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HomeMy WebLinkAbout10/16/2013 - STAFF REPORTS - 2.I. �OF?ALM S. i2 c u ,n C4<IFO0.N,P+ CITY COUNCIL STAFF REPORT DATE: October 16, 2013 Consent SUBJECT: APPROVAL FOR ASSIGNMENT OF PALM SPRINGS CHOCOLATES & FUDGE LEASE OF CITY-OWNED PROPERTY AT 211 SOUTH PALM CANYON DRIVE IN THE VILLAGE GREEN FROM: David H. Ready, City Manager BY: Community and Economic Development Department SUMMARY In 2006, the City entered into a lease agreement with John Flatley and Mahammad Haque, aka John Edwards, to operate a fudge and chocolate store at 211 South Palm Canyon Drive in the Village Green. The store has been a fudge shop at that location since 1995. One of the two owners died in 2012 and the surviving owner of the store has indicated that he wishes to sell the business and has requested that the City assign the lease agreement, which expires in May 2015, to a new owner. This action would approve the assignment of the lease agreement to Lutfa Mobarak (the current manager of the store and sister of the deceased partner) as the proposed new owner of the fudge and chocolate store. Additionally, the assignee, Lutfa Mobarak has applied for a small business loan with a term of 9 years. In order to acquire the loan, the lease term must be extended to match the term of the loan or greater. This action is to request Council approval for the extension of the lease term to meet these requirements. RECOMMENDATION: 1. Approve the assignment of the lease agreement A3525, transferring the lease currently held by John Flatley and Mahammad Haque to Lutfa Mobarak for the lease of the property, known as Palm Springs Chocolates & Fudge, located at 211 South Palm Canyon Drive. 2. Approve an option to renew the lease in a term to match or exceed the loan term of the assignee. 3. Authorize the City Manager or his designee to execute all necessary documents. ITEM NO._21. _ �O�p ALM SAP �Z c V N e 'cq�IF+O vat CITY COUNCIL STAFF REPORT DATE: October 16, 2013 Consent SUBJECT: APPROVAL FOR ASSIGNMENT OF PALM SPRINGS CHOCOLATES & FUDGE LEASE OF CITY-OWNED PROPERTY AT 211 SOUTH PALM CANYON DRIVE IN THE VILLAGE GREEN FROM: David H. Ready, City Manager BY: Community and Economic Development Department SUMMARY In 2006, the City entered into a lease agreement with John Flatley and Mahammad Haque, aka John Edwards, to operate a fudge and chocolate store at 211 South Palm Canyon Drive in the Village Green. The store has been a fudge shop at that location since 1995. One of the two owners died in 2012 and the surviving owner of the store has indicated that he wishes to sell the business and has requested that the City assign the lease agreement, which expires in May 2015, to a new owner. This action would approve the assignment of the lease agreement to Lutfa Mobarak (the current manager of the store and sister of the deceased partner) as the proposed new owner of the fudge and chocolate store. Additionally, the assignee, Lutfa Mobarak has applied for a small business loan with a term of 9 years. In order to acquire the loan, the lease term must be extended to match the term of the loan or greater. This action is to request Council approval for the extension of the lease term to meet these requirements. RECOMMENDATION: 1. Approve the assignment of the lease agreement A5283, transferring the lease currently held by John Flatley and Mahammad Haque to Lutfa Mobarak for the lease of the property, known as Palm Springs Chocolates & Fudge, located at 211 South Palm Canyon Drive. 2. Approve an option to renew the lease in a term to match or exceed the loan term of the assignee. 3. Authorize the City Manager or his designee to execute all necessary documents. ITEM NO.1_ City Council Staff Report October 16, 2013 ( ) -- Page 2 (PS Chocolates & Fudge Lease Assignment) STAFF ANALYSIS: In 1995, the City entered into a lease agreement with Fredrick and Sharon Heminger to operate a fudge and chocolate shop in the Village Green. The initial term of this lease was for ten (10) years expiring on May 31, 2005. On March 18, 2005, the lease was extended for an additional ten (10) year term, expiring on May 31, 2015. On May 3, 2006, Council approved the assignment of the lease held by Fredrick and Sharon Henninger to John Flatley and Mahammad Haque. On October 2, 2013, the City received correspondence from John Flatley, the surviving business partner and tenant indicating that he wishes to sell the business to Lutfa Mobarak. A copy of this correspondence is attached. Article 21 of the lease agreement provides that the "tenant shall not assign the lease or sublet the Demised Premises, or any interest therein, without the consent of the Landlord (City), which consent shall not be unreasonably withheld." In considering whether to consent to an assignment, the Landlord (City) may request information about the proposed assignee, including history of the proposed assignee's business experience, financial information and other such information required by Landlord (City) to verify that the proposed assignee is both financially responsible and has the merchandising capability equal to or greater than the existing Tenant. The proposed assignee, Lutfa Mobarak, is currently managing the Palm Springs Chocolates & Fudge Store. She has been involved in the operation of the business since 2006 when John Flatley and Mahammad Haque purchased the business from the Hemingers. Ms. Mobarak has extensive experience working with the company, and has an inside understanding of the company's operations, marketing efforts, and financial management. She has worked at the store for the past nine years and has made the transition from the front counter staff to manager. She has been a crucial component of the business, as she has helped increase sales by over 50%. Staff has reviewed the financial information provided by the assignee and finds that she has sufficient assets to operate a business. The assignee has applied for a small business loan through the CDC Small Business Finance Corporation and is eligible for funding contingent upon the lease providing an option to extend the term to match or exceed the loan term of 9 years. Ms. Mobarak has indicated that she would continue to operate the store in the same manner as it is currently being operated and will continue the tradition of handmade confections. The name of the store will remain the same. If the City Council elects to assign the lease, the City, pursuant to Article 21, is entitled to any consideration paid to Tenant for such assignment and may adjust the monthly rental to fair market rental value. In recognition of the short remaining term of the lease, 02 City Council Staff Report (October 16, 2013)-- Page 3 (PS Chocolates & Fudge Lease Assignment) the assignee's business plan, and her need to obtain a small business loan, it is proposed to amend and restate the lease in a form approved by the City Attorney for one five-year term and one option to extend the lease for an additional five-year term. The option to extend for the second five-year term would be subject to a fair market rental evaluation. FISCAL IMPACT: No fiscal impact. Tenant currently pays $1,707.53 in monthly rental. The assignment of the lease shall continue under the same terms and conditions as the existing agreement. (4 J n S. ay on , Director of Diana R. Shay, edevelopment omm ity conomic Development Coordinator David H. Ready, City M Attachments: 1 . Correspondence from John Flatley dated October 2, 2013 2. Assignment and Assumption of Lease 03 PALM SPRINGS FUDGE & CHOCOLATES 211 South Palm Canyon Drive Palm Springs, CA 92262-6310 760-416-0075 October 2, 2013 Honorable City Council City Hall 3200 E. Tahquitz Canyon Way Palm Springs, CA. 92263 Dear Honorable City Council Members, It is with mixed emotions that I respectfully request that you approve a transfer/assignment of my lease with the City. As you know, I have operated a downtown business for a long time. Working with downtown development, city economic development and city planners, Riverside County Health Department and other merchants, the experience could not have been better or more professional. Currently, I am forced to consider the sale of my business because of health reasons. I have been very fortunate to locate a purchaser that has the desire and ability to continue my vision of an 'old-fashioned candy store" in downtown Palm Springs. She will continue our tradition of handmade items that have made us a destination for many of our wonderful visitors and locals alike. She has been our Manager at the store for the last 4 years and has run the store effectively on her own for the last year after the passing of my business partner, John Edwards. I have been impressed with her integrity and diligence. I would ask that you approve this assignment/transfer immediately for the new owner so that she can prepare for the high season in a timely manner. I thank you in advance for your consideration, approval and for providing me an opportunity to establish a business in an exciting city at a time of development and growth. Sincerely, John Flatley, Owner Palm Springs Fudge & Chocolates 04 ASSIGNMENT AND ASSUMPTION OF LEASE This Assignment and Assumption of Lease ("Assignment') is made and entered into this day of , 2013, by and between John Flatley ("Assignor") and Lutfa Mobarak, President of Arenas Associates dba Palm Springs Fudge & Chocolate ("Assignee"). Assignor and Assignee are sometimes referred collectively herein as the "Parties". This Assignment is made with reference to the following background facts and circumstances: RECITALS A. Assignor is the lessee of the City of Palm Springs ("City") pursuant to Agreement No. 3525, as amended, ("Lease"), attached as Exhibit "A" relating to a business called "Palm Springs Chocolates & Fudge" located at 211 South Palm Canyon Drive in the City of Palm Springs. Assignor has sold its business to Assignee and desires to assign its interest in the Lease to Assignee and Assignee desires to accept the assignment. B. Assignor and Assignee desire the City to consent to the assignment. Now, therefore, in consideration of the foregoing and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: ASSIGNMENT 1. Assignment and Assumption. Assignor hereby assigns, transfers and conveys to Assignee all of Assignor's right, title, and interest in and to, and all obligations under the Lease to Assignee. Assignee hereby accepts such assignment (the "Assignment") and hereby expressly and unconditionally assumes all of the duties and obligations of Assignor under the Agreement and Amendment. 2. Warranty re: Prior Assignment. Assignor hereby represents and warrants to Assignee that except as specified herein, there has been no default under the Lease. Assignor further represents and warrants to Assignee that there has been no prior assignment, transfer, or conveyance of any of Assignor's right, title, or interest in the Lease pertaining in any way to Assignor's retail operations. 3. Assignment Binding upon Successors and Assigns. The Assignment shall be binding upon and shall inure to the benefit of Assignor and Assignee and their respective successors and assigns. 4. All Provisions Contractual and Binding. The Parties understand and agree that all terms and provisions of this Assignment, including the true and correct Recitals above together with the exhibit referenced therein, are contractual and binding upon the Parties. Assignment and Assumption of Lease 05 Palm Springs Chocolates&Fudge 1 5. Counterparts. This Assignment may be executed in one or more counterparts, each of which will be deemed an original, but all of which constitute one and the same instrument. 6. Jointly Drafted. It is agreed among the Parties that this Assignment was jointly negotiated and jointly drafted by the Parties and their respective legal counsel, to the extent any was desired. Neither this Assignment, nor any provision thereof, shall not be interpreted or construed in favor of or against any one of the Parties solely on the ground that it drafted the Assignment or the provision in question. It is also agreed and represented by all Parties that said Parties were of equal or relatively equal bargaining power and that in no way whatsoever shall this Assignment be deemed to be a contract of adhesion, or unreasonable or unconscionable. 7. Independent Legal Counsel. Each of the Parties acknowledges that it has been represented by independent legal counsel of its own choice throughout all of the negotiations which preceded the execution of this Assignment or has knowingly and voluntarily declined to consult legal counsel. Each of the Parties states that it has executed this Assignment with the consent and on the advice, or upon its voluntary decision to decline such independent le gal egal counsel. 8. Effective Date. This Assignment shall be effective and binding by and between the Parties retroactive to 9. Entire Agreement. This Assignment and the exhibit attached hereto and incorporated by reference herein contain the entire integrated agreement among the Parties. The Assignment is intended by the Parties to state their agreement in full to each and every one of the Assignment's provisions. Any prior agreements, understandings, promises, negotiations or representations respecting the matters dealt with herein or the duties of any of the Parties in relation thereto, not expressly set forth in this Assignment, are agreed by all Parties to be null and void. 10. Severability. If any term,provision, condition or covenant of this Assignment, or the application thereof to any of the Parties or any circumstance, shall to any extent be held invalid or unenforceable, the remainder of the Assignment, or the application of such term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Assignment shall be valid and enforceable to the fullest extent permitted by law. 11. Governing Law and Venue. This Assignment and the legal relations between the Parties shall be governed by and construed in accordance with the laws of the State of California. Furthermore, as to any legal matter arising out of or related to this Assignment, the Parties agree to venue in the Indio Branch of the Consolidated Courts of Riverside County, California. Assignment and Assumption of Lease 0 t) Palm Springs Chocolates&Fudge 2 12. Headines. The headings in this Assignment are inserted for convenience only. They do not constitute part of this Assignment and shall not be used in its construction. 13. Waiver. The waiver by any of the Parties of this Assignment of a breach of any provision thereof shall not be deemed a continuing waiver or a waiver of any subsequent breach of that or any other provision of this Assignment. 14. Attorney's Fees. In the event any of the Parties hereto brings an action or proceeding for a declaration of the rights of the parties, for injunctive relief for an alleged breach or default, or any other action arising out of or related to this Assignment or the potential transactions contemplated herein, or institutes a reference or arbitration proceeding as may expressly be permitted by the terms of this Assignment, each Party shall be responsible for its own attorneys' fees and costs. 15. _Further Cooperation. The Parties herein agree to execute any and all agreements, documents or instruments as may be reasonably necessary in order to fully effectuate the agreements and covenants of the Parties contained in this Assignment, or to evidence this Assignment as a matter of public record, if required to fulfill the purposes of this Assignment. The Parties further agree to mutually cooperate with one another in carrying out the purposes of this Assignment. 16. Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be either personally delivered (which shall include delivery by means of professional overnight courier service that confirms receipt in writing, e.g., Federal Express or UPS), sent by telecopier or facsimile ("Fax") machine capable of confirming transmission and receipt, or sent by certified or registered mail, return receipt requested, postage prepaid to the addresses or numbers on file with the City. Notices sent in accordance with this Section 16 shall be deemed delivered upon the: (i) date of delivery as indicated on the written confirmation of delivery (if sent by overnight courier service); (ii) date of actual receipt (if personally delivered by other means); (iii) date of transmission (if sent by telecopier or facsimile machine); or (iv) date of delivery as indicated on the return receipt (if sent by certified or registered mail, return receipt requested). Notice of chance of address shall be given by written notice in the manner detailed in this Section 16. Assignment and Assumption of Lease 07 Palm Springs Chocolates&Fudge 3 IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the day and year first above written. ASSIGNOR John lUley ASSIGNEE By. M f ARENAS ASSOCIATES dba 4 1 ' i01�aEaK PALM SPRINGS FUDGE& CHOCOLATE Lutf Moa Barak Consent to Assignment. City hereby consents to the Assignment and agrees to accept performance of Assignee duties and obligations set forth in the Lease by Assignee. CITY OF PALM SPRINGS By: Title: Attest: James Thompson, City Clerk Approved as to form: By: Douglas C. Holland, City Attorney Assignment and Assumption of Lease 08 Palm Springs Chocolates&Fudge 4