Cathedral City Downtown Foundation
MEETING DATE: 8/9/2017
TITLE:
Title
Amendment to Commercial Lease Agreement with Bonta Restaurant
End
FROM:
Leisa Lukes, Business Development Manager
RECOMMENDATION:
Recommendation
Staff recommends that the City Council acting as the Cathedral City Downtown Foundation authorize the Executive Director to execute the proposed amendment to the existing Commercial Lease Agreement with Bonta Restaurant located at 68-510 East Palm Canyon Drive, Space 140.
Body
BACKGROUND:
The commercial space located at 68-510 East Palm Canyon, Suite 140, is managed by the Cathedral City Downtown Foundation and has been occupied by Bonta Restaurant since December 1, 2014. The Downtown Foundation approved an amendment to the Commercial Lease Agreement in April 2016, discounting the rent for a period of two years. The business continues to be challenged during the summer months when customer traffic lulls and electricity expenses increase. The tenant has requested that the payment schedule be adjusted primarily during the remaining term of the First Amendment to the Commercial Lease Agreement while maintaining the total amount of rent to be paid during that same time period.
DISCUSSION:
Bonta Restaurant is in the third year of its initial 5-year Commercial Lease Agreement with the Downtown Foundation, which began December 1, 2014. The 4,853 square-foot space is located at 68-510 East Palm Canyon Drive, Suite 140, in the Desert Cinema complex. The Downtown Foundation approved the First Amendment to the Commercial Lease Agreement on April 13, 2016. This Amendment discounts the Base Rent and Common Area Maintenance (CAM) charges by 50% from April 1, 2016 through March 31, 2017 and by 40% from April 1, 2017 through March 31, 2018. For the remainder of the initial lease term (post March 31, 2018 through November 2019), the Base Rent and CAM charges remain consistent with the terms of the original Commercial Lease Agreement. The Amendment further allows for the tenant to pay on a weekly (versus monthly) basis.
The tenant is requesting an adjustment to the payment schedule to compensate for the reduction in business during the remainder of the 2017 non-peak season (August 7 through October 30, 2017) when air conditioning costs remain high. This modified payment schedule would allow for the Base Rent during that time period (totaling $9,608.43) to be spread equally over 26 weeks commencing November 6, 2017 and concluding April 30, 2018. This is during peak season and also coincides with the period in which the First Amendment to the Commercial Lease Agreement provides for a reduction in Base Rent and CAM charges (through March 26, 2018). The greatest impact of adding the "Replacement Rent" to the regularly-scheduled payments would occur during April 2018 when the terms of the First Amendment expire. Reference Attachment 1, Exhibit "A" - "Adjusted Weekly Payment Schedule." No further rent reduction is being requested or recommended.
Should the business close or be sold during the term of the Adjusted Payment Schedule, the remaining balance of the Replacement Rent would be transferred to the Downtown Foundation from the proceeds of the sales transaction, and the lease with the new business owner would reflect the provisions of the original Commercial Lease Agreement.
If ownership of the property in which Space 140 is located is transferred during the term of the Adjusted Payment Schedule, the remaining balance of the Replacement Rent would be paid to the Downtown Foundation by the buyer at the Close of Escrow.
All other current terms and provisions of the original Lease and the First Amendment would remain in effect. Reference Attachment 1 - Second Amendment to Commercial Lease Agreement.
Bonta Restaurant's continuing occupancy of Space 140 avoids disruption and loss of monthly lease revenues and could also benefit a future owner of the property. With the primary goal of retaining the current restaurant operator, staff supports the proposed Second Amendment to the Commercial Lease Agreement. To further reduce expenses, the tenant will operate the restaurant Wednesday through Sunday only through August 20th and close the restaurant between August 21 and September 20, 2017. The Adjusted Weekly Payment Schedule will assist the tenant during this period of modified operations and enable them to better prepare for the upcoming season.
FISCAL IMPACT:
Lease revenues totaling $39,558.85 in Base Rent, CAM and HVAC Maintenance charges are scheduled to be paid by the tenant between August 7, 2017 and April 30, 2018. The proposed Second Amendment to the Commercial Lease Agreement does not change the total anticipated revenue nor the end date in which this total amount is to be received by the Downtown Foundation. The Amendment would, however, allow for the Base Rent amount of $9,608.43 for the period between August 7 through October 30 to be paid in equal payments between November 6, 2017 and April 30, 2018.
ATTACHMENTS:
1. Second Amendment to Commercial Lease Agreement