City Council
MEETING DATE: 8/12/2015
TITLE:
Title
Ground Lease Extension and License Agreement with Big League Dreams Sports Park
End
FROM:
Tami E. Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Authorize the City Manager to execute a First Amendment to the existing Ground Lease and Agreement to Develop and a License Agreement with Big League Dreams Sports LLC that would extend the Ground Lease by 30 years, modify the Minimum Annual Rent, Amend the Promissory Note and provide for the use and maintenance of additional parking lot space and grant additional options to extend sublease agreement with STC One Communications in a final form mutually agreeable to Big League Dreams, the City and each parties' Legal representation.
Body
BACKGROUND:
The City of Cathedral City and Big League Dreams executed a Ground Lease and Agreement to Develop for the development and operation of a privately owned and privately constructed sports park and the development and maintenance of a municipally owned passive park on approximately 24.8 acres located within the City of Cathedral City at the intersection of Date Palm Drive and Dinah Shore Drive in September of 1996. Big League Dreams developed and constructed the Sports Park and has operated it since 1998 and has also maintained the Passive Park since that time.
To provide financing for the construction and development of the Sports Park, the City participated in a Certificate of Participation and Lease Revenue Bond, securitized by City Hall. The obligation under the financing mechanism has been paid for by Big League Dreams in the form of an executed Promissory Note dated July 30, 1998 by which Big League Dreams promised to pay the City the principal sum of $4,350,230.00 on or before September 30, 2027. Big League Dreams has made all installment payments to the City required of it pursuant to the terms of the Promissory Note to date.
In addition, Big League Dreams and Cox PCS Assets, LLC entered a Communications Site Ground Sublease Agreement dated September 17, 1998 whereby Cox subleased certain real property at the Sports Park for use as a wireless communications facility. The Sublease was approved by the City September 21, 1998. STC One LLC, subsequent “Sublessee”, by assignment is the successor in interest to the Original Sublessee ("Cox"). By a First Amendment to Communications Site Ground Sublease Agreement, City and Sublessee agreed that Sublessee shall have the right to extend the Sublease term for three renewal terms, with the final such renewal term to expire on March 31, 2028 to coincide with the expiration of the Big League Dreams Ground Lease. The City acknowledged and consented to such First Amendment. STC One has exercised the first of the three renewal terms to extend the Sublease through September 2, 2018. Big League Dreams and STC One desires to extend the Sublease beyond 2028 but is unable to do this without an amendment and extension of the Ground Lease.
DISCUSSION:
The parties wish now (a) to extend the Term of the Lease for a period of thirty (30) years (from 2028 to 2058); (b) to specify the Minimum Annual Rent to be paid by Tenant during the extended Term; (c) to require Tenant to maintain 109 spaces of the parking lot at Landlord’s library in exchange for the right to use the 109 spaces when the library is not open to the public; (d) to modify the terms of a sublease of an area of the Sports Park used as a wireless communications facility; and (e) modify the terms of the loan repayment evidenced by the Promissory Note in consideration for Tenant’s payment of an increased amount of Minimum Annual Rent during the Term.
The City was recently successful in refinancing the remaining obligation under the Lease Revenue Bond thus reducing its annual debt service obligation and desires to pass on this savings to Big League Dreams for several reasons. Over the last several years, Big League Dreams has struggled to remain viable with the heavy debt load while at the same time has developed a change in business plan that would require some significant capital investment into the park. To accomplish this, there is a need to reduce the annual debt load for the remaining term of the bond indebtedness to the City and then significantly reduce the minimum annual rent and extend the lease term by 30 years in order to provide capital for future improvements to the park. The current payment schedule of $118,750, paid quarterly, would be reduced to $100,000 quarterly through April 1, 2028 and is deemed the Minimum Annual Rent. The remaining Minimum Annual Rent beyond 2028 would be $20,000 for nine years, $30,000 for nine years, and $40,000 for the balance of the term.
In exchange for the reduced rent in the future years, Big League Dreams will immediately commence to maintain not only of their parking lot but the adjacent parking lot utilized by library patrons to include 109 spaces, painting light poles, trellis, paving and striping parking lot, tree trimming etc.
Big League Dreams, STC One and the City would further agree to modifications of the Communications Site Ground Sublease Agreement as follows to allow increased square footage of the real property subject to the Sublease by 300 square feet and shall be in a location adjacent to the existing subleased real property; STC One retains its options under the Sublease to extend the Sublease term until March 31, 2028 thereafter STC Once would have an additional three (3) options to extend the Sublease as follows: Option 4: April 1, 2028 - March 31, 2038; Option 5: April 1, 2038 - March 31, 2048; Option 6: April 1, 2048 - March 31, 2053. In the event new tenants contract to utilize the additional 300 square feet of subleased real property referenced in Section 5(a) of this Amendment, STC One shall pay to Big League Dreams, as additional Rent, fifty percent (50%) of the gross rent paid to the STC One by any such tenant within thirty (30) days of its receipt of the new tenant rent; and, all rent paid by STC One to Big League Dreams pursuant to the Sublease, whether monthly, quarterly, annually or at any other frequency; prepaid, discounted, deferred, increased, decreased or without change; with respect to the original subleased property or the additional 300 square feet referenced in Section 4(a) hereof; or otherwise, shall constitute Gross Revenues to Big League Dreams as defined in the Lease. Big League Dreams shall account to the City in its quarterly accountings for the receipt of such Gross Revenues and shall pay the Percentage Rent associated with such Gross Revenues required by Section 5(c) of the Lease, but shall otherwise be entitled to retain all such rents for its own uses.
FISCAL IMPACT:
There would be a reduced cost of maintenance obligation to the Library parking lot by the City. No negative fiscal impact to the City would occur.
ATTACHMENTS:
None