AGENDA REPORT
Meeting Date: August 23, 2022
Item Number:
To:
E-8
Honorable Mayor & City Council
From: Logan Phillippo, Policy & Management Analyst
Subject: FIFTH AMENDMENT TO LEASE BY AND BETWEEN THE CITY OF BEVERLY HILLS AND MELIK S, INC. (DBA KELLY’S COFFEE AND FUDGE FACTORY) AT 444 NORTH REXFORD DRIVE
Attachment: 1. Fifth Amendment to Lease
RECOMMENDATION
Staff recommends City Council approve Fifth Amendment to Lease by and between the City of Beverly Hills and Melik S, Inc. dba Kelly’s Coffee and Fudge Factory (the “Tenant”) at 444 North Rexford Drive.
INTRODUCTION
The proposed amendment continues a percentage rent arrangement with Tenant Melik S, Inc. dba Kelly’s Coffee and Fudge Factory at the Beverly Hills Library for three years, through July 30, 2025.
DISCUSSION
The City entered into a lease at 444 North Rexford Drive with Melik S, Inc. in 2006. The Tenant operates Kelly’s Coffee & Fudge Factory, which offers a variety of specialty coffee drinks, sandwiches, and baked goods. The Tenant was selected to operate in the Library after the completion of a request for proposals (RFP) process. The café is considered an amenity for patrons of the Library and Civic Center complex given there are limited food and beverage options on site or in the immediate vicinity.
In recent years, the Tenant has reported a significant decline in transactions due to low patronage at the Library and Civic Center as compared years prior to the pandemic. The Tenant has had to reduce operating hours and provide a limited menu to help reduce losses. While sales have steadily increased over the past year as evidenced by the Tenant’s gross receipts reporting, they remain nearly half as compared to 2019 prepandemic levels, while the cost of food, supplies, and labor have increased substantially due to high inflation.
Meeting Date: August 23, 2022
In November 2020, the City implemented a percentage rent structure tying rent to the tenant’s gross receipts. This provision was subsequently extended and expired on June 30, 2022. The Tenant was initially required to repay as additional rent, over a 36-month period, the difference between rent collected under the percentage rent structure and the rent obligations in effect under the lease prior to the pandemic. However, due to the sustained drop in business, the City later removed this repayment requirement in a lease amendment in April 2022.
The proposed amendment includes the following key terms:
Through June 30, 2025, the Tenant will pay a $500 minimum rent plus (i) 10% of the preceding month’s gross sales exceeding $5,000 and less than $15,000, plus (ii) 20% of the Tenant’s gross sales exceeding $15,000; Starting July 1, 2025, the percentage rent structure will expire and the Tenant will pay $5,705.75 per month, which will increase by the consumer price index (CPI), with a 3% minimum increase and 6% maximum increase, each year thereafter; and
A security deposit increase August 1, 2022 will no longer be applicable. However, on August 1, 2027 the Tenant will still be required to pay the increase to the Tenant’s total security deposit so that it will be equal to two months of the thencurrent monthly rent.
FISCAL IMPACT
The proposed lease amendment modifies the monthly rent from July 1, 2022, to June 30, 2025, to a minimum of $500 plus (i) 10% of the preceding calendar month’s gross sales above $5,000 and under $15,000, plus (ii) 20% of the preceding calendar month’s gross sales over $15,000. At their current estimated gross receipts levels, the City should anticipate approximately $1,500 in monthly rent. This amount will fluctuate depending on a number of factors such as activity at the Civic Center and is anticipated to increase along with the Tenant’s sales in the coming years.
There are no commissions associated with this lease amendment.
Gabriella Yap,
Deputy City Manager
Approved By
Attachment 1
-1-
B0785-0001\2690496v1.doc
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE (this “Fifth Amendment”) is dated as of _________________ __, 2022, and is entered into by and between the CITY OF BEVERLY HILLS (“Landlord”), and MELIK S, INC., a California corporation (dba “Kelly’s Coffee and Fudge Factory”) (“Tenant”).
R E C I T A L S
A. Landlord and Tenant executed that certain City of Beverly Hills Retail Lease dated June 27, 2006, and amended it by four amendments dated July 7, 2009, September 5, 2017, November 17, 2020 and April 12, 2022, respectively (the “Lease”).
B. A Memorandum of Lease dated June 27, 2006 was recorded on September 7, 2006 as Document No. 062001523 in the Official Records of Los Angeles County, California. The First Amendment to Lease was recorded on August 6, 2009 as Document No. 20091210345 in such Official Records, and the Second Amendment to Lease was recorded on October 26, 2017 as Document No. 14411792 in such Official Records; however, neither the Third Amendment to Lease nor the Fourth Amendment to Lease nor any Memorandum thereof was recorded.
C. Landlord and Tenant desire to further amend the Lease.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual covenants and terms hereof and in the Lease, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows:
1. Monthly Rent Payments.
(a) From July 1, 2022 through June 30, 2025, the Monthly Base Rent for the Premises shall be: (i) Five Hundred and No/100 Dollars ($500.00) per calendar month, payable by the first (1st) day of each calendar month; plus (ii) ten percent (10%) of the amount by which the preceding calendar month’s Gross Sales (as hereinafter defined) exceed $5,000, but such amount to which such percentage is applied shall not exceed $15,000; plus (iii) twenty percent (20%) of the amount by which the preceding calendar month’s Gross Sales exceed $15,000. The rent described in clauses (ii) and (iii) shall be payable by the tenth (10th) day of the following calendar month.
As used herein, the term “Gross Sales” shall mean all income paid to or for the benefit of Tenant relating in any way to Tenant’s business in the Premises. Tenant shall deliver to Landlord concurrently with its payment of monthly rent a statement of Gross Sales certified by Tenant’s Chief Financial Officer as being true and correct. Tenant shall keep reasonable records of all Gross Sales for a period of three (3) calendar years, and shall provide Landlord with copies thereof requested by Landlord in writing promptly after each such request. Additionally, Landlord shall at all times have the right to inspect and audit such records at the Premises.
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 -2-
B0785-0001\2690496v1.doc
(b) Commencing on July 1, 2025, the Monthly Base Rent for the Premises shall be Five Thousand Seven Hundred Five and 75/100 Dollars ($5,705.75), and shall thereafter adjust/increase on March 1, 2026 and each anniversary thereof by the annual percentage change in the CPI, determined by dividing the CPI for the December immediately prior to the applicable adjustment date by the CPI for the previous December. However, in no event shall any annual adjustment/increase be less than three percent (3%) or more than six percent (6%).
As used herein, the term “CPI” shall mean the United States Department of Labor, Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers for the Los AngelesRiverside-Orange County statistical area (CPI U) (1982 84=100) (“CPI”). The adjusted monthly rent shall be calculated by multiplying the then-current Monthly Base Rent amount by a fraction, the numerator of which shall be the December CPI immediately prior to the applicable Adjustment Date and the denominator of which shall be the December CPI of the year preceding the numerator year. Should the Bureau of Labor Statistics discontinue the publication of the Index, or publish the same less frequently or alter the same in some other manner, then the most nearly comparable index or procedure as reasonably determined by Landlord shall be substituted therefor.
Landlord shall notify Tenant in writing of each such annual adjustment; however, Tenant shall continue to pay Monthly Base Rent at the then-current rate until Landlord gives Tenant written notice of adjustment, but delay in giving such notice shall not waive the increase in Monthly Base Rent, and upon delivery of an adjustment notice, Tenant shall pay to Landlord all previous unpaid adjustments concurrently with Tenant’s next scheduled payment of Monthly Base Rent.
2. Security Deposit. Section 4 of the second amendment is hereby amended by deleting the words “August 1, 2022 and” (such that the deposit described therein shall occur on August 1, 2027 only).
3. Default. A default by Tenant under this Fifth Amendment shall constitute a default under the Lease.
4. Time of Essence. Time is of the essence of every provision herein in which time is a factor.
5. Conflict. In the event of a conflict or inconsistency between the terms and conditions of the Lease and the terms and conditions of this Fifth Amendment, the terms and conditions of this Fifth Amendment shall prevail and control.
6. Continuing Effect. Except as specifically modified hereby, the Lease shall remain unaffected and unchanged by reason of this Fifth Amendment.
7. Counterparts. This Fifth Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, taken together, shall be deemed to be one and the same instrument.
8. City Manager Authority. The City Manager of Landlord shall have the authority to execute this Fifth Amendment and any and all other documents contemplated by this Fifth Amendment.
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 -3-
B0785-0001\2690496v1.doc
9. Amendment of Recorded Memorandum of Lease. Upon its execution and delivery of this Fifth Amendment, Tenant shall concurrently execute and deliver a duly acknowledged counterpart of an Amendment to Memorandum of Lease in the form attached hereto as Exhibit “A”.
10. DocuSign. The parties may use DocuSign to execute and deliver this Fifth Amendment, but Tenant must deliver an executed original of the Amendment to Memorandum of Lease to Landlord, duly acknowledged, so that it can be executed and recorded by Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Fifth Amendment as of the date and year first above written.
LANDLORD: CITY OF BEVERLY HILLS
By: ________________________
Lili Bosse, Mayor
ATTEST:
Huma Ahmed, City Clerk
APPROVED AS TO FORM:
Laurence S. Wiener, City Attorney
APPROVED AS TO CONTENT:
George Chavez, City Manager
TENANT: MELIK S, INC.,
a California corporation
By:
Karo Alex Sayadyan,
President
By:
Goar Nazliyan,
Chief Financial Officer
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 -4-
B0785-0001\2690496v1.doc
EXHIBIT “A”
FORM OF AMENDMENT TO MEMORANDUM OF LEASE
(Attached.)
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 -5-
B0785-0001\2690496v1.doc
RECORDING REQUESTED BY, AND
WHEN RECORDED MAIL TO:
City of Beverly Hills
Office of the City Manager
455 North Rexford Drive
Beverly Hills, California 90210
Attn: City Clerk
(Space Above Line For Recorder’s Use)
Exempt from Recording Fees under California Government Code 27383.
AMENDMENT TO MEMORANDUM OF LEASE
THIS AMENDMENT TO MEMORANDUM OF LEASE (this “Amendment”) is dated as of ___________________, 2022, and is entered into by and between the CITY OF BEVERLY HILLS (“Landlord”), and MELIK S, INC., a California corporation (dba “Kelly’s Coffee and Fudge Factory”) (“Tenant”).
R E C I T A L S
A. Landlord and Tenant executed that certain City of Beverly Hills Retail Lease dated June 27, 2006, and amended it by four amendments dated July 7, 2009, September 5, 2017, November 7, 2020 and in 2022 (the “Lease”).
B. A Memorandum of Lease dated June 27, 2006 was recorded on September 7, 2006 as Document No. 062001523 in the Official Records of Los Angeles County, California. (“Memorandum”). The First Amendment to Lease was recorded on August 6, 2009 as Document No. 20091210345 in such Official Records, and the Second Amendment to Lease was recorded on October 26, 2017 as Document No. 14411792 in such Official Records; however, neither the Third Amendment to Lease nor the Fourth Amendment to Lease nor any Memorandum thereof was recorded.
C. Landlord and Tenant have entered into a Fifth Amendment of Lease (“Fifth Amendment”) and consequently, Landlord and Tenant desire to amend the Memorandum, as modified by the recorded First and Second Amendments to Lease, and reflect that there were Third, Fourth and Fifth Amendments to Lease.
A G R E E M E N T
NOW, THEREFORE, Landlord and Tenant hereby amend the Memorandum to reflect that the Lease has been amended as set forth in the Third, Fourth and Fifth Amendments to Lease (and the other amendments to the Lease described in Recital A above). The Lease, as amended, is incorporated herein by this reference.
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 -6-
B0785-0001\2690496v1.doc
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment.
LANDLORD: CITY OF BEVERLY HILLS
By:
George Chavez, City Manager
TENANT: MELIK S, INC.,
a California corporation
By:
Karo Alex Sayadyan,
President
By:
Goar Nazliyan,
Chief Financial Officer
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 B0785-0001\2690496v1.doc
State of California )
County of Los Angeles )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer
completing this certificate verifies only
the identity of the individual who signed
the document to which this certificate is
attached, and not the truthfulness,
accuracy, or validity of that document.
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 B0785-0001\2690496v1.doc
State of California )
County of Los Angeles )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer
completing this certificate verifies only
the identity of the individual who signed
the document to which this certificate is
attached, and not the truthfulness,
accuracy, or validity of that document.
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 B0785-0001\2690496v1.doc
State of California )
County of Los Angeles )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A notary public or other officer
completing this certificate verifies only
the identity of the individual who signed
the document to which this certificate is
attached, and not the truthfulness,
accuracy, or validity of that document.
DocuSign Envelope ID: 560BF4DC-3CEE-4FF5-B068-5F78AF2161F4 Certificate Of Completion
Envelope Id: 560BF4DC3CEE4FF5B0685F78AF2161F4 Status: Sent Subject: Please DocuSign: Fifth Amendment to Lease - Melik S, Inc.pdf Source Envelope:
Document Pages: 9 Signatures: 3 Envelope Originator:
Certificate Pages: 3 Initials: 0 Jonathan Gernes
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
455 N. Rexford Drive
Beverly Hills, CA 90210
[email protected]
IP Address: 104.175.193.255
Record Tracking
Status: Original
7/26/2022 4:26:10 PM
Holder: Jonathan Gernes
[email protected]
Location: DocuSign
Signer Events Signature Timestamp
Goar Nazliyan
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Drawn on Device
Using IP Address: 172.58.27.27
Signed using mobile
Sent: 7/26/2022 5:33:44 PM
Resent: 7/28/2022 9:52:15 AM
Resent: 8/3/2022 10:01:56 AM
Viewed: 8/5/2022 9:16:38 PM
Signed: 8/5/2022 9:18:18 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Karo Alex Sayadyan
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Drawn on Device
Using IP Address: 47.39.117.114
Signed using mobile
Sent: 7/26/2022 5:33:44 PM
Viewed: 7/26/2022 6:04:57 PM
Signed: 7/26/2022 8:32:16 PM
Electronic Record and Signature Disclosure:
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Bruce Galloway for
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 208.87.233.201
Sent: 8/5/2022 9:18:20 PM
Viewed: 8/6/2022 6:34:21 AM
Signed: 8/6/2022 6:34:27 AM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Logan Phillippo
[email protected]
Senior Management Analyst
City of Beverly Hills
Security Level: Email, Account Authentication
(None)
Sent: 8/6/2022 6:34:28 AM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
George Chavez
[email protected]
Security Level: Email, Account Authentication
(None)
Signer Events Signature Timestamp
Electronic Record and Signature Disclosure:
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Lili Bosse
[email protected]
Security Level: Email, Account Authentication
(None)
Electronic Record and Signature Disclosure:
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Huma Ahmed
[email protected]
Security Level: Email, Account Authentication
(None)
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
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Logan Phillippo
[email protected]
Senior Management Analyst
City of Beverly Hills
Security Level: Email, Account Authentication
(None)
Sent: 7/26/2022 5:33:44 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Kelly's Coffee
[email protected]
Security Level: Email, Account Authentication
(None)
Sent: 7/26/2022 5:33:45 PM
Viewed: 7/26/2022 6:41:03 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Adrianne Tarazon
[email protected]
Security Level: Email, Account Authentication
(None)
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Dorina Mohan
[email protected]
Security Level: Email, Account Authentication
(None)
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Carbon Copy Events Status Timestamp
Jackie Perez
[email protected]
Security Level: Email, Account Authentication
(None)
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
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Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 7/26/2022 5:33:44 PM
Payment Events Status Timestamps