July 15, 2025
City Council Meeting
Lease Amendment 120 East Santa Fe Ave
Background
2 Lease originated in 1990 with Bushala Brothers, Inc. and Fullerton Redevelopment Agency Amended in 1992 for a 35-year term expiring in 2027
Current lease includes two 10-year extension options through 2047 City became landlord following redevelopment agency dissolution
Summary of Proposed Amendment
2 Lease Term Extension: Confirms extension through 2047. Adds a new optional extension to 2060, with potential for further extension subject to City Council approval.
Expansion of Premises: Adds several indoor and outdoor areas (Areas 6, 8, and 9), including an outdoor seating area.
Expanded Uses: Authorizes restaurant use, including food preparation, alcohol sales, entertainment, and outdoor dining.
Tenant Improvements: Requires significant investment in upgrades across multiple areas, with a 5-year deadline for completion.
1A4
2 3
6 5
8 9
Existing Lease Premises (to 2047) (Areas 1A, 2, 3, 4, 5) Areas Designated in Original Lease with Tenant’s First Right of Refusal (Areas 6, 9) Proposed Additional Lease Area (Area 8)
Lease Premises Images
PREMISES 2 & 9
Santa Fe Café & Outdoor Dining Public Access Area
PREMISES 1
Amtrak Existing Lease Area
PREMISES 1A & 4
Amtrak Area &
Upstairs Leased Office Area
Lease Premises Images
PREMISES 3
Existing Leased Freight House Area
PREMISES 5
Existing Lease Covered Loading Dock Area
PREMISES 6
Option Exercise Premises
Extended Portion of Covered Dock
Lease Premises Images
PREMISES 8
NEW Premises
Extended Portion of Covered Dock
PREMISES 10
Unenclosed Dock Area NOT Included in Expansion
PREMISES 8
Inside NEW Premises Extended Portion of Covered Dock
Community Benefits of Amendment
Private Investment in Public Property: Tenant will pay for all site improvements, including building upgrades, outdoor dining areas, and utility enhancements.
Revitalization of Vacant Space: Long-unused areas of the Depot will be transformed into active restaurant and entertainment spaces, generating tax revenue and creating jobs.
Improved Access and Safety: Upgrades include lighting, walkways, fire safety systems, and other public-facing improvements. 5-Year Performance Requirement: Tenant must complete improvements within 5 years or risk losing extension rights.
Rent Structure Overview
Maintains existing rent for current areas with CPI adjustments (4% cap) New rent established for Areas 6 and 8
Area 6: Same rate as current areas
Area 8: $1,904/month starting rate + CPI
Rent credits for tenant-funded improvements
Rent abatement if hotel construction impacts access
Staff Recommendation
Approve Lease Amendment No. 2 between the City of Fullerton and Bushala Brothers, Inc. and authorize City Manager to execute all necessary documents for the lease of property located at 120-140 East Santa Fe Avenue.
Examples of Other City Owned Leases
Fullerton Operates Several Special Purpose Leases and Tenant Improvement Leases which facilitated improved operation of a facility that result in enhanced community experiences.
Dripp Lease (Firestone Building) – This lease was structured to incorporate approximately $1M in site improvements, furnished by tenant and materialized via rental credits offset against base with 2% annual increments.
Old Spaghetti Factory – Previous lease clauses allowed for below market rent to offset major site improvements and historic rehabilitation of a historic structure completed by the tenant.
Lease Areas Defined at Depot
Area
Original Lease (1992)
New Lease Amendment (2025)
Definition of Space
Area 2
✔️ Included (2,258 sq. ft.)
✔️ Pre-Existing Lease Area
Existing Santa Fe Cafe
Area 3
✔️ Included (1,920 sq. ft.)
✔️ Pre-Existing Lease Area
Existing Sublease Space
Area 4
✔️ Included (900 sq. ft.)
✔️ Pre-Existing Lease Area
Existing Sublease Space
Area 5
✔️ Included (1,170 sq. ft.)
✔️ Pre-Existing Lease Area
Existing Loading Dock
Area 6
✔️ Tenant Holds Right To Use Uncovered Dock Per Section 1.2 of 1999 Agreement ✅ Exercising Option for Proposed New Addition (1,313 sq. ft.) Existing concrete Uncovered Dock, proposed outdoor/covered dining and restaurant.
Area 8
❌ Not Included
✅ New Addition (952 sq. ft.)
Additional dining area, improvements planned.
Area 9
✔️ Per Article IV, Section 4.1 of 1999 Amendment, Use of Space Is No Net New Cost to Tenant ✅ Exercising Option for No-Fee Encroachment for Outdoor Dining Outdoor seating area, requires encroachment permit (no fee).
Amendment Terms & Tenant Obligations
Category
Details of Conditions in Amendment
Base Rent Calculation
Base Rent Continues to Escalate Per Existing 1999 Lease Subject to Lease Terms for Areas 2-5.
Areas 6 & 8 Rent Begins On Business Opening
Area 8 Base Rent: $24.00/SF Annually with CPI Adjustments Annually (CPI Adjustments Capped at 4%)
Rental Adjustments
Exercising THIRD (Net NEW) Term (2047-2060)
Results in a 10% annual increase for first 4 years after 2047, FMV appraisal at Year 5 Exercising FOURTH (Net NEW) Post 2060 Rent set at Fair Market Value via Independent Appraiser.
Rental Abatements
50% Abatement of Area-8 Rent IF construction of public improvements inclusive of the proposed hotel significantly impacts area of work.
Amendment Terms & Tenant Obligations
Category
Details of
Rental Credits
Area-8 Improvements (75% of Tenants Eligible Construction Costs, Capped at Credit of $190,400) Fire Improvements Credit (Capped at $120,000)
Access Improvements (Capped at 75% of eligible costs credited, no specific dollar threshold) Areas of Tenant Improvement
Area 3 – Food & Beverage Facilities W/New Restroom
Area 5 – Enclosed Restaurant With Alcohol Sales, Entertainment & Dining Area 6 – Outdoor Restaurant/Dining Area
Area 8 – Covered/Enclosed Restaurant W/Alcohol Sales & Fire Upgrades Access Areas – Ramps, Sidewalks, Trash Enclosures, Landscaping, Utilities Construction Timeline
Permitting Period – 180 days from amended Effective Date Construction Period – 365 Days Following Permitting Period Final Completion Deadline – All Improvements Within 5 Years of amendment Effective Date.
Clarifying Specifics in Amendment
City Retains 100% Fee Title Ownership
Performance Based Credit System – No Gifting of Public Funds Rent Credits Capped & Only Reimbursed After Proof of Investment (Section 7c, 8h) Credits Apply Solely to Permitted Public-Facing Improvements, Including Upgrades & ADA Access (Section 7c, 8a) Investment Triggers Rent Payments
Rent escalates annually, and FMV resets are built into the long-term extensions (Section 7h) All Subleases or assignments must be pre-approved by the City Manager and Attorney, with the original tenant remaining fully liable (Section 10) City maintains control and may terminate if construction not completed within 5 years with up to 5 one-year extensions for good cause (Section 8g) The amendment protects public interest and benefits through the repurposing of historic area.
Recommendation
Approve Lease Amendment No. 2 between the City of Fullerton and Bushala Brothers, Inc. and authorize City Manager to execute all necessary documents for the lease of property located at 120-140 East Santa Fe Avenue.