representation regarding the imposition of any mitigation measures or other conditions of approval. In addition, the Proposed Lessee acknowledges that the State of California, acting by and through the California State Lands Commission, leases the Property to the City of' I luntington Beach. In addition to the proposed lease, there are other regulatory agencies that require additional entitlements including the California Coastal Commission and that any approval by the City does not bind any other agency. ARTICLE IV: DUTIES OF 13ROPOSED LESSEE 4.1 ]'reposed Lessee will provide to Lessor. in a timely manner, all requested information related and/or necessary to complete this ENA phase and if successful, entering into a Lease. Information includes but is not limited to a draft Project Schedule of Performance with milestones to be included as an Exhibit to the Lease. The Schedule of Performance will outline timing associated with major tasks and milestones commencing with submittal of an application for Building Permit and ending with a Certificate of Occupancy, among other things. 4.2 Proposed Lessee will provide to Lessor a Site Plan and architectural renderings of the proposed Project. The Site Plan and architectural renderings shall include a well- defined architectural concept for the Property showing interior and exterior areas, elevations, signage, and architectural character of the proposed Project. However, notwithstanding submission by the Proposed Lessee as set forth herein, no such Site Plan or architectural renderings shall be deemed final until regulatory approvals and approval of the Lease. Such approval is at the sole discretion of the City. 4.3 Proposed Lessee will provide sample menus including pricing of food items 3 for breakfast, lunch and dinner, as well as hours of operation. 4.4 Proposed Lessee will work to secure Project funding and exhibit evidence of Funding commitments upon execution of the Lease. 4.5 Proposed Lessee will provide an updated pro forma and description of proposed improvements. 4.6 Proposed Lessee shall undertake such due diligence as is necessary to determine the suitability of the Property for the Project, including but not limited to alcohol sales, parking, outdoor dining, outdoor display of' goods, ADA compliance, and other building and health department requirements. Proposed Lessee shall conduct due diligence activities it deems necessary to provide the Lessor with sufficient information to determine the feasibility of developing the Project on the Property and shall be responsible for the costs of all such studies, surveys and investigations. 4.7 The Proposed Lessee, at its sole cost, shall be responsible for obtaining all land use entitlements and other governmental approvals from the City, and other entities as may be necessary for the Proposed Lessee's contemplated use on the Property. The Lessor shall cooperate with the Proposed Lessee's efforts to obtain such entitlements. Prior to submitting any applications to the City or other governmental entities, the Proposed Lessee shall submit to the Lessor the design and architecture of the Project, including the conceptual plans, elevations, the exterior design and layout and any other information that the Proposed Lessee intends to submit as part of its entitlement application. In the exercise of its reasonable discretion, the Lessor shall respond to the Proposed Lessee's written request for approval of conceptual plans within ten (10) business days of the Proposed Lessee's request therefor or the items submitted for approval shall be deemed approved. If the Lessor disapproves of the items submitted, it shall specifically state the reasons for such disapproval. The Proposed Lessee shall not submit any applications for entitlements until the Lessor has approved the conceptual plans and application materials. The Proposed Lessee shall provide to the Lessor, for its approval, any changes to the Project during the entitlement process and the Proposed Lessee shall not agree to any such changes unless previously approved by the Lessor. ARTICLE V: LEASE AGREEMENT The Parties agree to negotiate in good faith the terms, conditions, issues and topics to be included in the Lease. The terms, conditions, issues and topics to be included in the Lease shall include, but are not limited to, the following: 5.1 Term of the Lease including commencement date, extensions, rent and adjustments, and security deposit. The Lease will also include terms and conditions for termination of the Lease by either Party. 5.2 The terms and conditions for the operation and management of the Property by the Proposed Lessee, including a lease guaranty and assignment restrictions. 4 5.3 Requirement that Proposed Lessee shall operate and manage the Property in compliance with all federal, state and local equal opportunity standards. 5.4 Right of the Lessor to oversee and inspect the operations and management of Proposed Lessee to determine compliance with the provisions of the Lease. 5.5 Lessor oversight of all work done on the Property and that the work will be of the highest quality and standard. ARTICLE V1: TERMINATION Either Party may terminate this ENA if there is a material breach of the ENA. Material breach includes, but is not limited to. failure by either Party to negotiate in good faith and to use their reasonable efforts to negotiate the terms and conditions of the Lease. If a Party believes the other party is in breach, the aggrieved Party will provide notice to the other Party and request that both Parties negotiate in good faith, with ten (10) business days to cure. If the Lessor is the aggrieved Party and Proposed Lessee does not cure such default, the Lessor may terminate the ENA. If the Proposed Lessee is the aggrieved Party and the Lessor does not cure, neither party shall have any further rights against or liability to the other under this ENA. Proposed Lessee and Lessor may, at any time, mutually agree to terminate this ENA. 6.1 Termination by Lessor. Lessor shall have the right to terminate this ENA in the event that: a. The proposed Project is not approved. b. If the proposed Project is determined by Lessor, within reasonable discretion, to be infeasible or Proposed Lessee fails to meet the milestones in accordance with the critical milestones identified in the Performance Timeline. c. Any substitution of an individual of Surf City Partners, LL.0 without express written consent of the Lessor. 6.2 Termination by Proposed Lessee. Proposed Lessee shall have the right to terminate this ENA in the event that: a. Proposed Lessee determines that the Property is infeasible to undertake the proposed Project. b. Proposed Lessee fails to secure necessary entitlement approvals. ARTICLE VII: COMPLIANCE WITH FEDERAL AND STATE LAW Execution of a Lease by the Lessor shall be subject to compliance with all Federal and State laws and regulations including but not limited to the California Environmental Quality Act (California Public Resources Code § 2100 et seq.). The Proposed Lessee hereby agrees to 5 provide all reasonable assistance to the Lessor necessary for the City to carry out its obligations under CEQA. The costs of consultants, attorneys, engineers, appraisers, and other third party services undertaken by the City in considering and preparing any CEQA-required analysis or document shall be paid by the Proposed Lessee. ARTICLE XIII: NONDISCRIMINATION The Proposed Lessee shall not discriminate against nor segregate any person, or group of persons on account of race, color, creed, religion, sex, marital status, national origin, ancestry. handicap or sexual preference, in the sale. lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property in the formulation of the Lease or after its execution, nor shall the Proposed Lessee establish or permit any such practice or practices of discrimination or segregation in the selection, location, number, use or occupancy of Proposed Lessees, lessees, sub-Proposed Lessees, sub-lessees or vendees of the land. The Lease shall contain all applicable statutory covenants. ARTICLE IX: MUTUAL CONFIDENTIALITY To the extent permitted by applicable law, the Parties shall maintain all inf'oriation concerning this ENA and any pending or subsequent negotiations between the Parties as confidential, disclosing information only to those individuals and representatives as designated by the other Party, provided that such individuals acknowledge and agree to maintain the confidentiality of such information. Proposed Lessee agrees and acknowledges that the Lessor is a public agency and is subject to the California Public Records Action (Gov. Code 6250 et. seq.) (the "Act"). Lessor agrees to inform Proposed Lessee of any requests for information related to this ENA or the Project pursuant to the Act not less than 3 days prior to the release of information. ARTICLE X: CITY COUNCIL APPROVAL Proposed Lessee understands and agrees that any proposed Lease or other binding agreement(s) contemplated in this ENA, must be reviewed, considered, and approved at a public meeting before the City Council of the City of 1-luntington Beach. Further, this ENA does not convey any property rights, or any right to develop and/or lease the Property. While the City's staff may recommend approval of the Project, the City Council shall have the sole discretion to approve or disapprove. ARTICLE XI: MISCELLANEOUS PROVISIONS 11.1 Governing Law. This ENA shall be governed by and construed and enforced in accordance with the laws of the State of California. Therefore,any action brought by either Party in connection with this ENA shall be commenced and maintained in any proper jurisdiction located in Orange County, California. 11.2 Entire Agreement. This ENA constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes any and all prior agreements and 6 understandings between the Parties. There are no agreements or understandings between the Parties and no representations by either Party to the other as an inducement to enter into this ENA. Notwithstanding anything provided herein to the contrary, whether expressed or implied, the Lessor shall have no obligation to enter into a Lease with the Proposed Lessee and neither the Lessor, its representatives, staff or agents have made any promises to the Proposed Lessee other than to exclusively negotiate a Lease for the Property in good faith with the Proposed Lessee during the Exclusive Negotiating Period. No statements of the Lessor, its representatives or its officers, members, staffer agents as to future obligations shall be binding upon the Lessor unless and until such statements are memorialized in a Lease that has been approved by the City. 11.3 Assignment. The Proposed Lessee's may not transfer or assign any or all of its rights or obligations hereunder to any other person or entity without the written consent of the Lessor which may be withheld at its sole discretion. I1.4 No Warranty as to Site/Improvement Conditions. No warranty or representation of any kind is made by Lessor with respect to the condition of the Property or any improvements thereon. 11.5 Conflicts of Interest. The Parties to this ENA have read and are aware of the provisions of Section 1090 et seq. and Section 87100 et seq. of the California Government Code and related regulations and rulings relating to conflict of interest as well as the Conflict of Interest Code of the City. All parties hereto agree that they are unaware of any financial or economic interest of any public officer or employee of Lessor/City relating to this ENA. Notwithstanding any other provision of this ENA, it is further understood and agreed that if such a financial interest does exist at the inception of this ENA, Lessor may immediately terminate this ENA by giving written notice thereof. 11.6 Notices. Any notice which is required or which may be given hereunder may be delivered, mailed or emailed to the other Party to be notified, as follows: PROPOSED LESSEE: Jeff Bergsma Surf City Partners, LLC 221 Main Street, Suite S Fluntington Beach, CA 92648 (949) 877-9542 jeff 0a teamdesignhb.com LESSOR: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attention: Community Development Director With a Copy to: City Attorney 11.7 Counterparts. This ENA may be executed in counterparts, each of which when so executed shall be deemed an original, and all of which, together, shall constitute one and the 7 same instrument. 11.8 Attorney Fees. In the event that either party brings action or proceeding against the other party to enforce or interpret any of the conditions or provisions of this ENA, the prevailing party shall NOT be entitled to recover any attorney's fees and expenses and court costs associated with such action or proceeding. ]END OF TEXT; SIGNATURES ON FOLLOWING PAGE] 8 IN WITNESS WHEREOF, Lessor and Proposed Lessee have executed this ENA which shall be effective as of the day and year set next to the Mayor's signature below("Effective Date'). Proposed Lessee: Lessor: SURF CITY PARTNERS,LLC,a California CITY OF HUNTINGTON BEACH,a municipal limited liability company corporation of the State of California By: By he—ffi r ana ng Member Mayor Date: / Date: ATTEST By Robin Estanislau,City Clerk _ REVIEWED AND APPROVED: C� Date: //LZJ2/ By Oliver Chi,City Manager INITIATED AND APPROVED: Date: 1 t Z4 /OZ9oZ.1 (AAA n By Ursula Luna-Reynosa Community Development Director Date: 10. 21. 21 APPROVED AS TO FORM: By Michael E. Gates,City Attorney ;t? 9 EXHIBIT A PROPERTY DESCRIPTION 21 Main Street t t i i. 1 j .r• Approximately 800 SF of indoor building space ---j Potential outdoor space adjacent to building i I $20 5F.' NEW SNELL fiJ1 i.DIFIG EXIST. RR / In EXHIBIT B PERFORMANCE TIMELINE II EXHIBIT B PERFORMANCE TIMELINE Milestone Responsible Party Target Date Proposed Lessee to submit preliminary project description 1 Proposed Lessee Within 30 days of Effective Date and plans to Lessor for review Within 30 days of submittal of preliminary project 2 Lessor to approve preliminary project description and plans Lessor description and plans Proposed Lessee to consult with Regulatory Authority and 3 other permitting agencies(ABC,CCC,and Health Proposed Lessee Within 30 days of Lessor's approval of preliminary Department)to make best faith efforts to obtain written project description and plans feedback on preliminary project description and plans Proposed Lessee to schedule meeting with Lessor to review 4 feedback from Regulatory Authority and other permitting Proposed Lessee/ Within 15 days of Lessor's approval of preliminary agencies Lessor project description and plans Lessor to determine if requisite changes based on feedback 5 from Regulatory Authority and other permitting agencies is Lessor Within 15 days of meeting to review Regulatory feasible;if not,Lessee needs to revise plans to make feasible Authority and other permitting agencies'feedback or ENA terminates If feedback from Regulatory Authority and other permitting 6 agencies is feasible,then Proposed Lessee to revise project Proposed Lessee Within 15 days of Lessor determining that project is description and plans and submit application to Regulatory feasible Authori Regulatory Authority to schedule public hearing;if permits 7 Regulatory Authority Within 35 days of application being deemed complete denied(after exhausting due process)then ENA terminates If Regulatory Authority approves permits,Proposed Lessee 8 to submit CDP application to the CCC;if CDP denied then Proposed Lessee Within 7 days of Regulatory Authority approving ENA terminates permits If CDP approved,Proposed Lessee to submit CD's to 9 Regulatory Authority;if unable to secure permits then ENA Proposed Lessee Within 112 days of the CCC approving CDP terminates 10 Provide sample menu with prices and updated pro forma to Proposed Lessee Within 14 days of the CCC approving CDP Lessor 11 Lessor to approve sample menu and pro forma Lessor Within 7 days of receipt 12 Lessor to provide draft term sheet to Proposed Lessee Lessor Within 14 days of approval of menu and pro forma 13 Proposed Lessee to respond to draft term sheet Proposed Lessee Within 7 days of receipt 14 Lessor and Proposed Lessee to agree to draft term sheet Proposed Lessee/ Within 21 days of Proposed Lessee's response Lessor 15 Proposed Lessee to provide construction timeline,budget, Proposed Lessee Within 28 days of agreement on term sheet and proposed method of financing 16 Lessor to provide draft lease agreement Lessor Within 14 days of receipt of construction timeline 17 Proposed Lessee to respond to draft lease agreement Proposed Lessee Within 14 days of receipt 18 Lessor and Proposed Lessee to agree to final lease Proposed Lessee/ Within 21 days of Proposed Lessee's response agreement Lessor 19 Proposed Lessee to provide evidence of financing Proposed Lessee Within 7 days of agreement on lease agreement 20 CC consideration of lease agreement at public meeting Lessor Within 28 days of CCC approval of CDP or submittal of evidence of financing,whichever occurs LAST 21 Provide State Lands Commission with copy of lease Lessor Within 7 days of CC approval agreement for review and approval Within 14 days of State Lands Commission approval 22 Execute Lease Agreement and commence construction Proposed Lessee/ of lease or issuance of building permit,whichever Lessor occurs LAST City of Huntington Beach 2000 Main Street ♦ Huntington Beach, CA 92648 (714) 536-5227 ♦ NvNNiv.huntingtonbeachca.gov Office of the City Clerk Robin Estanislau, City Clerk November 10, 2021 Surf City Partners, LLC Attn: Jeff Bergsma 221 Main Street, Suite S Huntington Beach, CA 92648 Dear Mr. Bergsma: Enclosed is a fully executed copy of the "Exclusive Negotiation Agreement between City of Huntington Beach and Surf City Partners, LLC' approved by the Huntington Beach City Council on November 2, 2021. Sincerely, 9Afa"jv Robin Estanislau, CIVIC City Clerk RE:ds Enclosure Sister Cities: Anjo, Japan • Waitakere, New Zealand ATTACHMENT #2 PACIFIC § § � KEYNOTES OCEAN U D FILM PILLARS h �; %�' \. D FOOD PREP I KITCHEN 12M SF v _ .r. .�.. •' 1 ] dNING ROOM 145T SF �•'N V� I,V� ._ . , [A]OUTDOOR DINING I ISCO sf n.,•r��'" ,\ ,�. CI ENTRY(MULTI SLIDING COORS) dp P % �FIRE CYLINDEROR11UTER c� ( "I' •r%'\, ��V \ 1 C� a SCREEN VI,BENCH SEATING GI-ASS WINO SCREEN VU OPEN KITCHEN 2 It 4 g U COUNTER SEATING td f� ry M I9I CART I KIO5K C.� CU(E)GUARD RAILS ✓✓✓/ V/ [II)GAS LANTERN .I �,` � � �\� \.Q \\ .❑B ,>I GATE YN PAN,L HAROVlPRE I]ROLL UPGLASSDOOR `iJ % %� ,� C GAR I N SF 1 l 1-} 15I [I U vJ �� G I, �> OUTDOOR DINING OUTDOOR DINING In rl� I �❑i^. � I^:T-� � r'I_�n r:_j--� b r I� 8'.8' 9-8' 9'8' 9'-8' 1 T-0 9--8' 9'-8' 9'-8' 6�6- I BLDG ANLA MIA PREMISESAREA 2W S, 14'$ 491 P 14'6' I INDOOR KL ITHG 4 OUTDOOR SEATING Y BLOG. TOTu l9a P I E R FLOOR PLAN oa r HUNrvICTas RESTROOM BLDG. HUNTINGTON'S ON THE PIER 9�C Y L9+tiVtl CITY OF HUNG-21 N PIER BUILDING�71 MAIN ST AVAq wM ' fowl JA ft*AMft ATTACHMENT #3 / Wlez)VED City of Huntington Beach /Ix/E�!/-i (t.%SU�eFCrn Prtp�i� # 7D t_6 vt/ CErS Pr sr r Gr�lli� NE�p7L4�a� File #: 21-653 MEETING DATE: 9/7/2021 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Oliver Chi. City Manager PREPARED BY: Ursula Luna-Reynosa, Director of Community Development Subject: Authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC for 21 Main Street at the Huntington Beach Pier Statement of Issue: The City Council is requested to authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC (Ruby's), in a form approved by the City Attorney, for a concession building located at 21 Main Street on the Huntington Beach Pier. The purpose of the ENA is to establish duties and obligations related to the negotiation of a lease agreement for the site. Financial Impact: There is no financial impact associated with this request. If a new lease is executed with Ruby's. staff will return to City Council for approval, which will include the rental rate and the projected lease revenues that would be deposited into the General Fund (1000100.43095) Beach Concessions. Recommended Action: Authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC, in a form approved by the City Attorney, to negotiate the terms of a lease agreement for 21 Main Street. Alternative Action(s): Do not approve the recommended action and direct staff to enter into an ENA with either Let's Go Fishing & Surf City Snack Bar LLC (current lessee) or Surf City Partners. LLC, which are the remaining two responsive and qualified concessionaires that have submitted a proposal to lease 21 Main Street. Analysis: Background Cq of Hun•UV.w Beac� Pape 1 of 5 Pm!ea on 9/112021 File #: 21-653 MEETING DATE: 9/7/2021 The Huntington Beach Pier is one of the most recognizable landmarks on the west coast and serves as an attractive destination for visitors and locals. The Pier also features an estimated 800 square foot concession building located at 21 Main Street and has been in operation since 2009. The site is also in the Downtown Specific Plan (DTSP) and Coastal Zone. Currently, the concession is operated by Let's Go Fishing & Surf City Snack Bar LLC (dba Let's Go Fishing), which offers fishing supplies, snacks, and souvenirs. Let's Go Fishing initially entered into a five-year lease agreement with the City on November 16, 2009. The lease also included a five-year extension ending on November 2019, which has been exercised by the tenant. In anticipation of the lease expiring at that time, the City released a Request for Proposals (RFP) to identify a qualified and responsive operator in April 2019. The City Council authorized a 6-month lease agreement with Let's Go Fishing in November 2019, followed by a month-to-month term. Due to the stressors caused by the COVID-19 pandemic, the City also granted a 90-day extension in June 2020. Under this extended lease agreement, Let's Go Fishing's current base rent is 5950/month or 10.5% of gross receipts, whichever is higher. Lease payments are currently in excess of 550.000 per year. RFQ Results On May 26. 2021 , the City released a Request for Qualifications (RFQ) to solicit qualifications from potential concessionaires with a proven track record of operating a successful business of similar nature and scale. Additionally, respondents were asked to demonstrate their financial capacity and articulate a vision to enhance the pier experience for visitors. Submittal requirements included a cover letter, tax returns, income statement and balance sheet, audited financial statements. a description of the proposed use of the property, and biographical information of the principals. The City received submittals from the following four entities: • Let's Go Fishing & Surf City Snack Bar LLC (current lessee) • Ruby's Hospitality Group. LLC • Surf City Partners. LLC • Armijo Enterprises Staff and the National Development Council (NDC), the City's independent economic advisor, conducted a preliminary review of the proposals. Armijo Enterprises was disqualified due to lack of financial capacity and failure to submit current and historical financial information. The remaining three entities moved onto the second round of review and submitted additional information, which included a pro forma, a description of any proposed improvements to the property, and a construction timeline and costs. Below is a summary of the proposals received. • Let's Go Fishing & Surf City Snack Bar LLC - Marian Johnson is the sole member of this LLC. which has been operating at the concessionaire site since 2009. Current offerings include pre- packaged foods, ice cream, chips and other beach related merchandise. in addition to bait and tackle items. Ms. Johnson expressed interest in growing her business by creating additional revenue streams through the sale of hot foods (pizza, nachos, tacos and hot dogs), ice cream and Icee drinks; the provision of a coffee bar with pastries, bagels and muffins; and expanded City of Huntington 8eacn Page 2 of 5 Primed on g/1/2021 oo44W Leas;ar0° File #: 21-653 MEETING DATE: 9/7/2021 offerings of pole rentals, pier fishing classes and fishing-themed birthday parties/events. A budget of 528,500 was proposed for upgrading and remodeling the inside and outside of the building with an approximate timeline of 12-17 weeks to complete the improvements. Projected sales for the first three years are estimated at 5435,000-S635,000 based on 100-110 sales per day at an average of $12-16 per sale and assumes 15% growth per year with a net profit margin of 13-20% (not inclusive of the owner's salary). • Ruby's Hospitality Group, LLC - In 2018, Ruby's Diner entered into a Chapter 11 bankruptcy process to reorganize its obligations and ownership. In November 2020, Casbure Management, LLC acquired the master franchise rights and formed Ruby's Hospitality Group, LLC. The principal owners include: Casbure Management, LLC (affiliate of West 51" Street Partners), Todd Spector, an individual; Eric Kurtzman, an individual; and Joe Micatrotto, an individual. The proposed concept from the new owners of the Ruby's brand includes constructing an adapted version of the classic Ruby's Diner that utilizes a walk-up window for guest service and a modified menu to streamline operations and conform to existing space limitations. The projected budget for improvements is approximately S520,000 with plans to open within 12-14 weeks of receiving permits. Projected sales for the first three years range from 51 .1 - SlA million with a 4-9% net profit margin. Proposed rent includes a base rent figure of 590,000 annually with percentage rent to be determined but preference would be for a long-term, flat rent structure. The owners would pay the cost of all improvements and guarantee the lease. • S.urf City Partn ._L ers, LC - This local team with hospitality and franchise experience includes Jeff Bergsma (Design/Construction/Maintenance), Keith Bohr (Government Approvals). Paul Motenko (Restaurant Food and Beverage/Operational Systems), and Sharon and Adam Go (Restaurant Systems/RecruitmenUTraining). The concept is a "locals" eatery named Huntington's which would offer high quality comfort food and beverages (fine wines, locally crafted beers and libations). outdoor dining, surf line views, and occasional live music. The eatery would be open for breakfast, lunch and dinner with an estimated check average of S22.62, 90-minute table turns, a 130 person occupancy (49 inside & 81 patio), and 340 days of operation. Additionally, there would be two mobile retail carts for fishing pole rentals, the sale of bait and tackle, and the sale of coffee, hot chocolate and bottled water. The projected budget for improvements is 5532,000 with a project timeline of approximately seven months (four months for permit approval process and three months for construction) with the goal of opening by May 2022. Projected sales for year one are S1.5 million with an increase of 66% in year two (52.5 million) and another increase of 10% in year three (52.75 million) with a 5-8% net profit margin. Proposed annual base rent is 5180,000 which is 7% of sales based on the year two revenue assumption. Preliminarily, the cost of improvements is proposed to be financed using a one million dollar loan commitment with a 10- year term at 5% interest. Assessment of Qualifications Staff and NDC performed an analysis (Exhibit 1 ) of the submitted proposals and on August 11 , 2021 . a summary of the top three finalists was presented to the City's Economic Development Committee (EDC). While all three respondents offered compelling visions and demonstrated experience Cry of Hun,ing;on Beach Page 3 of 5 Primed on 91•d202t File #: 21-653 MEETING DATE: 9/7/2021 operating successful businesses, the feasibility and viability of the concepts varied greatly with respect to their degrees of risk for failure. After careful consideration of each proposal, including a review against industry standards and entitlement requirements, the EDC recommended Ruby's for the concession space. Ruby's desire to revitalize the brand and relaunch this iconic burger chain with a fresh take offers the return of a beloved, community and family-oriented amenity that has strong brand recognition at the Huntington Beach pier. Although the new ownership entity was recently formed, the principals have extensive experience and strong financial assets, which depict a high-level of competency to implement a successful business operation. Additionally, the lease revenue proposed is almost double the existing rent, and the site will be enhanced without triggering major entitlements. Ruby's was a favorite for its location, prices and retro-style, and its reopening in close proximity to its original location will provide locals and visitors with a memorable and nostalgic pier experience. Let's Go Fishing offers the lowest risk to the City and is a profitable, established and successful business with a proven record. The proposal is similar to the products and services currently offered with comparable annual revenues and minor improvements to the building. If there is desire to maintain the status quo with a concessionaire that sells fishing supplies and convenience store items, the City Council could alternatively select Let's Go Fishing. Surf City Partners offers the highest proposed revenue potential by completely reimagining the site. This proposal is also the most ambitious with required entitlement approvals (i.e., coastal commission. parking, outdoor dining for 81 seats, ABC license for alcohol sales) given the intensification of the use and scope of improvements to the property. Upon review, the construction timeline and revenue projections appear aggressive with revenue highly dependent on sales during the summer months and 40% of sales derived from alcohol (typical restaurant 20-30%). Additionally, because improvements are anticipated to be funded using debt, this proposal is riskier than the other two finalists should actual revenue be lower than anticipated. However, if there is a desire to create a unique dining establishment on the Pier, the City Council could alternatively select Surf City Partners, Exclusive Negotiating Agreement Given the EDC's consideration of each proposal and its recommendation of Ruby's, staff is seeking Council authorization and direction for the City Manager to execute an ENA with Ruby's for 180 days to negotiate the terms of a lease agreement, establish duties and obligations between the parties, and conduct due diligence. Approval of an ENA does not obligate the City to enter into a lease agreement. A lease of the site will require separate City Council approval. An ENA will provide an opportunity to analyze the feasibility of pursuing the project while addressing various issues related to the change of use and proposed remodel. Such lease terms and obligations include the following: • Use, Term, Rent, Minimum Days/Hours of Operation, Maintenance. etc. • Design of Building Plans • Approvals including a Conditional Use Permit from the Zoning Administrator, Review by the Design Review Board for the building's design, colors, signage and materials, a Coastal Development Permit processed and approved by the Coastal Commission, and any applicable requirements related to outdoor dining, parking, and outdoor sales City of Huntington Beach Page 4 of 5 Printed on 91112021 File #: 21-653 MEETING DATE: 9/7/2021 • Establishment of a Schedule of Performance and Entitlement Milestones Additionally, this ENA period will allow the current tenant, Let's Go Fishing, to continue its lease and operations while Ruby's obtains all necessary permits rather than leaving the concession vacant during this period. Environmental Status: Pursuant to CEQA Guidelines Section 15378(b)(5), organizational or administrative activities of governments that will not result in direct or indirect physical changes to the environment, do not constitute a project. If negotiations are successful, a lease agreement will be brought forward for City Council consideration and an environmental assessment will be conducted at that time. Strategic Plan Goal: Economic Development & Housing Attachment(s): 1 . Request for Qualifications 2. Memorandum by NDC City of Huntington Beach Page 5 of 5 Printed on 91;12021 DOwCFW3 LeFlstar" City Council/ Public Financing Authority ACTION AGENDA September 7, 2021 30. 21-653 Authorized and directed the City Manager to execute an Exclusive Negotiating Agreement (ENA) with Ruby's Hospitality Group, LLC for 21 Main Street at the Huntington Beach Pier Recommended Action: Authorize and direct the City Manager to execute an Exclusive Negotiating Agreement (ENA) with , in a form approved by the City Attorney, to negotiate the terms of a lease agreement for 21 Main Street. Approved as amended to negotiate an ENA with Surf City Partners and allow Let's Go Fishing to remain open while under negotiations. Approved 6-1 (Paterson-No) PUBLIC HEARING 31. 21-633 Cancelled Advertised Public Hearing Item 21-633 authorizing City staff to apply for the Orange County Enhanced Mobility for Seniors and Disable Grant Program (EMSD) ADMINISTRATIVE ITEMS 32. 21-588 Approved American Rescue Plan Act (ARPA) Spending Plan Review and Allocation Recommended Action: Approve the proposed ARPA funds spending plan for Huntington Beach, and direct staff to prepare the necessary budget appropriate documents to facilitate the adopted program. Approved 7-0 33. 21-625 Provided Direction to Staff Regarding the Pier Plaza Art A-Faire Events at Pier Plaza Recommended Action: A) B) Direct staff to issue an RFQ to identify the most qualified arts and craft fair operators and return to City Council with a proposed operator and promotional agreement for consideration. Approved 5-1-1 (Peterson— No; Oelgleize—Abstain) 34. 21.656 Approved formation of a 2021 Charter Revision Committee to conduct a review of the Huntington Beach City Charter 1619