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Home My WebLink About1/17/2001 - STAFF REPORTS (2) DATE: January 17, 2001 TO: City Council FROM: Acting Director of Aviation via Director of Finance &Treasurer PALM SPRINGS SENIOR CENTER CITIZEN COMPLEX LEASE AMENDMENT NO. 2 RECOMMENDATION: It is recommended that the City Council approve lease amendment No. 2 to lease agreement No. 1529 between the City of Palm Springs ("Lessor")and the Palm Springs Senior Citizen Complex, a California Limited Partnership, by Casden Properties GPII Limited Partnership, its General Partner, by Casden Properties QRS II Inc., its General Partner(collectively"Lessee"). SUMMARY: City staff, with the assistance of the City Attoney's office, have worked collectively to resolve a dispute in the lease(of land owned by the Airport Fund)agreement between all parties concerning rental rates. The terms of the agreement are acceptable to all parties pursuant to the terms shown in Amendment No.2(attached). The minimum annual rent would be set at$59,796 (the current year's amount), plus 6.75% of the amount of gross receipts over$1,174,173. BACKGROUND: On June 4, 1980, the City entered into Lease Agreement No. 1529 ("Agreement") with Lessee's predecessor, G & K'Management Co., dba Palm Springs Senior Citizen Complex,for the lease of the land underlying the apartments. The project was developed under a California Housing Finance Agency Authority. Subsequently,the City and G&K Management,Co.entered into Amendment No. 1 to the "Agreement"which modified the rental formula provided in Article V. Unfortunately, the language in Amendment No. 1 contained some confusing and contradictory statements. G&K Management interpreted the lease amendment one way, and City staff and the attorney's office another. Under G & K's interpretation, the rental payment would have been about $52,000 per year and would have been effectively capped at that level. After several months of negotiation between all parties, Amendment No. 2 had been mutually agreed upon by all parties,pending approval of the Airport Commission and City Council. "Lessee' agrees to pay"Lessor" a minimum annual guarantee of$59,796 per year plus the percentage rent calculated as 6.75%of the difference between the previous year's total gross receipts over the base amount of$1,174,173. The Airport Commission recommended City Council approval of this item at its January 3, 2001 meeting. This item is submitted for City Council consideration. 'AIRY GRI,�ITH/ %'� �� THOMAS M. KANARR Acting Direaor'of Av't'n Director of Finance &Treasurer APPROVE --a City Man r i� Attachments: (1) Amendment No. 2 /J (1) Minute Order AMENDMENT NO. 2 TO LEASE AGREEMENT NO. 1529 This Amendment No. 2 to Lease Agreement No. 1529 ("Amendment No. 2") is entered this day of , 2000, by and between the CITY OF PALM SPRINGS, a California municipal corporation ("City"), and PALM SPRINGS SENIOR CITIZEN COMPLEX, a California Limited Partnership, by CASDEN PROPERTIES GPII LIMITED PARTNERSHIP, its General Partner, by CASDEN PROPERTIES QRS II INC., its General Partner (collectively "Lessee"). RECITALS WHEREAS, on June 4, 1980, City entered into that certain Lease Agreement No. 1529 ("Agreement") with Lessee's predecessor, G & K Management Co., dba Palm Springs Senior Citizen Complex, concerning the property located in the City of Palm Springs, County of Riverside, California, as specifically described at Exhibit "A" to the Agreement("Property") for the construction of improvements upon the Property and lease of the Property as a California Housing Finance Agency subsidized apartment development and related facilities, as more specifically provided in the Agreement. WHEREAS, City and Lessee entered into that certain Amendment No. I to the Agreement ("Amendment No. V) modifying the rental formula provided in Article V of the Agreement pursuant to the terms of Amendment No. 1. WHEREAS, a dispute has arisen between the parties regarding interpretation of language amended under Amendment No. 1, as to Article V, Paragraph F of the Agreement, which resulted in payments of the rental rate by Lessee below that calculated by the City. WHEREAS, the parties wish to resolve their disputes regarding the rental rate due under the Agreement and clarify the terms of the Agreement, including Amendment No. 1 pursuant to the terms of this Amendment No. 2. NOW THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties mutually agree as follows: I. Article V, Paragraph B of the Agreement, as amended in Amendment No. 1, is amended to read as follows: B. Minimum Annual Guarantee. Beginning on June 4, 1999 through the end of the term, Lessee shall pay to City a minimum annual guarantee of Fifty Nine Thousand Seven Hundred Ninety-Six Dollars ($ 59,796)per year in equal monthly installments of Four Thousand Nine Hundred Eighty Three Dollars ($4,983). The Minimum Annual Guarantee plus the percentage rent provided under Paragraph V.F. below, shall be paid by Lessee to City pursuant to Paragraph V. D., as amended, below. 2. Article V, Paragraph C of the Agreement, at the second full paragraph therein, which begins with the words "'Gross receipts' shall include any ad valorem taxes. . ." shall be amended to read as follows: 0a 001 361 #4c 36130.04.04 aDI01/08/Oi "Gross receipts shall include any ad valorem taxes paid by other than the Lessee for the account of the Lessee." 3. Article V, Paragraph C of the Agreement, at the third full paragraph therein, which begins with the words "'Gross receipts' shall not include. . . " shall be amended to read as follows: "Gross receipts" shall not include: (a) amounts collected and paid out for a sales or excise tax imposed by a governmental authority where such tax is billed to the purchaser as a separate item; (b) income from the sale of fixtures, goodwill or the sale of improvements; or (c) receipts from the resale of electricity, gas, telephone and television cable services. 4. Article V, Paragraph D of the Agreement is amended to read as follows: D. Payment of Rent. Lessee shall pay the monthly installments of the Minimum Annual Guarantee of Four Thousand Nine Hundred Eighty Three Dollars ($4,983) in advance, on the first day of each and every month during the tenn of this Agreement. In addition to the Minimum Annual Guarantee, Lessee shall furnish to City by July 31 of each year of the term a verified statement of its total gross receipts, as that term is defined in the Agreement, during the preceding year (June I"through May 31") of the term. Such statement of gross receipts shall be accompanied by a payment of percentage rent for the preceding term of the Agreement, if any, as provided in Section F below. 5. Article V, Paragraph F of the Agreement, as amended in Amendment No. 1, is amended to read as follows: F. Percentage Rent. In addition to the Minimum Annual Guarantee, Lessee shall pay to City percentage rent, calculated as six and three fourths percent(6.75%) of the difference between the previous year's total gross receipts over the base amount of One Million One Hundred Seventy Four Thousand One Hundred Seventy Three Dollars ($1,174,173) ("Base Receipts"). The percentage rent provided herein shall be payable pursuant to Paragraph V. D., as amended, immediately above. Lessee shall not be entitled to offset any payment of rent for gross receipts for any given year where gross receipts fall below the Base Receipts. As such, in no event shall the rental payment paid by Lessee to City ever be below the Minimum Annual Guarantee amount of$59,796. The following provides examples of the method by which percentage rent shall be calculated,which examples are provided for illustration purposes only: Example No. 1. Gross receipts for the 2000-2001 year of the tern equal $1,500,000. Lessee shall pay to City, by July 31, 2001, rent equal to $21,993, ($1,500,000 less $1,174,173 times 6.75%) as percentage rent, plus the Minimum Annual Guarantee of 59,796 paid during the 2000-2001 term, for a total rent obligation of $81,789 for the 2000-2001 tern. Example No. 2. Gross receipts for the 2000-2001 year of the term equal $700,000. Lessee shall not be required to pay to City any amount of percentage rent by July 31, 2001, for the 2000-2001 term. The total rent obligation paid by Lessee to City 627/014084-0001 36130.04 a01/08/01 -2 / 193 - • for the 2000-2001 term shall be$59,796 (the amount of the Minimum Annual Rent Guarantee). 6. Full Force and Effect. Except as expressly amended herein, all terms of the Agreement, including Amendment No. 1 shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties have executed and entered into this Amendment No. 2 as of the date first written above. CITY OF PALM SPRINGS, By: City Manager ATTEST: City Clerk APPROVED AS TO FORM: City Attorney LESSEE PALM SPRINGS SENIOR CITIZEN COMPLEX, a California Limited Partnership, by CASDEN PROPERTIES GPII LIMITED PARTNERSHIP, its General Partner, by CASDEN PROPERTIES QRS II INC., INC., its Gener Partner By: Name: Andrew J. Starrels Title: Senior Vice President and General Counsel HAPI MANAGEMENT By: Name: Title: [END OF SIGNATURES] DI 36130.04.11 03/ 36130.04 al 1/03/00 -3- MINUTE ORDER NO. AUTHORIZING APPROVAL OF LEASE AMENDMENT NO. 2 TO THE LEASE AGREEMENT NO. 1529 BETWEEN THE CITY OF PALM SPRINGS ("LESSOR")AND THE PALM SPRINGS SENIOR CENTER COMPLEX, A CALIFORNIA LIMITED PARTNERSHIP,BYCASDEN PROPERTIES GPII LIMITED PARTNERSHIP, ITS GENERAL PARTNER, BY CASDEN PROPERTIES QRS II INC., ITS GENERAL PARTNER (COLLECTIVELY "LESSEE"). I HEREBY CERTIFY that this Minute Order authorizing approval of lease amendment No. 2 to the lease agreement No. 1529 between the City of Palm Springs ("Lessor") and the Palm Springs Senior Center Complex, a California Limited Partnership, by Casden Properties GPI Limited Partnership, its General Partner, by Casden Properties QRS II Inc., its General Partner (Collectively "Lessee"), was adopted by the City Council of the City of Palm Springs, California in a meeting thereof held on the 17h day of January, 2001. PATRICIA A. SANDERS City Clerk 115