CITY OF COMMERCEAGENDA REPORTCITY OF COMMERCEAGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
TO: Honorable City Council
FROM: City Manager
SUBJECT: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COMMERCE, CALIFORNIA, APPROVING A SUBLEASE AGREEMENT BETWEEN THE CITY OF COMMERCE AND THE AMITIM GROUP LLC MEETING DATE: October 8, 2024
RECOMMENDATION:
Approve and adopt the Resolution as presented.
BACKGROUND & ANALYSIS:
The following is a snapshot of what has transpired related to said property:
Company ("Structural Materials") has been an established retailer of roofing materials since 1948. On November 21, 1995, the Commerce Community Development Commission entered into a Ground Lease (the "Master Lease") with Structural Materials (an established retailer of roofing materials since 1948) for the property located at 7025 Slauson Avenue. The Lease was for a 55-year term. Pursuant to Section 4.2 of the Lease, Structural Materials was required to pay $6,000.00 per month ("Base Monthly Rent") on the first day of the month for the use of the Property.
On June 1, 2012, the City received a letter from Structural Materials advising that they will be going out of business and will be selling their business to Beacon Sales Acquisition, Inc. As a result, Structural Materials proposed an Assiqnment of the Lease to Beacon. At the time, Beacon was one of the largest distributors of residential and non-residential roofinq and complementary buildinq products in North America. With the transition to Beacon, day-to-day operations of the business did not change.
The Successor Agency approved the Assignment and Assumption of the Master Lease to Beacon on July 3, 2012.
At the beginning of calendar year 2020, Beacon approached the City regarding the Lease-Purchase of said property. After much discussion, Beacon exercised its option to cancel the Lease and gave notice to terminate effective June 7, 2021.
On April 1, 2021, Beacon assigned all of its interest in the Master Lease to the City.
On October 1, 2022, the City and the Amitim Group LLC entered into a Temporary Lease Agreement for a majority of the Subject Property on a month-to-month basis. The tenant has occupied the premises since highlighted date.
Since the beginning of calendar year 2024, staff have been negotiating with the tenant for a new sublease (“Sublease”) of the property. Relevant to the negotiations was the monthly lease rate, so at the direction of the City Council, staff solicited five (5) Real Estate companies to provide Monthly Lease Assumptions.
Conclusion of Current Fair Market Value for Lease was estimated at $85,000 per month.
With that said, a draft sublease for the property located at 7025 Slauson is attached. The sublease is subject to the terms of the Master Lease. The subtenant will assume all of the obligations of the Master Lease, except as provided in the Sublease. Also, the sublease is a month-to-month term.
The terms of the Master Lease allow this Sublease without the consent of the Successor Agency.
FISCAL IMPACT:
If the City Council approves staff’s recommendation, the City’s General Fund will recognize $79,000 ($85,000 minus the City’s obligation of $6,000 to the Successor Agency) per month for the duration of the agreement.
ALTERNATIVES:
None
RELATIONSHIP TO STRATEGIC GOALS:
This agenda report relates to the 2016 City of Commerce Strategic Guiding Principle – City Organization, as follows: Establish clear expectations, roles and responsibilities for all employees, elected officials, appointed commissioners and committee members, and volunteers.
Respectfully and recommended submitted by: Vilko Domic, Assistant City Manager Reviewed by: Noel Tapia, City Attorney