CITY OF COMMERCEAGENDA REPORTCITY OF COMMERCEAGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
Item No. Item No.
Item No.
Item No.
TO: Honorable City Council
FROM: City Manager
SUBJECT: Resolution Approving a Lease Agreement at 5555 E. Washington Blvd. (APN: 6335-024-909) Between Lilend Investment, LLC, DBA El Pollo Loco and the City of Commerce Meeting Date: September 22, 2026
RECOMMENDATION:
It is recommended that the City Council consider:
Adopting the proposed Resolution approving a Lease Agreement between Lilend Investment, LLC, DBA El Pollo Loco (Lessee), and the City of Commerce (Lessor), for 5555 E. Washington Boulevard, Commerce, California, 90040; Assessor’s Parcel Number (“APN”) 6335-024-909 and authorize the Mayor to sign the agreement on behalf of the City; and ANALYSIS/DISCUSSION:
In October 2017, the City of Commerce engaged Eastside Development regarding the opportunity to purchase property along Washington Boulevard in order to relocate Transportation Department staff which has outgrown its current site and/or develop a project that would complement the Housing Overlay Zone. The City entered into negotiations with Eastside Development for the acquisition of real property that consists of approximately 23,267 square feet (SF) of land and 3,700 SF of a restaurant building with an existing drive-thru located on the southwest corner of Jillson Street and Washington Boulevard. This property previously housed a Jack in the Box establishment with a parking lot with asphalt paving and fencing.
During May of 2026, the previous tenant relocated to another site on Washington Blvd and Atlantic Ave within the City of Commerce. The City decided to advertise the property to seek a long-term tenant for the existing drive-thru restaurant building. Following negotiations with the interested potential tenants, the City received a proposal from Lilend Investment, LLC, DBA El Pollo Loco. Staff evaluated the proposal based on the tenant’s financial qualifications, proposed investment in the property, anticipated sales tax generation, and the ability to activate a currently vacant City-owned property. Staff determined that the proposed lease terms provide a favorable long-term economic benefit to the City.
Part of conditions in the agreement, the City will allow the Lessee to have ninety (90) days from the date this Lease is mutually executed (the “Permitting Period”) to obtain any and all required permits for the construction and operation of an El Pollo Loco drive-thru restaurant. The City will cooperate with Lessee in obtaining the Permits. The Lessee shall diligently pursue the acquisition of the Permits consistent with an entitlement schedule to be established after completion of Lessee’s Site Feasibility Report, which shall be completed prior to the mutual execution of this Lease. If Lessee has not obtained the Permits within the Permitting Period, provided that Lessee is diligently pursuing the Permits, Lessee may, no more than two (2) times, extend the Permitting Period for THIRTY (30) days upon notice to Lessor.
The City will reimburse Lessee for Lessee’s leasehold improvements and vandalism remediation in the amount not to exceed two hundred fifteen thousand five hundred eighty-seven dollars ($215,587.50), payable in the form of rent abatement, such abatement to commence on Lessee’s Rent Commencement Date. Lessee shall provide all paid invoices and lien waivers upon completion of Lessee’s improvements to the City-owned premises. The rent credit serves as reimbursement for tenant-funded improvements to the site that would otherwise require City funding to prepare the site for occupancy.
The lessee will have the right to assign the lease or sublease of all or any portion of the Leased Premises without the City’s consent to any of the following (each, a “Permitted Transferee”): (a) any successor corporation or other entity resulting from a merger, consolidation, or reorganization (other than as a result of Lessee’s bankruptcy) involving Lessee; (b)any purchaser of all or substantially all of Lessee’s assets; (c) any entity that controls, is controlled by, or is under common control with Lessee; or (d) any franchisor, licensee, or franchisee with a minimum net worth equivalent to five million dollars ($5,000,000). Lessee will give the City written notice of any such assignment or sublease to a Permitted Transferee within thirty (30) days thereof. Any Permitted Transferee will assume in writing all of Lessee’s obligations under the Lease. Except as provided above, Lessee may not assign the Lease or sublease the Leased Premises other than as provided in Paragraph 12 of the Lease.
Upon the Commencement Date of the lease, the monthly base rent of $13,333.33 shall be increased every sixty (60) months thereafter during the original term and the option term (if exercised) by fifteen (15) percent of the monthly base rent scheduled to be paid for the month immediately preceding the applicable percentage increase date. The term of this agreement is for eleven (11) years with a one-time option to extend to four (4) more years. The maximum term of the agreement was set as 15 years, per the Surplus Land Act regulations. Based on this, the agreement is projected to generate approximately $2.8 million in gross rental revenue over the potential 15-year term. While the City is providing rent credit to reimburse eligible tenant improvements, the agreement ultimately converts a vacant City-owned property into a revenue-producing asset that supports long-term economic activity ENVIRONMENTAL ANALYSIS:
The City of Commerce has previously completed a Phase 1 and the City has completed its due diligence on ensuring that the property is free from environmental hazards at the time the City acquired the property.
City staff has determined the project to be exempt from environmental review pursuant to the guidelines of the California Environmental Quality Act (Public Resources Code § 21080(b)(9); Administrative Code, Title 14, Chapter 3, § 15301(a), Class 1, Existing Facilities). This section specifically applies to small additions, expansions, or alterations to existing structures where there is negligible or no expansion of the use. For this project, the applicant will limit the construction to interior tenant improvements, electrical, plumbing, and façade improvements.
ALTERNATIVES:
Approve recommendation
Reject recommendation
Provide staff with further direction
FISCAL IMPACT:
Under the proposed lease agreement, the City will receive initial base rent of $13,333.33 per month ($160,000 annually). The lease term is eleven (11) years with one option to extend for an additional four (4) years. Beginning in year six and at each subsequent five-year interval, the monthly base rent will increase by fifteen percent (15%). As consideration for tenant improvements and vandalism remediation to the site, the City will provide a rent abatement credit of $215,587.50, which will be applied against rent payments until the amount is exhausted. Based on the initial monthly rent, the credit is expected to be fully exhausted over approximately sixteen (16) months. Following the exhaustion of the rent credit, the City will receive the full monthly rental payment for the remainder of the lease term.
The lease will generate a long-term revenue stream from a currently vacant City-owned property while shifting responsibility for tenant improvements and maintenance obligations to the tenant as provided in the lease agreement.
Written by: Gisselle S. Delgado, Senior Management Analyst Reviewed by: Alvaro Castellon, Director of Finance
Approved as to form: Noel Tapia, City Attorney
Respectfully submitted: Ernie Hernandez, City Manager ATTACHMENTS:
Lease Agreement
Resolution