June 18, 2024
CSUF and Sky Harbor Fullerton, LLC (Marriott) Lease Amendments
Tri-Party Agreements
California State University Fullerton (CSUF) owns the Marriott hotel property.
City subleased the property to the Marriott Corporation to construct and operate the Marriott hotel.
City of Fullerton Former Redevelopment Agency (RDA) loan CSUF $7.3 million dollars for the construction of a parking deck and sports complex in exchange for CUSF leasing the property to the City.
The loan was to be paid back to RDA by percentage of Marriott’s Annual Gross Room revenue. 2 Tri-Party Agreements
The sub-lessee (currently Sky Harbor Fullerton LLC) seeks to refinance the Marriott and make necessary upgrades as a franchisee and requested a lease term extension.
To support Sky Harbor Fullerton LLC’s ability to re-finance, lease term extension is required.
Cal State Fullerton needs to agree to the new proposed terms to finalize an agreement with the Tenant. The existing sublease agreement provides minimal benefit for Cal State Fullerton to agree to an extension due to the need for future student housing land and the lack of revenue received through the current agreement structure. 3 Loan Repayment Structure
Current Structure:
4% of Annual Gross Room Sales
70% to RDA (now City) and 30% to CSUF
Proposed Structure
5.5% of Annual Gross Room Sales
70.91% to CSUF and 29.09% to City
CSUF agrees to pay off the outstanding principal and amended interest balance on the Redevelopment Agency loan (approximately $745,000) as part of the Amendment to the Ground Lease. 4 Amendment to Ground Lease and Amended & Restated Sublease Amendment to Ground Lease by and between The Board of Trustees of the California State University and The City of Fullerton, California Amended and Restated Sublease by and between The City of Fullerton, California and Sky Harbor Fullerton LLC Amendments:
Extends the lease term to December 31, 2088
Amends the interest on the loan to simple interest
CSUF agrees to repay the balance of the outstanding principal and interest Revenue sharing between CSUF and Fullerton of 5.5% of hotel annual gross room sales (30% City of Fullerton; 70% CSUF) 5 Recommendation
Approve in substantially the form attached and authorize the City Manager or designee to finalize, execute and administer the Amendment to the Ground Lease by and between The Board of Trustees of the California State University and The City of Fullerton, California in a form approved by City Attorney.
Approve in substantially the form attached and authorize the City Manager or designee to finalize, execute and administer the Amended and Restated Sublease by and between The City of Fullerton, California and Sky Harbor Fullerton LLC in a form approved by City Attorney. 6