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Home My WebLink AboutMINUTES - 12162008 - C.27 TO: BOARD OF SUPERVISORS L°� Contra FROM: KEITH R. FREITAS, DIRECTOR OF AIRPORTS :;li Costa DATE: December 16, 2008 A' �a Count/ SUBJECT: APPROVAL and AUTHORIZE the Director of Airports to take specified actions related to a long-term lease of property located on the northwest end of Sally Ride Drive. SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION I. Recommended Action: APPROVE and AUTHORIZE the Director of Airports,or designee,to execute on behalf of the County a Consent to Assignment(the"Consent"). Upon satisfaction of conditions precedent,the Consent permits the assignment of an existing lease dated August 8,2006 between the County and DHI Northwest Hangar,LLC, a California limited liability company (the "Lease") from DHI to Wings at Buchanan, LLC, a California limited liability company. APPROVE and AUTHORIZE the Director of Airports,or designee,to execute on behalf of the County a first amendment to the Lease,following the assignment of the Lease from DHI to Wings at Buchanan,LLC. APPROVE and AUTHORIZE the Director of Airports, or designee,to refund to DHI the full amount of DHI's security deposit, following execution of the Consent. II. Financial Impact: 1. Consent to Assignment. No negative impact on the General Fund is anticipated. The revenue stream to the Airport Enterprise Fund will be affected., Continued on Attachment: X SIGNATURE: / RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ONIAoD 6 e P0,/ OVED AS RE MMENDED—OTHElf I hereby certify that this is a true and correct copy of an action VOTESUPERVISORS ,/� taken and entered on the minutes of the Board of Supervisors on UNANIMOUS(ABSENT Ala WC.— ) the date shown. AYES: NOES: ABSENT: ABSTAIN: / ATTESTED: 441444�� DAVID TWA,Clerk of the Board of Supervisors and County Orig.Div: County Airports Administrator Contact: Beth Lee(925)646-5722 cc: County Administrator Recorder Auditor-Controller Public Works Director By , Deputy DHI Northwest Hangar,LLC Wings at Buchanan,LLC �. •, , . �,, } - .��l�'a rFr..' �Yy �Jtib��t �4��w v++*.. h)A s U �' �j `y. �'s �� !'' l` '_ \, `tlw SUBJECT: APPROVAL and AUTHORIZE the Director of Airports to take specified actions related to a long- term lease of property located on the northwest end of Sally Ride Drive. DATE: December 16, 2008 PAGE: 2 II. Financial Impact (Continued): 1. Consent to Assignment, (Contd.) Under the terms of the Lease, DHI is scheduled to pay ground rent in the amount of$1,937.50 per month through July 2009. Rent is then scheduled to step up each year for six years and thereafter is subject to adjustments based on changes in the Consumer Price Index and periodic revaluations of the fair market rental value of the property. However, DHI is in default and we do not anticipate receiving any of the future scheduled payments. In addition, DHI has failed to develop the property. In the absence of development,the County is deprived of property,sales and possessory interest tax revenues. 2. First Amendment to Lease. The proposed amendment to the Lease will extend the lease term by three years, modify the rent schedule, change the timing of revaluations of fair market rent, and will create a due diligence period. Rent will be reduced to zero through February 2009. From March 2009 through July 2009,rent will be$500 per month. Rent will then step up each year for nine years and will thereafter be subject to the same adjustments that apply under the current lease terms,although these adjustments will occur on a modified schedule. In addition,the amended Lease will permit the tenant to terminate the Lease on or before May 15, 2009. The right to terminate gives Wings at Buchanan an opportunity to conduct due diligence prior to commencing development. However, this change also means that the Lease could be terminated without penalty. 3. Security Deposit. The County is holding a security deposit of$5,344 from DHI. Under the terms of the Lease,the County may,but is not required to,apply the security deposit to amounts due under the Lease. DHI owes the County unpaid rent in an amount that exceeds the security deposit. However,in exchange for returning the security deposit to DHI,the County will receive pre-development documents valued in excess of the security deposit. III. Reasons for Recommendations and Background: 1. Consent to Assignment. The current tenant is in default. To achieve the long-term goal of having the site developed, a new tenant is needed. Consent to the assignment is appropriate on the basis that the assignee is capable of satisfying the financial and business requirements 6f the Lease. The Consent will not be executed until the following conditions precedent have been satisfied: (i)the Director of Airports has received certain documents from DHI, (ii) the Director of Airports has reviewed and approved the form of the assignment between DHI and the new tenant,and(iii)the Director of Airports has received an executed copy of the assignment between DHI and the new tenant. 2. First Amendment to Lease. The recommended amendment to the Lease reflects the current market. In the absence of modifications to the Lease, it is likely development of the site will be postponed indefinitely. 3. Security Deposit. In consideration for returning DHI's security deposit in full, the County will obtain from DHI pre-development soil and engineering studies and relevant plans,which have a value in excess of the amount of the security deposit. IV. Consequences of Negative Action: The County will not consent to the assignment of the Lease by DHI and the lease will not be assigned. As the existing tenant is in default, the County will then have to consider the merits of legal action. CONSENT TO ASSIGNMENT OF LEASE This consent to assignment of lease ("Consent") is dated 2008 and is between the County of Contra Costa, a political subdivision of the State of California("Lessor"), DHI Northwest Hangar, LLC ("Assignor"), and Wings at Buchanan, LLC, a California Limited Partnership ("Assignee"). RECITALS: A. Lessor is the lessor under that certain Lease dated August 8, 2006 and any amendments thereto (the "Lease"), between Lessor and Assignor, as lessee, relating to the real property identified in the Lease as the Premises. B. Assignor desires to assign to Assignee all of Assignor's right, title, interest, and obligations, in to and under the Lease (the "Assignment") and Assignee desires to accept the Assignment. C. The Lease requires that Assignor and Assignee receive Lessor's written consent to the Assignment. D. In consideration of Lessor's consent to the Assignment, and other valuable consideration, the receipt and adequacy of which is hereby acknowledged, Assignor has agreed to deliver certain documents to Lessor. E. In consideration of all of the terms and conditions contained herein, Lessor will agree to consent to the Assignment. Lessor, Assignor, and Assignee therefore agree as follows: AGREEMENT 1. Defined Terms. Defined terms used but not defined in this Consent are as defined in the Lease. 2. Pre-Development Documents. Assignor shall deliver to the Director of Airports all pre-development documents, reports, and studies owned by or available to Assignor, including but not limited to soil studies, engineering studies and development plans (together,the "Documents"). 3. Security Deposit. As soon as practicable following the effective date of the Assignment, Lessor will return to Assignor the Security Deposit previously paid by Assignor. Page 1 of 4 Consent to Assignment of Lease: Contra Costa County,DHI Northwest Hangar and Wings at Buchanan 4. Representations and Warranties of Assignor and Assignee. Each of Assignor and Assignee hereby represents and warrants that: a. Assignee's intended use of the Premises is the same as the Assignor's intended use of the Premises and is not inconsistent with the use permitted under the Lease and will not require alteration of the Premises. b. Assignee has a good reputation in the business community in which it has conducted its businesses and its business reputation and business credit history is consistent with other business conducted on the Premises. C. Assignee's intended use of the Premises will not increase the hazardous substance liability to the premises and will not otherwise adversely affect the Lessor's interest in the Premises. d. Assignee is capable of operating an aviation business as contemplated by the terms of the Lease and has business experience and management ability that is equal to or greater than that of Assignor. e. Assignee's financial condition is sufficient to support the obligations of Tenant under the Lease and any encumbrances secured by the Lease. f. Assignor and Assignee have the legal right and authority to enter into this Consent and each has received all necessary approvals to do so. 5. Assignment and Assumption Agreement. Assignor and Assignee are entering into an Assignment and Assumption of Commercial Lease dated (the "Assignment Agreement") under which the Assignment will be effected. . 6. Conditions Precedent to Execution of Consent. Lessor's consent to the Assignment is subject to satisfaction of the following conditions: a. that the Director of Airports has received the Documents; b. that the Director of Airports has reviewed and approved the form of the Assignment Agreement; C. that the Director of Airports receives an executed copy of the Assignment Agreement; 7. Consent of Lessor. In reliance on the representations and warranties of Assignor and Assignee and upon satisfaction of the terms and conditions set forth herein, Lessor consents to the Assignment Page 2 of 4 Consent to Assignment of Lease: Contra Costa County, DHt Northwest Hangar and Wings at Buchanan 8. Consent to Assignment Only. This Consent does not amend the Lease. If there is any confusion or contradiction between any term of the Lease and this Consent, the terms of the Lease will prevail. 9. Goveminna Law. The laws of the State of California govern all matters arising out of this Consent, with venue in the Superior Court of the County of Contra Costa, California. 10. Survival. The provisions of this Consent shall survive both the execution and delivery of this Consent. 11. Notice. From and after the effective date of this Consent, all notices given to Tenant under the Lease will be mailed to: Wings at Buchanan, LLC c/o Golden Gate Petroleum 501 Shell Avenue Martinez, CA 94553 The parties are signing this Consent as of the date set forth in the introductory clause. LESSOR ASSIGNOR CONTRA COSTA COUNTY, a political DHI Northwest Hangar, LLC Subdivision of the State of California By: Civic Property Group, Inc., its Member-Manager By By Keith Freitas Name: David B. Sanson Director of Airports President By Name: Title: Page 3 of 4 Consent to Assignment of Lease: Contra Costa County,DHI Northwest Hangar and Wings at Buchanan RECOMMENDED FOR APPROVAL: By Karen Laws Principal Real Property Agent ASSIGNEE By Wings at Buchanan, LLC, a Beth Lee California limited liability company Assistant Director of Airports APPROVED AS TO FORM: By Name By Silvano B. Marchesi, County Counsel Title BY BY Kathleen M. Andrus, Name Deputy County Counsel Title Page 4 of 4 Consent to Assignment of Lease: Contra Costa County, DHI Northwest Hangar and Wings at Buchanan