7-2
After the initial report, it was determined that the next step was additional testing at each cathodic protection test station and creation of a pre-design survey report. The additional work was performed under Amendment No. One for $49,000, for a total contract value of $108,855.Corrpro’s Cathodic Protection System Pre-Design Survey Report, produced in the fall of 2024, recommended upgrading the existing cathodic protection and corrosion monitoring systems with galvanic anode cathodic protection to mitigate corrosion, preserve the integrity, and extend the service life of the pipelines.
Staff recommends City Council approval of Amendment No. Two with Corrpro to provide detailed plans, specifications, bid and construction phase services so that the cathodic protection program can be constructed and implemented.
FISCAL IMPACT:
The adopted Capital Improvement Program budget includes sufficient funding for these additional services. Work will be expensed to the Water Capital Master Plan account in the Public Works Department, 70201931-980000-24W11. The consultant’s proposed not-to-exceed fee for this additional service is $138,755.
Account Description Account Number Amount
Water Capital Master Plan All 70201931-980000-24W11 $ 138,755 Total: $ 138,755
Proposed fund uses are as follows:
Vendor Purpose Amount
Corrpro Companies, Inc. Cathodic Protection design $ 138,755 Total: $ 138,755
The Water Capital Fund generates revenue primarily through water rates collected by service users.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this project exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15302(c), Class 2 (reconstruction of an existing facility involving negligible or no expansion of capacity) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because this project has no potential to have a significant effect on the environment.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – Amendment No. 2
191
7-3
ATTACHMENT A
192
7-4
193
7-5
194
7-6
195
7-7
196
7-8
197
7-9
198
7-10
199
7-11
200
January 28, 2025, City Council Agenda Comments
The following comments on items on the Newport Beach City Council agenda are submitted by:
Jim Mosher ( [email protected] ), 2210 Private Road, Newport Beach 92660 (949-548-6229) Item III.A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
I continue to think the City could improve transparency by disclosing why it is interested in leasing or buying properties under negotiation in closed session.
It is a particular mystery to me why the City would be interested in the 1.2 acre office parcel at 3848 Campus Drive, a property facing the airport at the corner of Campus and Quail. According to the CIty’s What's Going on in My Neighborhood? map, the owner is pursuing an application, PA2023-0145, to build a 78,000 square foot self-storage operation on the site.
What is the City’s interest in the property?
If it is considering building a new fire station to serve the residential development anticipated in the Airport Area, this seems unusually close to the existing station in Santa Ana Heights.
Item 1. Minutes for the January 14, 2025 City Council Meeting The passage shown in italics below is from the draft minutes with a suggested correction shown in strikeout underline format. The page number refers to Volume 66.
1870, …” [see presentation, slide 6]
Item 6. Bay Crossing Water Transmission Main and Sewer Force Main Rehabilitation – Award of Contract No. 8487-3 (16W12)
The Location Map provided as Attachment A (page 6-4) is unusual in that the background image of streets is so faded that when printed it is nearly invisible, looking more like a watermark than a reference image intended for study.
Item 7. Approval of Amendment No. Two to Professional Services Agreement with Corrpro Companies, Inc. for Cathodic Protection Program, Contract No. 9483-1 (24W11)
This started as a staff-approved $59,855, contract C-9483-1, entered into on February 1, 2024, which, according to its preamble, was to cover an evaluation of the City’s vulnerability to corrosion in its steel water transmission lines and preparation of a project that could be bid to improve it – although the contractor, in their Scope of Services and Billing Rates, seems to have understood the latter to be an extra, separately-charged task:
Received After Agenda Printed
January 28, 2025
Written Comments
201
January 28, 2025, City Council agenda comments - Jim Mosher Page 2 of 4 It has now ballooned into a $247,610 proposal based largely, it seems, on the contractor’s own recommendations.
Could the size of this effort (going over staff approval limits) have been anticipated at the beginning
so
it
would
have
been
subject
to
a
more
transparent
award
process,
with
Council
approval?
Or, assuming there is more than one company that does this kind of work, should this large next phase
be
separately
bid?
Item 8. Approval of Amendment No. One to Residential Solid Waste Collection
&
Recycling
Contract
(Contract
No.
8823-1)
with
CR&R
Inc.
–
Addition
of
5%
De-Escalation
Maximum
I understand the logic of this request, but I have a number of problems with it:
1. Since I assume CR&R is not requesting this amendment to receive less money from the City,
I
am
completely
baffled
by
the
statement
under
“FISCAL
IMPACT”
on
page
8-2
that
approving
this
action
“
will
lower
costs
to
the
City
by
approximately
$436,000
for
FY
2024-25
relative
to
last
year's
FY
2023-24
cost.
”
Isn’t
the
real
question,
and
the
fiscal
impact,
how
much
more
the
City
will
pay
if
the
Council
approves
this
than
it
would
without
an
approval?
2. The proposed amendment, page 8-3, indicates the Council is being asked to approve a complete replacement of Attachment J to the original contract C-8823-1, but the new Attachment J is not provided in redlined format, so it is difficult for either the Council or the public
to
be
sure
exactly
what
changes
are
being
made
to
it.
3. Far more concerning to me is the statement in the staff report, which seems to be that “ This decrease
would
be
applied
retroactively
to
the
beginning
of
FY
2024-25,
July
1,
2024
.”
Does this mean CR&R will be expecting a refund for services already performed, using a higher
rate,
re-computed
using
a
smaller
adjustment
starting
July
1 of
last
year,
as
if
the
decrease
had
been
capped
back
then?
While I have no problem with changing the terms “going forward,” an increased payment for past services seems completely at odds with the general principle, enshrined in Article XI, Section 10(a), of the California Constitution, that entities contracting with cities are expected to provide the services they promised at the cost agreed to, and cannot demand extra compensation,
not
anticipated
in
the
contract,
for
them.
It might be noted that no system of price adjustments based on year-to-year CPI changes with arbitrarily
imposed
caps
is
ever
going
to
be
fair
and
equitable
because,
as
the
examples
in
the
staff
report
confirm,
there
is
not
symmetry
in
the
long
term
errors
introduced
when
the
actual
change
in
a
given
year
exceeds
the
caps
by
unpredictable
amounts.
If the City wanted a fairer system, it might consider setting rates each year based on the rate in the
contract’s
start
year
corrected
by
the
ratio
of
the
true
CPI
(not
a
capped
one)
in
the
current
year
compared
to
the
CPI
in
the
contract’s
start
year.
If
there
is
a
wish
to
insulate
both
parties
from
unexpectedly
large
fluctuations,
the
increase
or
decrease
in
any
one
year
could
be
limited
to
a
maximum
of
5%.
Unless
the
changes
are
all
one-sided
and
larger
than
that
limit,
the
series
202
January 28, 2025, City Council agenda comments - Jim Mosher Page 3 of 4 of 5%, or smaller, yearly rate adjustments would eventually produce a rate in correct alignment with
the
contractor’s
true,
total
change
in
costs
since
the
contract
started.
1 Item 10. Approve Professional Services Agreement with Environmental
Compliance
Inspection
Services
Corp.
for
Grease
Control
Device
Inspection
Services
As the staff report indicates, only one proposal, from the current incumbent, was received for this
contract.
It seems the same incumbent was also the only proposer when the existing contract was awarded as Item 7 on February 11, 2014. And that may have been the case for over 20 years (see, for example, Item 9 from November 25, 2003, and Item 4 from January 25, 2005). Is there really no competition in this field? Item 12. Lease Agreement with Basin Marine, Inc. for Use of a Portion of
the
Real
Property
and
Tidelands
at
the
Balboa
Yacht
Basin
Located
at
829
Harbor
Island
Drive
I can partially see the justification for collecting less than fair market rent from the operator of what
the
City
considers
to
be
an
essential
service.
But I am unable to see why the choice of operator would not be subject to competitive bidding. The Abstract to the staff report implies that Basin Marine has had its operation at this site since the
1940’s,
an
assertion
repeated
on
page
12-3
(“
The
Tenant
has
operated
the
Premises
under
various agreements since the 1940s ”). However, the earliest contract, C-2490, on file with the City Clerk indicates they have been involved “only” since September 20, 1973 (as seems more correctly
reflected
in
Recital
D
of
the
proposed
lease,
on
page
12-7).
Item 13. License Agreement with The Regents of the University of California
for
Operation
of
a
Coastal
Observation
System
at
the
Newport
Pier
Is there any relation between this and the probes producing similar information about water in the
harbor,
operated
under
the
eyes
of
the
Harbor
Department?
Item 14. Planning Commission Agenda for the January 23, 2025 Meeting
As Item 3 on its agenda, the Commission heard an item of considerable public interest – involving
allowing
areas
in
Newport
Center
currently
limited
to
32 feet
in
height
to
go
to
heights
1 The City instituted a similar system for the biennial adjustment of electoral campaign contribution limits with
Ordinance No. 2019-19, choosing a fixed reference year of 2019. Because the limit is rounded to the nearest
$100,
the
former
system
based
on
short-term
changes
in
CPI
did
not
accurately
capture
the
cumulative
effect
of
small
annual
changes
in
CPI.
Possibly
to
“save”
words,
or
possibly
unknowingly,
the
City
reverted
to
what
looks
like
that
flawed
former
system
(see
NBMC
Subsection 1.25.030.C)
somewhere
in
the
ill-conceived
471-page
Ordinance No. 2023-22.
203
January 28, 2025, City Council agenda comments - Jim Mosher Page 4 of 4 up to 270 feet for residential development. Yet it passed largely unknown to the general public (the
only
speaker
from
the
general
public,
other
than
myself,
being
someone
I
had
told
about
it).
I believe the lack of public involvement was due both to the very limited amount of information provided
in
the
agenda
announcement
(which
refers
only
to
height
“adjustments”
and
not
to
amounts)
and
to
an
antiquated
system
of
noticing
which,
for
proposals
where
there
are
more
than
1,000
people
within
300
feet
of
impacted
properties,
requires
only
publication
of
a
small,
one-time ad in the “Legal Notices” section of the City’s “official newspaper,” the Daily Pilot. I think it is fair to guess very few people see those notices, especially if they read the “paper” online
(where
that
isn’t
even
a
section
with
a
link
to
it).
Since the Item 3 proposal will be coming to the Council for final action, it is probably not necessary
to
comment
on
its
substance
at
this
time,
but
in
my
view
increasing
heights
allowed
“by
right,”
rather
than
allowing
them
as
an
incentive
for
incorporating
affordable
units,
is
counter-productive
to
meeting
the
City’s
RHNA
obligations.
It
removes
that
incentive
and,
instead,
encourages
construction
of
the
large,
luxury
units
which
are
not
being
requested
by
the
state.
While
it
has
been
said
that
the
City
only
has
to
plan
for
affordable
housing,
not
build
it,
a
failure
to
produce
what
has
been
promised
puts
the
City
at
risk
of
de-certification
of
its
Housing
Element
and
the
consequences
that
flow
from
that,
including
loss
of
local
control
over
the
construction
of
those
lower
income
units.
Item 16. General Plan Update Steering Committee (GPUSC) Bi-Monthly
Update
to
the
City
Council
In the four months since the last “Bi-Monthly” Update, one of the main developments has been the
update
committee
members'
discovery
that
all
their
memberships
will
end
on
February
11. As a GPAC member, but speaking as an individual, I can say that has been very discouraging and
somewhat
put
on
hold
plans
to
continue
meetings
of
the
Noise
Subcommittee
mentioned
in
the
last
bullet
on
page
16-5,
since
its
future
membership
is
unknown.
In that respect, if there is, indeed, to be a change in membership, I see a lack of plan as to how the
current
committee
members
are
expected
to
pass
on
any
insights
they
have
gained
to
the
new
members.
With regard to the consultant’s recommendation to change the format of our General Plan, as mentioned
in
GPUSC
Chair
Gardner’s
memo
on
the
final
page,
which
includes
a
proposal
to
adopt
a
“primarily
web-based”
format,
I
have
some
misgivings
about
that.
While
progress
and
innovation
can
be
helpful,
other
cities’
and
counties’
efforts
in
that
direction
have
been
less
than
successful.
Online
projects
started
with
the
best
of
intentions
tend
to
fall
into
neglect.
And
while
new,
official
documents
and
amendments
are
approved
in
printed,
form,
the
web-based
products
may
or
may
not
be
accurately
and
timely
updated
to
reflect
them,
so
they
become
unreliable. One of the most complex efforts of this sort in California is the San Bernardino Countywide Plan, which, after changing its URL, seems not have figured out how to incorporate their changing Housing Element and has a “Tracking & Implementation” section (hidden under the
“Business
Plan”)
that
is
still,
at
least
four
years
after
its
debut,
in
a
“coming
soon”
state.
204
8-1
NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
January 28, 2025
Agenda Item No. 8
ABSTRACT:
Staff recommends approval of Amendment No. One to the agreement with CR&R Incorporated (CR&R) for residential refuse collection , which would limit potential annual rate decreases to mirror the current agreement’s limit on potential annual rate increases.
The agreement with CR&R includes a multi-factor annual rate adjustment formula and limits total annual increases to 5%, but it has no language limiting potential decreases.
This historically presented no issues, and the Ci ty of Newport Beach benefitted significantly from the escalation cap the previous two years . An unusual combination of factors during the previous year, however, would result in a prescribed 7% rate decrease for Fiscal Year 2024-25. In the interest of maintaining a fair relationship with its contractual partner, staff proposes a reciprocal 5% limit on annual decreases, with retroactive application to July 1, 2024.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and
b) Approval of Amendment No. One to the Residential Solid Waste Collection & Recycling Agreement with CR&R Inc. to add a 5% rate de-escalation maximum.
DISCUSSION:
The proposed amendment would limit potential annual rate decreases to 5% to mirror the contract’s language limiting maximum annual rate increases. No other changes would be made. This decrease would be applied retroactively to the beginning of FY 2024 -25, July 1, 2024.
The rate adjustment formula in the contract is calculated based on changes to a weighted combination of fuel costs, disposal costs, and all other costs over the previous year.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David A. Webb, Public Works Director - 949-644-3311, [email protected]
PREPARED BY: Charles Springer, Senior Management Analyst - 949-718-3466, [email protected]
TITLE: Approval of Amendment No. One to Residential Solid Waste Collection & Recycling Contract ( Contract No. 8823-1) with CR&R Inc. – Addition of 5% De-Escalation Maximum
205
Approval of Amendment No. One to Residential Solid Waste Collection and Recycling Contract (Contract No. 8823-1) with CR&R Inc.
January 28, 2025
8-2
Each cost category is tied to a particular market index, and total annual rate increases are capped at 5%. This provided significant benefits to the City during the first two years of the agreement as the Consumer Price Index was high due to the recent period of inflation. Without this limit, the annual contract rate paid by the City would have increased by 9.4% in FY 2022-23, and 10.1% in FY 2023-24.
However, an unusual combination of factors, primarily associated with fuel costs, during the previous year resulted in a prescribed 7% annual rate decrease for FY 2024 -25.
Concerned about the rate decrease, CR&R provided data and requested that the formula fuel component be removed, or for the rate to be frozen to equal last year’s rate. Working with the contractor, and understanding that it has a lot of fixed costs and that it would be atypical for a contract to markedly decrease, staff agreed to look into a potential remedy.
After much discussion , staff responded that it would be inappropriate to provide the contractual relief CR&R requested as the prescribed rate formula should also allow the City to share in any associated cost savings, such as lower fuel costs. However, staff did feel that since the City caps cost increases, it would be fair to consider including the same cap on decreases.
FISCAL IMPACT:
The adopted operating budget includes sufficient funding for this amendment. Costs for this agreement are expensed to the General Fund in the Public Works Department, 0108051-851006. If this Amendment No. One is approved, the 5% decrease for this billing year will lower costs to the City by approximately $436,000 for FY 2024-25 relative to last year’s FY 2023-24 cost.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – Amendment No. One to Residential Solid Waste Collection & Recycling Contract
206
ATTACHMENT A
8-3
207
8-4
208
8-5
209
8-6
210
8-7
211
8-8
212
8-9
213
8-10
214
8-11
215
8-12
216
8-13
217
8-14
218
January 28, 2025, City Council Agenda Comments
The following comments on items on the Newport Beach City Council agenda are submitted by:
Jim Mosher ( [email protected] ), 2210 Private Road, Newport Beach 92660 (949-548-6229) Item III.A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
I continue to think the City could improve transparency by disclosing why it is interested in leasing or buying properties under negotiation in closed session.
It is a particular mystery to me why the City would be interested in the 1.2 acre office parcel at 3848 Campus Drive, a property facing the airport at the corner of Campus and Quail. According to the CIty’s What's Going on in My Neighborhood? map, the owner is pursuing an application, PA2023-0145, to build a 78,000 square foot self-storage operation on the site.
What is the City’s interest in the property?
If it is considering building a new fire station to serve the residential development anticipated in the Airport Area, this seems unusually close to the existing station in Santa Ana Heights.
Item 1. Minutes for the January 14, 2025 City Council Meeting The passage shown in italics below is from the draft minutes with a suggested correction shown in strikeout underline format. The page number refers to Volume 66.
1870, …” [see presentation, slide 6]
Item 6. Bay Crossing Water Transmission Main and Sewer Force Main Rehabilitation – Award of Contract No. 8487-3 (16W12)
The Location Map provided as Attachment A (page 6-4) is unusual in that the background image of streets is so faded that when printed it is nearly invisible, looking more like a watermark than a reference image intended for study.
Item 7. Approval of Amendment No. Two to Professional Services Agreement with Corrpro Companies, Inc. for Cathodic Protection Program, Contract No. 9483-1 (24W11)
This started as a staff-approved $59,855, contract C-9483-1, entered into on February 1, 2024, which, according to its preamble, was to cover an evaluation of the City’s vulnerability to corrosion in its steel water transmission lines and preparation of a project that could be bid to improve it – although the contractor, in their Scope of Services and Billing Rates, seems to have understood the latter to be an extra, separately-charged task:
Received After Agenda Printed
January 28, 2025
Written Comments
219
January 28, 2025, City Council agenda comments - Jim Mosher Page 2 of 4 It has now ballooned into a $247,610 proposal based largely, it seems, on the contractor’s own recommendations.
Could the size of this effort (going over staff approval limits) have been anticipated at the beginning
so
it
would
have
been
subject
to
a
more
transparent
award
process,
with
Council
approval?
Or, assuming there is more than one company that does this kind of work, should this large next phase
be
separately
bid?
Item 8. Approval of Amendment No. One to Residential Solid Waste Collection
&
Recycling
Contract
(Contract
No.
8823-1)
with
CR&R
Inc.
–
Addition
of
5%
De-Escalation
Maximum
I understand the logic of this request, but I have a number of problems with it:
1. Since I assume CR&R is not requesting this amendment to receive less money from the City,
I
am
completely
baffled
by
the
statement
under
“FISCAL
IMPACT”
on
page
8-2
that
approving
this
action
“
will
lower
costs
to
the
City
by
approximately
$436,000
for
FY
2024-25
relative
to
last
year's
FY
2023-24
cost.
”
Isn’t
the
real
question,
and
the
fiscal
impact,
how
much
more
the
City
will
pay
if
the
Council
approves
this
than
it
would
without
an
approval?
2. The proposed amendment, page 8-3, indicates the Council is being asked to approve a complete replacement of Attachment J to the original contract C-8823-1, but the new Attachment J is not provided in redlined format, so it is difficult for either the Council or the public
to
be
sure
exactly
what
changes
are
being
made
to
it.
3. Far more concerning to me is the statement in the staff report, which seems to be that “ This decrease
would
be
applied
retroactively
to
the
beginning
of
FY
2024-25,
July
1,
2024
.”
Does this mean CR&R will be expecting a refund for services already performed, using a higher
rate,
re-computed
using
a
smaller
adjustment
starting
July
1 of
last
year,
as
if
the
decrease
had
been
capped
back
then?
While I have no problem with changing the terms “going forward,” an increased payment for past services seems completely at odds with the general principle, enshrined in Article XI, Section 10(a), of the California Constitution, that entities contracting with cities are expected to provide the services they promised at the cost agreed to, and cannot demand extra compensation,
not
anticipated
in
the
contract,
for
them.
It might be noted that no system of price adjustments based on year-to-year CPI changes with arbitrarily
imposed
caps
is
ever
going
to
be
fair
and
equitable
because,
as
the
examples
in
the
staff
report
confirm,
there
is
not
symmetry
in
the
long
term
errors
introduced
when
the
actual
change
in
a
given
year
exceeds
the
caps
by
unpredictable
amounts.
If the City wanted a fairer system, it might consider setting rates each year based on the rate in the
contract’s
start
year
corrected
by
the
ratio
of
the
true
CPI
(not
a
capped
one)
in
the
current
year
compared
to
the
CPI
in
the
contract’s
start
year.
If
there
is
a
wish
to
insulate
both
parties
from
unexpectedly
large
fluctuations,
the
increase
or
decrease
in
any
one
year
could
be
limited
to
a
maximum
of
5%.
Unless
the
changes
are
all
one-sided
and
larger
than
that
limit,
the
series
220
January 28, 2025, City Council agenda comments - Jim Mosher Page 3 of 4 of 5%, or smaller, yearly rate adjustments would eventually produce a rate in correct alignment with
the
contractor’s
true,
total
change
in
costs
since
the
contract
started.
1 Item 10. Approve Professional Services Agreement with Environmental
Compliance
Inspection
Services
Corp.
for
Grease
Control
Device
Inspection
Services
As the staff report indicates, only one proposal, from the current incumbent, was received for this
contract.
It seems the same incumbent was also the only proposer when the existing contract was awarded as Item 7 on February 11, 2014. And that may have been the case for over 20 years (see, for example, Item 9 from November 25, 2003, and Item 4 from January 25, 2005). Is there really no competition in this field? Item 12. Lease Agreement with Basin Marine, Inc. for Use of a Portion of
the
Real
Property
and
Tidelands
at
the
Balboa
Yacht
Basin
Located
at
829
Harbor
Island
Drive
I can partially see the justification for collecting less than fair market rent from the operator of what
the
City
considers
to
be
an
essential
service.
But I am unable to see why the choice of operator would not be subject to competitive bidding. The Abstract to the staff report implies that Basin Marine has had its operation at this site since the
1940’s,
an
assertion
repeated
on
page
12-3
(“
The
Tenant
has
operated
the
Premises
under
various agreements since the 1940s ”). However, the earliest contract, C-2490, on file with the City Clerk indicates they have been involved “only” since September 20, 1973 (as seems more correctly
reflected
in
Recital
D
of
the
proposed
lease,
on
page
12-7).
Item 13. License Agreement with The Regents of the University of California
for
Operation
of
a
Coastal
Observation
System
at
the
Newport
Pier
Is there any relation between this and the probes producing similar information about water in the
harbor,
operated
under
the
eyes
of
the
Harbor
Department?
Item 14. Planning Commission Agenda for the January 23, 2025 Meeting
As Item 3 on its agenda, the Commission heard an item of considerable public interest – involving
allowing
areas
in
Newport
Center
currently
limited
to
32 feet
in
height
to
go
to
heights
1 The City instituted a similar system for the biennial adjustment of electoral campaign contribution limits with
Ordinance No. 2019-19, choosing a fixed reference year of 2019. Because the limit is rounded to the nearest
$100,
the
former
system
based
on
short-term
changes
in
CPI
did
not
accurately
capture
the
cumulative
effect
of
small
annual
changes
in
CPI.
Possibly
to
“save”
words,
or
possibly
unknowingly,
the
City
reverted
to
what
looks
like
that
flawed
former
system
(see
NBMC
Subsection 1.25.030.C)
somewhere
in
the
ill-conceived
471-page
Ordinance No. 2023-22.
221
January 28, 2025, City Council agenda comments - Jim Mosher Page 4 of 4 up to 270 feet for residential development. Yet it passed largely unknown to the general public (the
only
speaker
from
the
general
public,
other
than
myself,
being
someone
I
had
told
about
it).
I believe the lack of public involvement was due both to the very limited amount of information provided
in
the
agenda
announcement
(which
refers
only
to
height
“adjustments”
and
not
to
amounts)
and
to
an
antiquated
system
of
noticing
which,
for
proposals
where
there
are
more
than
1,000
people
within
300
feet
of
impacted
properties,
requires
only
publication
of
a
small,
one-time ad in the “Legal Notices” section of the City’s “official newspaper,” the Daily Pilot. I think it is fair to guess very few people see those notices, especially if they read the “paper” online
(where
that
isn’t
even
a
section
with
a
link
to
it).
Since the Item 3 proposal will be coming to the Council for final action, it is probably not necessary
to
comment
on
its
substance
at
this
time,
but
in
my
view
increasing
heights
allowed
“by
right,”
rather
than
allowing
them
as
an
incentive
for
incorporating
affordable
units,
is
counter-productive
to
meeting
the
City’s
RHNA
obligations.
It
removes
that
incentive
and,
instead,
encourages
construction
of
the
large,
luxury
units
which
are
not
being
requested
by
the
state.
While
it
has
been
said
that
the
City
only
has
to
plan
for
affordable
housing,
not
build
it,
a
failure
to
produce
what
has
been
promised
puts
the
City
at
risk
of
de-certification
of
its
Housing
Element
and
the
consequences
that
flow
from
that,
including
loss
of
local
control
over
the
construction
of
those
lower
income
units.
Item 16. General Plan Update Steering Committee (GPUSC) Bi-Monthly
Update
to
the
City
Council
In the four months since the last “Bi-Monthly” Update, one of the main developments has been the
update
committee
members'
discovery
that
all
their
memberships
will
end
on
February
11. As a GPAC member, but speaking as an individual, I can say that has been very discouraging and
somewhat
put
on
hold
plans
to
continue
meetings
of
the
Noise
Subcommittee
mentioned
in
the
last
bullet
on
page
16-5,
since
its
future
membership
is
unknown.
In that respect, if there is, indeed, to be a change in membership, I see a lack of plan as to how the
current
committee
members
are
expected
to
pass
on
any
insights
they
have
gained
to
the
new
members.
With regard to the consultant’s recommendation to change the format of our General Plan, as mentioned
in
GPUSC
Chair
Gardner’s
memo
on
the
final
page,
which
includes
a
proposal
to
adopt
a
“primarily
web-based”
format,
I
have
some
misgivings
about
that.
While
progress
and
innovation
can
be
helpful,
other
cities’
and
counties’
efforts
in
that
direction
have
been
less
than
successful.
Online
projects
started
with
the
best
of
intentions
tend
to
fall
into
neglect.
And
while
new,
official
documents
and
amendments
are
approved
in
printed,
form,
the
web-based
products
may
or
may
not
be
accurately
and
timely
updated
to
reflect
them,
so
they
become
unreliable. One of the most complex efforts of this sort in California is the San Bernardino Countywide Plan, which, after changing its URL, seems not have figured out how to incorporate their changing Housing Element and has a “Tracking & Implementation” section (hidden under the
“Business
Plan”)
that
is
still,
at
least
four
years
after
its
debut,
in
a
“coming
soon”
state.
222
9-1
NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
January 28, 2025
Agenda Item No. 9
ABSTRACT:
The Utilities Department utilizes a Supervisory Control and Data Acquisition system (SCADA) to control and monitor the City of Newport Beach’s water, wastewater and storm drain systems. SCADA is the Utilities Department ’s information technology system comprised of software and hardware elements. Following a Request for Proposals selection and evaluation process , staff recommends the approval of a five -year, agreement with Partners in Control, Inc., dba Enterprise Automation for on-call as-needed SCADA services.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and
b) Approve an On-Call Professional Services Agreement with Partners in Control , Inc., dba Enterprise Automation to provide SCADA System Services for a five -year term and a total contract compensation amount of $1 million, and authorize the Mayor and City Clerk to execute the Agreement.
DISCUSSION:
The Utilities Department utilizes a Supervisory Control and Data Acquisition (SCADA) software, hardware and communication system to control and monitor the City’s water, wastewater and storm drain systems. SCADA is critical to the department’s mission and serves as its Information Technology (IT) System . SCADA controls, monitors, gathers and processes real -time data at stations or remote locations. SCADA is also fully coordinated with the City’s IT Department . A similar example of SCADA is the City’s Traffic Management Center and traffic signal controllers.
The Utilities Department uses a combination of City Utilities Department staff, IT Department staff, consultants, co ntractors and suppliers to operate, maintain and continuously update and upgrade the SCADA system. Utilities’ electricians run and manage the day-to-day operations of the system.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Mark Vukojevic, Utilities Director - 949-644-3011, [email protected]
PREPARED BY: Joshua Rosenbaum, Senior Management Analyst - 949-644-3011 [email protected]
TITLE: Approval of an On-Call Professional Services Agreement with Partners in Control, Inc. for SCADA System Services
223
Approval of an On-Call Professional Services Agreement with Partners in Control, Inc. for SCADA System Services
January 28, 2025
9-2
Outside support services , like Partners in Control , are utilized for major upgrades and repairs, audit/evaluations, troubl e shooting, and for immediate needs. Similar to most computer-related technologies, the SCADA system components and software require regular replacement and upgrades.
The consultant will provide as -needed programming and engineering services, emergency response, and electrical instrumentation troubleshooting. The scope of work also includes as-needed system assessments and analysis, an updated audit, updated mapping and blueprinting of the system, and updated cyber, physical and organizational security reviews.
The department’s current service provider agreement was set to expire in early 2025, prompting Utilities staff to initiate a Request for Proposal s solicitation p rocess. Th ree proposals were received, and an evaluation panel composed of Utilities staff members reviewed and graded the proposals . The review was based on technical qualifications, experience, and the proposer’s ability to perform and deploy services, which accounted for 70 percent of the evaluation criteria. The remaining 30 percent was based on cost , including a comparison of hourly rates for completing a sample work project.
The proposals ranked as follows:
SCADA SYSTEM SERVICES RFP EVALUATION SCORES AND RANKINGS
PROPOSER
TECHNICAL
SCORE -
MAX 70
COST
SCORE -
MAX 30
TOTAL
SCORE -
MAX 100
OVERALL
RANK
Partners in Control, Inc., 63.67 29.17 92.84 1
Freedom Automation 49.00 30.00 79.00 2
Winlad Electrical Controls 51.33 23.22 74.55 3
Upon completing the evaluation scoring, Partners in Control ranked highest among the proposals, particularly for its technical qualifications. Both Partners in Control and Freedom Automation proposed nearly identical costs for a sample work project based on estimated hours required for each job title.
Partners in Control has been the incumbent consultant for the past five years, consistently delivering excellent SCADA system services for the Utilities Department. In addition, its assigned staff have demonstrated the ability to respond promptly to the City ’s needs outside of normal working hours. The Utilities Department recommends the approval of an on -call, Professional Services Agreement with Partners in Control for a five -year contract term, with a total not-to-exceed amount of $1 million. The Utilities Department will continue to monitor the contractor’s performance on a routine basis. 224
Approval of an On-Call Professional Services Agreement with Partners in Control, Inc. for SCADA System Services
January 28, 2025
9-3
FISCAL IMPACT:
The adopted budget includes sufficient funding for SCADA System services utilizing budget program accounts in both the Water (7019052 -811057 – SCADA) and Wastewater (7119061-811057 – SCADA) enterprise funds, respectively.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – On-Call Professional Services Agreement
225
ATTACHMENT A
9-4
226
9-5
227
9-6
228
9-7
229
9-8
230
9-9
231
9-10
232
9-11
233
9-12
234
9-13
235
9-14
236
9-15
237
9-16
238
9-17
239
9-18
240
9-19
241
9-20
242
9-21
243
9-22
244
9-23
245
9-24
246
9-25
247
9-26
248
10-1
NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
January 28, 2025
Agenda Item No. 10
ABSTRACT:
The Utilities Department is responsible for the biannual permitting, monitoring and inspection of grease control devices and grease management practices for restaurants within the City’s sewer service area. These responsibilities are mandated und er the City’s Municipal Code Chapter 14.30 and are part of the Sewer System Management Plan to minimize sanitary sewer overflows . Following a Request for Proposals process, the department is requesting approval of a five -year agreement with Environmental Compliance Inspection Services Corporation to provide these services.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and
b) Approve the Professional Services Agreement with Environmental Compliance Inspection Services Corporation for the grease control device inspection program for a five-year term and a total contract compensation amount of $450,000, and authorize the Mayor and City Clerk to execute the agreement.
DISCUSSION:
Newport Beach Municipal Code section 14.30 e stablishes regulations for the proper disposal of grease and other insoluble waste discharges from food service establishments (i.e., restaurants and commercial kitchens). As part of the Utilities Department ’s responsibilities, the City inspects approximately 400 restaurants to ensure compliance with these regulations . The goal is to prevent sewer spills into Newport Bay and the Pacific Ocean caused by blockages resulting from the buildup of fats, oils and grease (FOG). The code specifies grease disposal requirements for restaurants while promoting public health, safety and welfare , and ensuring the cost of maintaining the public sewer system is equitably distributed amongst users.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Mark Vukojevic, Utilities Director - 949-644-3011, [email protected]
PREPARED BY: Joshua Rosenbaum, Senior Management Analyst - 949-644-3011 [email protected]
TITLE: Approve Professional Services Agreement with Environmental Compliance Inspection Services Corp . for Grease Control Device Inspection Services
249
Approve Professional Services Agreement with Environmental Compliance Inspection Services Corp. for Grease Control Device Inspection Services January 28, 2025
10-2
Additionally, the State Water Resources Control Board requires every wastewater agency to adopt a Sewer System Management Plan specifically focused on minimizing sewer spills. This plan provides an overview of the City ’s procedures, protocols and best management practices and is updated regularly. A new update of the sewer management plan was recently completed and will be brought forward for the Council’s consideration in spring 2025. One important component of the management plan is the City’s program to manage FOG generated by approximately 400 restaurants in the City’s service area.
The FOG program is administered through a combination of City Utilities staff and a contracted service . City s taff oversees the overall program, manages the permitting system, and responds to emergencies. A specialized environmental contractor conducts regular restaurant visits to educate operators on grease best management practices, inspect documentation and grease control devices, and to follow up with any non-compliance issues that are noted or obser ved. The program’s primary goal is to eliminate or reduce sewer overflows and spills from the restaurants themselves or from the City’s system. Currently, there is no fee to the business for this service.
In October 2024, the City issued a formal Request for Proposals (RFP25-23) for these services. One proposal was submitted by the current contractor, Environmental Compliance Inspection Services Corp (ECIS). Despite receiving only one proposal , a review panel evaluated ECIS’s submission and rated its technical qualifications very high.
The proposed costs were deemed reasonable, with increases limited to adjustments due to inflation.
The scope of work includes over 400 kitchen inspections and more than 1,000 grease trap/grease interceptor inspections annual ly, along with necessary follow -ups and re-inspections. ECIS has been the City’s contractor for grease inspection services since 2011 and has consistently delivered satisfactory results. ECIS has built a positive working relationship with the restaurant c ommunity, leading to a reduction in sewer overflows.
ECIS also brings valuable experience from working with other sewer agencies, making its expertise valuable to the City. The Utilities Department requests approval of a new five-year contract term with ECIS to continue providing grease control device inspection services, for a total contract compensation amount of $450,000.
FISCAL IMPACT:
The adopted budget includes sufficient funding for this Agreement. The costs for services will be expensed to the Wastewater Enterprise Fund program account in the Utilities Department, 7119061-851036.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. 250
Approve Professional Services Agreement with Environmental Compliance Inspection Services Corp. for Grease Control Device Inspection Services January 28, 2025
10-3
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – Professional Services Agreement with Environmental Compliance Inspection Services Corporation
251
ATTACHMENT A
10-4
252
10-5
253
10-6
254
10-7
255
10-8
256
10-9
257
10-10
258
10-11
259
10-12
260
10-13
261
10-14
262
10-15
263
10-16
264
10-17
265
10-18
266
10-19
267
10-20
268
10-21
269
10-22
270
10-23
271
10-24
272
10-25
273
January 28, 2025, City Council Agenda Comments
The following comments on items on the Newport Beach City Council agenda are submitted by:
Jim Mosher ( [email protected] ), 2210 Private Road, Newport Beach 92660 (949-548-6229) Item III.A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
I continue to think the City could improve transparency by disclosing why it is interested in leasing or buying properties under negotiation in closed session.
It is a particular mystery to me why the City would be interested in the 1.2 acre office parcel at 3848 Campus Drive, a property facing the airport at the corner of Campus and Quail. According to the CIty’s What's Going on in My Neighborhood? map, the owner is pursuing an application, PA2023-0145, to build a 78,000 square foot self-storage operation on the site.
What is the City’s interest in the property?
If it is considering building a new fire station to serve the residential development anticipated in the Airport Area, this seems unusually close to the existing station in Santa Ana Heights.
Item 1. Minutes for the January 14, 2025 City Council Meeting The passage shown in italics below is from the draft minutes with a suggested correction shown in strikeout underline format. The page number refers to Volume 66.
1870, …” [see presentation, slide 6]
Item 6. Bay Crossing Water Transmission Main and Sewer Force Main Rehabilitation – Award of Contract No. 8487-3 (16W12)
The Location Map provided as Attachment A (page 6-4) is unusual in that the background image of streets is so faded that when printed it is nearly invisible, looking more like a watermark than a reference image intended for study.
Item 7. Approval of Amendment No. Two to Professional Services Agreement with Corrpro Companies, Inc. for Cathodic Protection Program, Contract No. 9483-1 (24W11)
This started as a staff-approved $59,855, contract C-9483-1, entered into on February 1, 2024, which, according to its preamble, was to cover an evaluation of the City’s vulnerability to corrosion in its steel water transmission lines and preparation of a project that could be bid to improve it – although the contractor, in their Scope of Services and Billing Rates, seems to have understood the latter to be an extra, separately-charged task:
Received After Agenda Printed
January 28, 2025
Written Comments
274
January 28, 2025, City Council agenda comments - Jim Mosher Page 2 of 4 It has now ballooned into a $247,610 proposal based largely, it seems, on the contractor’s own recommendations.
Could the size of this effort (going over staff approval limits) have been anticipated at the beginning
so
it
would
have
been
subject
to
a
more
transparent
award
process,
with
Council
approval?
Or, assuming there is more than one company that does this kind of work, should this large next phase
be
separately
bid?
Item 8. Approval of Amendment No. One to Residential Solid Waste Collection
&
Recycling
Contract
(Contract
No.
8823-1)
with
CR&R
Inc.
–
Addition
of
5%
De-Escalation
Maximum
I understand the logic of this request, but I have a number of problems with it:
1. Since I assume CR&R is not requesting this amendment to receive less money from the City,
I
am
completely
baffled
by
the
statement
under
“FISCAL
IMPACT”
on
page
8-2
that
approving
this
action
“
will
lower
costs
to
the
City
by
approximately
$436,000
for
FY
2024-25
relative
to
last
year's
FY
2023-24
cost.
”
Isn’t
the
real
question,
and
the
fiscal
impact,
how
much
more
the
City
will
pay
if
the
Council
approves
this
than
it
would
without
an
approval?
2. The proposed amendment, page 8-3, indicates the Council is being asked to approve a complete replacement of Attachment J to the original contract C-8823-1, but the new Attachment J is not provided in redlined format, so it is difficult for either the Council or the public
to
be
sure
exactly
what
changes
are
being
made
to
it.
3. Far more concerning to me is the statement in the staff report, which seems to be that “ This decrease
would
be
applied
retroactively
to
the
beginning
of
FY
2024-25,
July
1,
2024
.”
Does this mean CR&R will be expecting a refund for services already performed, using a higher
rate,
re-computed
using
a
smaller
adjustment
starting
July
1 of
last
year,
as
if
the
decrease
had
been
capped
back
then?
While I have no problem with changing the terms “going forward,” an increased payment for past services seems completely at odds with the general principle, enshrined in Article XI, Section 10(a), of the California Constitution, that entities contracting with cities are expected to provide the services they promised at the cost agreed to, and cannot demand extra compensation,
not
anticipated
in
the
contract,
for
them.
It might be noted that no system of price adjustments based on year-to-year CPI changes with arbitrarily
imposed
caps
is
ever
going
to
be
fair
and
equitable
because,
as
the
examples
in
the
staff
report
confirm,
there
is
not
symmetry
in
the
long
term
errors
introduced
when
the
actual
change
in
a
given
year
exceeds
the
caps
by
unpredictable
amounts.
If the City wanted a fairer system, it might consider setting rates each year based on the rate in the
contract’s
start
year
corrected
by
the
ratio
of
the
true
CPI
(not
a
capped
one)
in
the
current
year
compared
to
the
CPI
in
the
contract’s
start
year.
If
there
is
a
wish
to
insulate
both
parties
from
unexpectedly
large
fluctuations,
the
increase
or
decrease
in
any
one
year
could
be
limited
to
a
maximum
of
5%.
Unless
the
changes
are
all
one-sided
and
larger
than
that
limit,
the
series
275
January 28, 2025, City Council agenda comments - Jim Mosher Page 3 of 4 of 5%, or smaller, yearly rate adjustments would eventually produce a rate in correct alignment with
the
contractor’s
true,
total
change
in
costs
since
the
contract
started.
1 Item 10. Approve Professional Services Agreement with Environmental
Compliance
Inspection
Services
Corp.
for
Grease
Control
Device
Inspection
Services
As the staff report indicates, only one proposal, from the current incumbent, was received for this
contract.
It seems the same incumbent was also the only proposer when the existing contract was awarded as Item 7 on February 11, 2014. And that may have been the case for over 20 years (see, for example, Item 9 from November 25, 2003, and Item 4 from January 25, 2005). Is there really no competition in this field? Item 12. Lease Agreement with Basin Marine, Inc. for Use of a Portion of
the
Real
Property
and
Tidelands
at
the
Balboa
Yacht
Basin
Located
at
829
Harbor
Island
Drive
I can partially see the justification for collecting less than fair market rent from the operator of what
the
City
considers
to
be
an
essential
service.
But I am unable to see why the choice of operator would not be subject to competitive bidding. The Abstract to the staff report implies that Basin Marine has had its operation at this site since the
1940’s,
an
assertion
repeated
on
page
12-3
(“
The
Tenant
has
operated
the
Premises
under
various agreements since the 1940s ”). However, the earliest contract, C-2490, on file with the City Clerk indicates they have been involved “only” since September 20, 1973 (as seems more correctly
reflected
in
Recital
D
of
the
proposed
lease,
on
page
12-7).
Item 13. License Agreement with The Regents of the University of California
for
Operation
of
a
Coastal
Observation
System
at
the
Newport
Pier
Is there any relation between this and the probes producing similar information about water in the
harbor,
operated
under
the
eyes
of
the
Harbor
Department?
Item 14. Planning Commission Agenda for the January 23, 2025 Meeting
As Item 3 on its agenda, the Commission heard an item of considerable public interest – involving
allowing
areas
in
Newport
Center
currently
limited
to
32 feet
in
height
to
go
to
heights
1 The City instituted a similar system for the biennial adjustment of electoral campaign contribution limits with
Ordinance No. 2019-19, choosing a fixed reference year of 2019. Because the limit is rounded to the nearest
$100,
the
former
system
based
on
short-term
changes
in
CPI
did
not
accurately
capture
the
cumulative
effect
of
small
annual
changes
in
CPI.
Possibly
to
“save”
words,
or
possibly
unknowingly,
the
City
reverted
to
what
looks
like
that
flawed
former
system
(see
NBMC
Subsection 1.25.030.C)
somewhere
in
the
ill-conceived
471-page
Ordinance No. 2023-22.
276
January 28, 2025, City Council agenda comments - Jim Mosher Page 4 of 4 up to 270 feet for residential development. Yet it passed largely unknown to the general public (the
only
speaker
from
the
general
public,
other
than
myself,
being
someone
I
had
told
about
it).
I believe the lack of public involvement was due both to the very limited amount of information provided
in
the
agenda
announcement
(which
refers
only
to
height
“adjustments”
and
not
to
amounts)
and
to
an
antiquated
system
of
noticing
which,
for
proposals
where
there
are
more
than
1,000
people
within
300
feet
of
impacted
properties,
requires
only
publication
of
a
small,
one-time ad in the “Legal Notices” section of the City’s “official newspaper,” the Daily Pilot. I think it is fair to guess very few people see those notices, especially if they read the “paper” online
(where
that
isn’t
even
a
section
with
a
link
to
it).
Since the Item 3 proposal will be coming to the Council for final action, it is probably not necessary
to
comment
on
its
substance
at
this
time,
but
in
my
view
increasing
heights
allowed
“by
right,”
rather
than
allowing
them
as
an
incentive
for
incorporating
affordable
units,
is
counter-productive
to
meeting
the
City’s
RHNA
obligations.
It
removes
that
incentive
and,
instead,
encourages
construction
of
the
large,
luxury
units
which
are
not
being
requested
by
the
state.
While
it
has
been
said
that
the
City
only
has
to
plan
for
affordable
housing,
not
build
it,
a
failure
to
produce
what
has
been
promised
puts
the
City
at
risk
of
de-certification
of
its
Housing
Element
and
the
consequences
that
flow
from
that,
including
loss
of
local
control
over
the
construction
of
those
lower
income
units.
Item 16. General Plan Update Steering Committee (GPUSC) Bi-Monthly
Update
to
the
City
Council
In the four months since the last “Bi-Monthly” Update, one of the main developments has been the
update
committee
members'
discovery
that
all
their
memberships
will
end
on
February
11. As a GPAC member, but speaking as an individual, I can say that has been very discouraging and
somewhat
put
on
hold
plans
to
continue
meetings
of
the
Noise
Subcommittee
mentioned
in
the
last
bullet
on
page
16-5,
since
its
future
membership
is
unknown.
In that respect, if there is, indeed, to be a change in membership, I see a lack of plan as to how the
current
committee
members
are
expected
to
pass
on
any
insights
they
have
gained
to
the
new
members.
With regard to the consultant’s recommendation to change the format of our General Plan, as mentioned
in
GPUSC
Chair
Gardner’s
memo
on
the
final
page,
which
includes
a
proposal
to
adopt
a
“primarily
web-based”
format,
I
have
some
misgivings
about
that.
While
progress
and
innovation
can
be
helpful,
other
cities’
and
counties’
efforts
in
that
direction
have
been
less
than
successful.
Online
projects
started
with
the
best
of
intentions
tend
to
fall
into
neglect.
And
while
new,
official
documents
and
amendments
are
approved
in
printed,
form,
the
web-based
products
may
or
may
not
be
accurately
and
timely
updated
to
reflect
them,
so
they
become
unreliable. One of the most complex efforts of this sort in California is the San Bernardino Countywide Plan, which, after changing its URL, seems not have figured out how to incorporate their changing Housing Element and has a “Tracking & Implementation” section (hidden under the
“Business
Plan”)
that
is
still,
at
least
four
years
after
its
debut,
in
a
“coming
soon”
state.
277
11-1
NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
January 28, 2025
Agenda Item No. 11
ABSTRACT:
The Police Department seeks City Council approval for the purchase of three Ford Explorer patrol vehicles in the amount of $173,311.80. The purchase would be made using Sourcewell cooperative pricing from National Auto Fleet Group (NAFG) under Sourcewell Contract 091521-NAF. This purchase is in accordance with the department’s annual vehicle replacement plan and the three, black-and-white patrol vehicles scheduled for replacement meet the time, mileage and condition replacement criteria of City Council Policy F-9.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Approve th e purchase of three Ford Explorer police patrol vehicles from the National Auto Fleet Group of Watsonville using Sourcewell cooperative pricing and authorize the City Manager to execute a purchase order in the amount of $173,311.80.
DISCUSSION:
The Police Department operates 29 patrol SUVs (Explorers or Durangos), configured as standard black-and-white, unmarked and K9 vehicles. In accordance with City Council Policy F9, patrol vehicles are on a four -year/75,000-mile replacement cycle and three vehicles are budgeted for replacement in the current fiscal year.
In prior years, many police departments had issues procuring Ford Explorers due to supply chain issues. Last fiscal year, the Newport Beach Police Department purchased Dodge Durangos as an alternative solution. So far, the Durangos have been working well, however, they do not have a long history of reliability. Ford Explorers are available again and have a proven history of reliability. Additionally, purchasing Ford Explorers allows the department to reuse some interior components which will save costs with upfitting.
The purchase cost per patrol vehicle is shown in the table below:
Per Vehicle For 3 Vehicles
Purchase Cost $57,770.60 $173,311.80
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David Miner, Acting Chief of Police - 949-644-3701, [email protected]
PREPARED BY: Eric Little, Lieutenant - 949-644-3660, [email protected] TITLE: Purchase of Police Patrol Vehicles
278
Purchase of Police Patrol Vehicles
January 28, 2025
11-2
FISCAL IMPACT:
The adopted budget includes sufficient funding for this purchase. It will be expensed to the rolling equipment account in the Police Department, 75304-911016.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Secti on 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brow n Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – Quote from National Auto Fleet Group
279
Attachment A
Quote from National Auto Fleet Group
11-3
280
11-4
281
11-5
282
11-6
283
11-7
284
11-8
285
11-9
286
11-10
287
11-11
288
11-12
289
11-13
290
12-1
NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
January 28, 2025
Agenda Item No. 12
ABSTRACT:
The City of Newport Beach owns and operates the property known as the Balboa Yacht Basin. Constructed in the early 1940s, the Balboa Yacht Basin consists of a marina, shipyard and other commercial uses. The shipyard and marine store, operated by Basin Marine, Inc., has leased a portion of the B alboa Yacht Basin property since it was first constructed. With the current lease term expiring in 2026, the tenant requested a new agreement to continue its business operations at the property. For the City Council’s consideration is a new lease agreement with Basin Marine, Inc., for use of a portion of the B alboa Yacht Basin for a term of 20 years, including a request to waive City Council Policy F-7.
RECOMMENDATIONS:
a) Find this project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing facilities) and Section 15302 (Replacement or Reconstruction) of the CE QA Guidelines, California Code of Regulations, Title 14, Chapter 3, because this project has no potential to have a significant effect on the environment;
b) Authorize the City Manager and City Clerk to execute the Lease Agreement Between the City of Newpo rt Beach and Basin Marine, Inc. for use of a portion of the City property known as the Balboa Yacht Basin at 829 Harbor Island Drive , in a form substantially similar to the attached agreement; and
c) Approve a waiver of City Council Policy F -7 – Income and Other Property based on the findings contained in this staff report and the lease agreement, that conducting an open bid process or changing the tenant would result in excessive vacancy, and that charging less than fair market rent promotes the City of Ne wport Beach’s goals to provide essential or unique services to the community, that cannot otherwise be provided if full market rates were charged, and based on the unique services provided by the tenant.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Seimone Jurjis, Assistant City Manager/Community Development Director - 949-644-3232, [email protected]
PREPARED BY: Lauren Wooding Whitlinger, Real Property Administrator - 949-644- 3236, [email protected]
TITLE: Lease Agreement with Basin Marine, Inc. for Use of a Portion of the Real Property and Tidela nds at the Balboa Yacht Basin Located at 829 Harbor Island Drive
291
Lease Agreement with Basin Marine, Inc. for Use of a Portion of the Real Property and Tidelands at the Balboa Yacht Basin Located at 829 Harbor Island Drive January 28, 2025
12-2
DISCUSSION:
The Balboa Yacht Basin (B YB) is located at 829 Harbor Island Drive, Newport Beach, and includes a 172-slip marina, a shipyard and marine store, a restaurant, offices, three residential apartments, storage garages, a small 0.05-acre park, and on-site parking. The shipyard and marine store occupy approximately 42,062 square feet of dry land and tidelands along the east side of the property (Premises) as shown in Figure 1 below.
Figure 1
The BYB consists of City-owned land and State of California (State) owned filled tide and submerged lands. The tidelands are subject to the trust statutes and managed by the City on the State’s behalf under the terms of the Beacon Bay Bill.
Basin Marine, Inc.
Basin Marine, Inc. (Tenant) is a family owned and operated shipyard and marine store and provides a var iety of boat repair and maintenance services. The operation also employs more than 30 highly skilled employees with a combined experience of more than 375 years, as well as us es more than 50 unique trade subcontractors. With the location and size of the Premises, the Tenant is able to offer services such as vessel haul-outs for boats of up to 70 feet and 100,000 pounds, and a telescoping forklift to provide additional services like picking up an engine or generator to allow for repair. Services like fiberglass and gel coat repairs, bottom paint and other painting detail and varnish services are also available.
292
Lease Agreement with Basin Marine, Inc. for Use of a Portion of the Real Property and Tidelands at the Balboa Yacht Basin Located at 829 Harbor Island Drive January 28, 2025
12-3
The marine store also sells boat parts and supplies to meet the needs of the boating community in Newport Harbor. The Tenant services more than 3,0 00 boats per year, or one -third of the number of vessels in the harbor. Additionally, Basin Marine maintains compliance with numerous environmental and regulatory requirements.
The Tenant has operated the Premises under various agreements since the 1940s, and the current agreement, dated January 1, 2001, is set to expire December 31, 2026 . The Tenant desires to perform capital improvements and repairs to the Premises, including purchasing a new travel lift for vessel haul -outs. A new lease term of 20 -years will allow the Tenant to continue its operations of the shipyard, marine store, and boat repair facility at the BYB pursuant to its request letter, dated June 28, 2023 (Attachment C).
Lease Agreement
Subject to the existing lease (Attachment B) the Tenant currently pays a base rent of $167,000 per year with percentage rent. Rent payments to the City for the last couple of years total approximately $290,000 per year.
City staff and the Tenant have negotiated the terms of a new a lease agreement (Lease) (Attachment A) . The proposed terms of the Lease, for use of the Premises , are summarized below:
1. The initial term is 20 years, with four 5-year extension options, for a total possible term of 40 years, unless terminated earlier as provided by the Lease. The Existing Lease shall terminate concurrently with execution of the new Lease.
2. Annual base rent of $300,000, or $25,000 per month, shall be paid by the Tenant.
Base rent shall be adjusted every three years by the cumulative change in the Consumer Price Index (CPI), and shall not be less than 3% or greater than 21% for the three-year period.
3. Percentage rent of the monthly gross sales (less the amount paid in base rent) shall be paid by the Tenant for the following sales categories:
Sales Category Percentage Rates
Shipyard/Boat Repair (including labor
and services)
4% of Gross Sales
Outside Labor and Materials
(performed or furnished by 3rd parties)
10% of Gross Markup,
Commission and Fees received by
Tenant
Equipment and Hardware Sales at
Marine Store (includes internal sale)
5% of Gross Sales
293
Lease Agreement with Basin Marine, Inc. for Use of a Portion of the Real Property and Tidelands at the Balboa Yacht Basin Located at 829 Harbor Island Drive January 28, 2025
12-4
4. In addition to the payment of rent, each year - free of charge - the Tenant shall provide the City haul-out and re-launch of up to 12 City-owned vessels. The Tenant shall also provide transport and storage of the hauled -out City-owned vessels on the Premises (to facilitate repairs or maintenance) for up to 7 days each.
5. In consideration of the City’s potential redevelopment of a portion of the BYB, the Lease reserves the City’s right to access the Premises to conduct studies or tests in connection with the redevelopment. The City may also temporarily occupy a portion of the Premises to facilitate the redevelopment project.
6. The Tenant must keep the Premises in good condition at its sole cost and expense.
7. In consideration of the Tenant’s proposed capital improvements to the Premises, a one-time rent abatement in the amount of $25,000 will be applied to the Tenant’s account.
8. The Tenant shall provide certificates of insurance to the satisfaction of the City’s risk manager, naming the City as additional insured.
The Lease has been reviewed by the City Attorney’s Office and has been approved as to form. The Tenant has reviewed and approved the terms of the Lease.
City Council Policy F-7, Income and Other Property
Due to the Tenant’s long-term use of the Premises, the unique services provided to the marine industry, and the very limited number of similar marine -related services, staff did not conduct an open bid process to solicit proposals from other operators, as is typically required by City Council Policy F-7, Income and Other Property (Policy) (Attachment D).
An appraisal of the fair market rental value for the building and property on the Premises was conducted by Curtis-Rosenthal, Inc. (Attachment E). The appraisal concluded annual fair market rent to be $492,000.
Staff believes the following findings can be made, as required by the Policy, when an open bid is not conducted, and when less than fair market value rent is received, and a waiver is requested:
1. Converting the property to another use or changing the operator of the property would result in excessive vacancy, which would outweigh other financial benefits;
2. The Tenant provides an essential or unique service to the community that might not otherwise be provided where full market value of the property is required; and
3. With the proposed rent charged at less than fair market value, the use provides an important marine -oriented business on Newport Harbor, provides marine -related services to the City, and is of statewide benefit and might not otherwise be provided were an open bid or full fair market value of the property is required. 294
Lease Agreement with Basin Marine, Inc. for Use of a Portion of the Real Property and Tidelands at the Balboa Yacht Basin Located at 829 Harbor Island Drive January 28, 2025
12-5
California Surplus Land Act
Assembly Bill 1486 was signed into law in 2019, went into effect in 2020, and made significant changes to the California Surplus Land Act (SLA) (Government Code §54220, et seq.). With further updates to the legislation in 2024, and in compliance with the updated SLA, the Lease is not subject to the SLA as its terms do not provid e for a “disposition of surplus land” as the Tenant is limited to tenant improvements and no development or demolition of the Premises shall occur.
FISCAL IMPACT:
Revenues collected pursuant to the proposed Lease will be posted to the Tidelands Fund (10050505), Tidelands Capital Fund (10103), and General Fund (01050505) accounts in the Community Development Department and will be included in future years’ budgets.
The revenues collected from the existing lease agreement are included in the budget for Fiscal Year 2024-25.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing facilities) and Section 15302 (Replacement or Reconstruction) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because th is project has no potential to have a significant effect on the environment.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A – Lease Agreement
Attachment B – Existing Lease Agreement
Attachment C – Lease Renewal Request Letter
Attachment D – City Council Policy F-7 – Income and Other Property Attachment E – Appraisal Report
295
At
tachment A
Lease Agreement
12-6
296
12-7
297
12-8
298
12-9
299
12-10
300
12-11
301
12-12
302
12-13
303
12-14
304
12-15
305
12-16
306
12-17
307
12-18
308
12-19
309
12-20
310
12-21
311
12-22
312
12-23
313
12-24
314
12-25
315
12-26
316
12-27
317
12-28
318
12-29
319
12-30
320
12-31
321
12-32
322
12-33
323
12-34
324
12-35
325
12-36
326
12-37
327
12-38
328
12-39
329
12-40
330
12-41
331
12-42
332
12-43
333
12-44
334
12-45
335
12-46
336
12-47
337
12-48
338
12-49
339
12-50
340
12-51
341
12-52
342
12-53
343
12-54
344
12-55
345
12-56
346
12-57
347
12-58
348
12-59
349
12-60
350
12-61
351
12-62
352
12-63
353
12-64
354
12-65
355
12-66
356
12-67
357
12-68
358
12-69
359
12-70
360
12-71
361
12-72
362
12-73
363
12-74
364
Attachment B
Existing Lease Agreement
12-75
365
LEASE AGREEMENT
BALBOA YACHT BASIN
BASIN MARINE, INC.
THIS LEASE is made and effective as of the 1st day of January 2001 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a Municipal Corporation ("City") and BASIN MARINE, INC., a California Corporation ("Tenant").
RECITALS
A. City is owner of certain harbor frontage and tidelands, together with .~ertain abutting upland property known as "Balboa Yacht Basin" located on Harbor Island Drive in the City of Newport Beach, County of Orange in the State of California.
A portion of the area of the Balboa Yacht Basin is currently being used by Tenant for a • shipyard/boat repair facility with a marine hardware store, ("Premises") and is described in Exhibit "A". Tenant is occupying the Premises pursuant to a Lease dated March 5, 1985, which will expire on June 30, 2010 ("Old Lease").
B. Under the Old Lease terms Tenant agreed to improve and repair the shipyard and boat repair facilities on the Premises under terms and conditions that would allow Tenant an opportunity to recover funds contributed to the redevelopment of the site. The improvements have been completed and Tenant desires a new lease with extended term to replace the Old Lease.
C. Landlord with Tenant'_s concurrence has obtained a recent appraisal (the October 4, 2000 appraisal by George Jones, MAI) of the fair market value rental based upon current conditions. The Base Rent and Percentage Rent described below is based upon such appraisal.
D. Tenant and City desire to terminate the Old Lease and enter into a new Lease of the Premises to allow Tenant to continue to operate shipyard/boat repair 12-76
366
facilities for an extended term upon revised terms and conditions as provided in this Agreement.
E. The uses to be made of the Premises are consistent with provisions of the Local Coastal Plan and General Plan of the City of Newport Beach, and the terms and conditions in this Lease are consistent with the provisions of the City Charter and the ordinances of the City of Newport Beach.
F. The uses to be made of the property subject to this Lease are consistent with provisions of the Tideland Grant pursuant to which the City obtained title to the property.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, City and Tenant agree as follows:
1. DEFINITIONS
1.1 General Definitions. As used in this Lease, the following words and phrases shall have the following meanings:
(a) Alteration - any addition or change to or modification of, the Premises made by Tenant including, without limitation, fixtures. (b) Annual Total Rent - Base Rent and Percentage Rent for a Lease Year.
(c) Authorized Representative - any officer, agent, employee, or independent contractor retained or employed by either Party, acting within authority given by that Party.
(d) City - the CITY OF NEWPORT BEACH.
( e) Damage - an injury to or death of any Person, or the damage destruction, or loss of property caused by another Person's acts or omissions.
12-77
367
(f) Damages - monetary compensation or indemnity that can be recovered in the courts by any Person who has suffered Damage. (g) Days - means calendar days, subject to extension for any weekend or day when banks are not open in California if a deadline occurs on any such Day.
(h) Expiration - the lapse of the time specified as the Term of this Lease, including any extension of the Term resulting from the exercise of an option to extend.
(i) Good Condition - the clean, safe, physical condition of the Premises and each portion of the Premises in compliance with all applicable governmental laws and regulations.
U) Hazardous Materials - shall mean any substance whose nature and/or quantity of existence, storage, use, manufacture, disposal or effect, renders such substance and/or the user thereof and/or the owner of real property affected thereby, subject to or controlled by federal, state or local law, or regulation because such substance is actually or potentially injurious or a threat to public health or welfare or to the environment; or because such substance under federal, state or local law requires remediation, removal, cleanup or other action to bring such substance in any areas impacted into conformance with applicable law.
(k) Hold Harmless - to protect, defend, indemnify and hold harmless the other party (including that party's employees and, agents) from all liability, losses, penalties, Damage, costs, attorney fees, expenses, causes of action, claims, or judgments arising out of or related to any Damage to any Person or property.
-3-
12-78
368
(I) Law - any judicial decision, statute, constitution, ordinance, resolution, regulation, rule, administrative order, or other requirement of any municipal, county, state, federal, or other government agency or authority having jurisdiction over the Parties and/or the Premises.
(m) Lease Year - means each calendar year of the term. (For illustration, Lease Year one (1) is from January 1, 2001 to December 31, 2001 . )
(n) Maintenance or Maintain - repairs replacement, maintenance, repainting, and cleaning.
(o) Material Default - means the failure of Tenant to cure a default under Section 16, below, by the applicable Tenant cure deadline which cure reasonably exceeds Five Thousand Dollars
($5,000.00).
(p) Person - one or more natural persons, or legal entities, including, without limitation, partnerships, corporations, trusts, estates, associations, or a combination of natural persons and legal entities. (q) Premises - those portions of the Balboa Yacht Basin designated on Exhibit "A" encompassing the marine hardware store and boat repair yard, including all structures and improvements located within the Premises.
(r) Provision - any term, covenant, condition, or clause in this Lease that defines, establishes, or limits the performance required or permitted by either Party.
(s) Rent - Base Rent, Percentage Rent, late payment penalties, interest, taxes, and other similar monetary amounts and charges payable by Tenant under the Provisions of this Lease.
-4-
12-79
369
(t) Rent Commencement Date - the Rent Commencement Date (and the Effective Date) shall be January 1, 2001.
(u) Successor - assignee, transferee, personal representative, heir, or other Person succeeding lawfully, and pursuant to the provisions of this Lease, to the rights or obligations of either Party. (v) Tenant - BASIN MARINE, INC., a California corporation, and any approved Successor.
(w) Termination - the termination of this Lease, for any reason, prior to Expiration.
2. LEASE OF PREMISES
City leases the Premises to Tenant and Tenant leases the Premises from City for the Term and on the conditions contained in this Lease.
3. TERM
3.1 Base Term. The "Base Term" of this Lease shall be Fifteen (15) years from the Effective Date unless sooner terminated in accordance with the other provisions of this Lease.
3.2 Option to Extend. Provided Tenant is not then in Material Default, both at the time of Tenant notice of exercise and also at the start of such Option Term, Tenant may extend the term of this Lease for two additional successive terms of Five (5) years (the "Option Term" or "Option Terms") the first commencing on Expiration of the Base Term and the second commencing on Expiration of the first Option Term (which assumes Tenant has exercised the first option). Tenant may exercise each extension option by giving City written notice of its intention to do so at least Six (6) months prior to Expiration of the Base Term or the first Option Term, as applicable.
3.3 Terms of Lease. The "Term" is defined as the Base Term and each Option Term(s).
12-80
370
3.4 Hold Over. Should Tenant hold over and continue in possession of the Premises after Expiration of the Term or any Option Term, Tenant's continued occupancy of the Premises shall be considered a month-to-month tenancy subject to:
(a) termination by either Party upon Thirty (30) days advance written notice; and (b) also to all the terms and conditions of this Lease, except the provisions of Sections 3.1 and 3.2.
4. RENT
From and after the Rent Commencement Date, each month Tenant shall pay to City Base Rent, as adjusted periodically pursuant to Section 4.1 (b) below, plus • Percentage Rent. Base Rent and Percentage Rent are together part of the defined term "Rent."
4.1 Base Rent.
(a) Base Rent. Tenant shall pay Base Rent to City in the sum of Sixty Three Thousand Six Hundred Forty Two Dollars ($63,642.00) per year. Base Rent shall be paid in equal monthly installments of Five Thousand Three Hundred and Three Dollars ($5,303.00). Base Rent for each full month shall be due on the Tenth (10th) day of that month and late on the Twentieth (20th) day of such month. Base Rent for any partial month shall be prorated in accordance with the actual number of days in that month. Any unpaid Base Rent due for Lease Year 2001 will be paid within thirty (30) days of Lease execution.
(b) Periodic Adjustment. At the end of every Third (3rd) Lease Year (i.e. the start of Lease Year Four (4) (January, 2004) Seven (7)-, Ten (10), Thirteen (13), etc.) the Annual Base Rent shall be adjusted to the greater of either: (i) Seventy Five Percent (75%) of the average Reconciled Annual Total Rent for such just ended 12-81
371
Three (3) Lease Years; or (ii) the Annual Base Rent for the just concluded Lease Year (i.e. Base Rent for Lease Year Three (3), Six (6), Nine (9), Twelve (12), etc.). (For illustration, assume for the periodic Base Rent adjustment for Lease Year Four (4), the Base Rent for Lease Year Three (3) was Sixty Three Thousand Six Hundred Forty Two Dollars ($63,642.00) and the Reconciled Total Annual Rent for Lease Years One (1 ), Two (2) and Three (3) was Sixty Eight Thousand Dollars ($68,000.00), Eighty Five Thousand Dollars ($85,000.00) and Seventy Eight Thousand Dollars ($78,000.00), respectively, then the adjusted Base Rent for Lease Year Four (4) would remain at Sixty Three Thousand Six Hundred Forty Two Dollars ($63,642.00) calculated as follows: Sixty Eight Thousand Dollars ($68,000.00), Eighty Five Thousand Dollars ($85,000.00) and Seventy Eight Thousand Dollars ($78,000.00) equals Two Hundred Thirty One Thousand Dollars ($231,000.00), divided by Three (3) equals Seventy Seven Thousand Dollars ($77,000.00), times Seventy Five Percent (75%) equals Fifty Seven Thousand Seven Hundred Fifty Dollars ($57,750.00), which is less than Sixty Three Thousand Six Hundred Forty Two Dollars ($63,642.00).)
4.2 Percentage Rent.
(a) In addition to the Base Rent, during the term of this Lease, Tenant shall pay to City each month,, a Percentage Rent calculated by multiplying the Gross Sales Percentage Rates by the Gross Sales (as defined in Section 4.4) for each of the following sales categories attributable to the Premises during each Lease Year to -7-
12-82
372
the extent that such Percentage Rent exceeds the Base Rent due for such month:
Gross Sales Percentage Rates:
1 . Shipyard/boat repair
(labor, service and materials) ...... .4% of Gross Sales
2. Outside labor and materials ......... 10% of gross commissions and fees received by
Tenant
3. Equipment and hardware sales,
exclusive of internal sales to
boat repair business ..................... 5% of Gross Sales. (b) Percentage Rent shall be paid for the preceding month with Tenant's monthly Base Rent payment, under Section 4.1(a), above.
With each monthly Rent payment Tenant shall furnish to City a statement, in writing, signed and certified by Tenant to be correct (a "Monthly Sales Statement"), showing the total Gross Sales during the preceding calendar month, the applicable percentage for each category, the Percentage Rent for each category, Total Gross Sales plus Percentage Rent, Base Rent payable for such prior month, amount of any Percentage Rent due and resulting Total Rent due for such month. (For illustration of the above categories, percentages and calculation of percentage rent; attached as Exhibit "B" is Tenant's monthly Rent and Statement for May, 2000).
(c) Prior to January 31st of each Lease Year, Tenant shall furnish City a statement of Tenant's monthly and Annual Gross Sales made during the previous Lease Year, or any partial Lease Year (if applicable) with each category of sales calculated using the Gross Sales Percentage Rates under Section 4.2(a), above, including any authorized deductions, the Base Rent and percentage Rent paid -8-
12-83
373
per category and total for each month and for such entire Lease Year and Base Rent paid by Tenant during such same Lease Year ("Annual Sales Statement"). The Annual Sales Statement shall be signed and certified as correct by Tenant, or if Tenant is a corporation, by an authorized officer of Tenant. If the Annual Sales Statement shows that during the previous Lease Year Tenant paid less Percentage Rent than obligated under the terms of this Lease, Tenant shall pay to City within Thirty (30) days the amount of any additional Percentage Rent that is payable to City. If the Annual Sales Statement shows that during the previous Lease Year Tenant paid more Percentage Rent than it was obligated to pay under the terms of this Lease, the amount of this overpayment shall be applied to the next monthly installment or installments of Base Rent due or, if the overpayment was in the last year of the Term, or Option Term(s), City shall refund to Tenant the full amount of this overpayment within Thirty (30) days of City's receipt of the statement. The net resulting reconciled Annual Total Rent for a Lease Year is defined as the "Reconciled Annual Total Rent". (For illustration, attached as Exhibit "C" is Tenants Annual Sales Statement for Lease Year 2000, in which the Reconciled Annual Total Rent was ($101,048.17), total Rent paid was $108,170.05, and total credit to Tenant was $7,121.88).
(d) If Tenant fails to provide to City any Monthly Sales Statement or Annual Sales Statement at the time and in the manner specified in this Lease, this failure shall constitute a default under this Lease and City shall have the right, in addition to any other rights or remedies it may have under this Lease, to c"onduct an audit and 12-84
374
Tenant shall immediately reimburse City for the cost of the audit on written demand by City. If any Monthly Sales Statement or Annual Sales Statement is found to be more than Three Percent (3%) less than the amount of Tenant's Gross Sales shown by this audit, the understatement shall be deemed willful and City may terminate this Lease upon written notice given at any time within Thirty (30) days after receipt of the audit by City.
4.3 Payment Location. Rent shall be payable at the office of the City's Revenue Division at 3300 Newport Boulevard, Newport Beach, California, or at such other place or places as City may from time to time designate by written notice delivered to Tenant.
4.4 Gross Sales.
(a) The term "Gross Sales" means:
(1 ) The entire amount of the actual sales price, whether wholesale or retail, and whether wholly or partly for cash, on credit or in exchange for any other product, commodity, service, commercial paper or forbearance, of all sales of merchandise, labor, service and materials and all charges made by or on behalf of Tenant from or upon the Premises; (2) Orders taken in or from the Premises, even if the orders are filled elsewhere, and sales by any subtenant, or
subcontractor in or from the Premises;
(3) All sales originating at the Premises shall be considered as made and completed therein, even though bookkeeping and collection of the account may be transferred to another place, and even though actual' filling of the sale or service -10-
12-85
375
order and actual delivery of the merchandise may be made from a place other than the Premises.
(4) Gross receipts of all coin-operated devices that are placed on the Premises by Tenant or pursuant to any rent
concession, percentage or other arrangement (but excluding revenue from one drink vending machine for employees and telephones that are collected by a public and/or private utility).
(5) Each sale upon installment or credit shall be treated as a sale for the full price in the month during which such sale shall be made, irrespective of the time when Tenant shall receive payment (whether in full or partial) from its
customers.
(b) Exclusions from Gross Sales. Gross Sales shall not include, or if included there shall be deducted (but only to the extent they have been included), the following:
(1) Sales and use taxes, so-called luxury taxes, consumers' excise taxes, and other similar taxes now or in the future imposed on the sale of merchandise or services, but only if such taxes are separately stated on the invoice and added to the selling price and collected from customers.
(2) The amount of returns to shippers or manufacturers. (3) The amount of any cash or credit refund made upon any sale where the merchandise sold or some portion is returned by the purchaser.
(4) Sums and credits received in the settlement of claims for loss of or damage to merchandise.
-11-
12-86
376
(c)
(5) Cash refunds made to customers in the ordinary course of business.
(6) Value Added Taxes ("VAT") or other taxes added to the selling price of products and other similar taxes now or hereafter imposed upon the sale of merchandise or services, whether such taxes are added to, or included in the selling price.
(7) Uncollectible credit accounts and other bad debts, not to exceed Two Percent (2%) of Gross Sales.
(8) The proceeds of sale of Tenant's personal property, trade fixtures or business equipment
Statements of Gross Sales. Tenant shall furnish to City statements of Tenant's Gross Sales in accordance with Section 4.2(b) and
4.2(c), above. Each statement shall be signed and certified to be true, complete and correct by an Authorized Representative of Tenant.
(d) Sales and Charges. All sales and charges shall be recorded by (e)
one of the following means: (1) cash registers that display the amount of the transaction certifying the amount recorded. The register shall be equipped with devices that log in daily sales totals, and record on tapes the transaction numbers and sales. details. At the end of each day the tape will record the total sales for that day; (2) or sales invoices.
Production of Statement. Records and Audit. Tenant agrees to make available for inspection by City, or its Authorized Representative, at the Premises a complete and accurate set of books and records 9f all sales of merchandise and revenue derived -12-
12-87
377
from the conduct of business or activity in, at or from the Premises from which Gross Sales can be determined. Tenant shall also make available, upon City's request, all supporting records, including federal, state and local tax returns. Tenant shall also furnish City's Authorized Representative, upon request, copies of its quarterly California sales and use tax returns filed with the State of California. Tenant shall retain and preserve for at least Three (3) years all records, books, bankbooks or duplicate deposit books and other evidence of Gross Sales. City and its Authorized
Representative shall have the right, upon reasonable notice, during the Term or any Option Term, to inspect and audit Tenant's books and records and to make transcripts to verify the Rent due City.
The audit may be conducted at any reasonable time during normal business hours. Tenant shall cooperate with City in making the inspection and· conducting the audit. City shall also be entitled, once during each Lease Year and within Two (2) years after its end, and once within One Hundred Eighty (180) days after Expiration or Termination of this Lease, to an independent audit of Tenant's books of account, records, cash receipts, and other pertinent data to determine Tenant's Gross Sales. The audit shall be conducted at City's sole cost and expense by a certified public accountant designated by City. The audit shall be limited to the determination of Gross Sales and shall be conducted during usual business hours in a manner that minimizes any interference with the conduct of Tenant's regular business operations. If the audit concludes that there is a deficiency in the payment of any Rent, the deficiency shall become due and payable within Twenty (20) days -13-
12-88
378
(f)
and if there is an overpayment, City shall refund the amount of the overpayment within Twenty (20) days. City shall bear its costs of the audit unless the audit shows that Tenant understated Gross Sales by more than Three Percent (3%), in which case Tenant shall pay all City's reasonable costs of the audit. City and City's Authorized Representative shall be required to keep any information gained from such documents, statements, inspections or audits confidential to the maximum extent permitted by law. City and its Authorized Representative shall not disclose financial information received in confidence and pursuant to this Lease except to carry out the purposes of this Lease unless disclosure is required (rather than permitted) by law. However, City may disclose the results of any audit in connection with any financing arrangements, the sale or transfer of City's interest in the Premises, or pursuant to order of a court or administrative tribunal.
Tenant's Gross Sales Audit. In the event of any audit by City in accordance with this Lease, Tenant may contest the results of City's audit by performing a confirming audit within Thirty (30) days of receipt of City's audit results and supporting evidence, using an independent public accountant reasonably acceptable to City. If Tenant's audit discloses that City's audit was incorrect by more than Three Percent (3%), then City shall pay the cost of Tenant's contesting audit.
(g) Acceptance. The acceptance by City of any money paid to City by Tenant as Percentage Rent for the Premises, as shown by any statement furnished by Tenant, shall not be construed as an -14-
12-89
379
admission of the accuracy of said statement, or of the sufficiency of the amount of the Percentage Rent payment.
4.5 Late Payment Penalty. Rent shall be late if paid on or after the Twentieth (20
th
) day of the month due. Late Rent shall be assessed a One (1) time penalty of Ten Percent (10%) of the amount due and shall bear interest at the rate of Ten Percent ( 10%) per annum on the unpaid balance calculated from the date such Rent was due to the date that such Rent, late payment penalty and such interest is fully paid.
5. BUSINESS PURPOSES AND USE OF PREMISES
5.1 "Approved Use". The Premises are to be used by Tenant:
(a) For the principal operation of a shipyard/boat repair facility; and (b) At Tenant's option, also to sell new or used boats and/or marine equipment and hardware, so long as such uses are incidental to the principal use in Section 5(a) above.
(c) Tenant may not use the Premises for any other use except with prior written consent of the City.
5.2 Operation of Premises. Tenant shall operate and manage the Premises in a manner comparable to other high quality businesses providing similar shipyard/boat repair services. Tenant shall not use or permit the use of the Premises in any manner that: (a) creates a nuisance; (b) violates any Law; or (c) is not in compliance with all statutes, laws, permits, use restrictions and regulations of City applicable to the Premises, Tenant and/or Tenant's use of the Premises. Tenant assumes the risk of and shall cause all its workman, customers and independent contractors to also comply with all laws regarding their activities at the Premises.
5.3 Sales Restrictions. Tenant shall not display, sell or store merchandise outside the defined exterior walls and permanent doorways of said Premises, and no sale by auction in, upon or from said Premises, whether said auction be voluntary, -15-
12-90
380
involuntary, pursuant to any assignment for benefit of creditors or pursuant to any bankruptcy or other solvency proceedings, shall be conducted except such auctions that may be conducted by officers of a court with respect to any vessels in custody of Tenant.
5.4 Continuous Operation. Weather permitting, Tenant shall at a minimum keep the Premises in operation and open to the public for business during normal business hours, Monday - Friday 8:00 A.M. - 4:30 P.M. Tenant may close the Premises on federal and state holidays and during periods of remodeling, reconstruction, inventory and emergencies (including substantially inclement weather) or to comply with laws, but such closure shall not:
(a) Excuse Tenant's payment of Base Rent;
(b) Be for a period of more than Four (4) months during any Three (3) Lease Year segment of the Term, with the exception of major repairs or reconstruction exceeding Two Hundred Fifty Thousand Dollars ($250,000.00), when the closure period will be increased to Eight (8) months.
5.5 Advertising Display. Tenant may, at its own expense, place signs in or upon the Premises subject to the prior written consent of the City Manager as to the size, type, design and method of installation. All signage placed by Tenant on, in or about the Premises shall remain the property of Tenant and shall be removed by Tenant upon Termination or Expiration of this Lease at Tenant's expense; and any damage caused by removal shall be repaired at Tenant's expense. The permanent signage in place as of the Execution Date of this Lease shall be deemed approved by the City and the City Manager as to graphic design and sign placement.
5.6 Independent Contractor. City shall have no interest in the business of Tenant, and no liability for the business operations or Gross Sales of Tenant, whether -16-
12-91
381
or not caused by City's enforcement of City laws and regulations which apply to the Premises and/or Tenant.
5.7 No Distress Sales. No auction, fire, bankruptcy, "going out of business" or other distress sales of any nature may be conducted on the Premises without the prior written consent of the City Manager, which will not be unreasonably withheld, on the condition that such event occurs once during the Term.
5.8 Parking. Tenant shall provide a total of Four (4) parking spaces on-site which satisfy Newport Beach Municipal Code requirements. The required parking shall be provided in an area that is visible to Tenant's customers and shall be available for parking at all times. Tenant's employees shall park in City's adjacent marina parking lot located in the northwest corner of such lot, nearest the Beacon Bay development, and shall not exceed 15spaces (no repair, overnight storage or parking of Tenant customer or employee vehicles is permitted, in such adjacent parking area).
6. SERVICES FOR CITY
Tenant, in addition to the obligation to pay Rent, shall perform the other terms and conditions of this Lease and shall, at Tenant's sole expense, also do the following:
(a) Haul out and re-launch, each Lease Year, up to Four (4) of the vessels owned and maintained by the City, of a size capable of being handled by Tenant's equipment provided, however, all such Four (4) City vessels shall be hauled out no more than Two (2) vessels at a time.; (b) Transport the vessels to an area on the Premises suitable for the purposes of repairs or maintenance;
(c) Allow each such vessel to remain on the Premises for a period of Two (2) weeks immediately after haul-out; and
(d) Permit access to the vessels by employees or representatives of City for the purpose of repairs and maintenance, which shall be performed by City at no cost or liability to Tenant.
-17-
12-92
382
City shall give Tenant Thirty (30) days' written notice prior to the date on which the vessels are to be hauled-out and City shall waive such Tenant obligation each year unless such City notice is given during such Lease Year.
7. TAXES, LICENSES AND OTHER OBLIGATIONS
7.1 Payment of Taxes. Tenant acknowledges that this Lease may create a possessory interest subject to property taxation and that Tenant shall pay property taxes levied on such interest. Tenant shall pay, before delinquency, all taxes, assessments, license fees and other charges (Taxes) that are levied or assessed against Tenant's leasehold interest in the Premises, any Tenant fixture, improvement, equipment and other Tenant property (including any such property of any customer of Tenant) installed or located on the Premises from time to time. Tenant shall pay directly to the appropriate taxing authorities all such taxes at least Ten (10) days before delinquency and before any fine, interest or penalty is due or imposed by operation of law and furnish to the City with Tenant's next Rent installment a copy of Tenant's payment check and the Tax bill thereby paid. Tenant shall not be required to pay any real property taxes or assessments based upon City's ownership interest in the Premises.
7.2 Payment of Obligations. Tenant shall promptly pay, when due, any and all bills, debts, liabilities and obligations incurred by or charged to Tenant in connection with Tenant's occupation and use of the Premises.
7.3 Challenge to Taxes. Tenant shall have the right in good faith, at its sole cost and expense, to contest the amount or legality of arny Taxes including the right to apply for reduction. If Tenant seeks a reduction or contests such Taxes, Tenant's failure to pay the Taxes shall not constitute a default as long as Tenant complies with the provisions of this Section. City shall not be required to join in any proceeding or contest brought by Tenant unless the provisions of any Law require that the proceeding or contest be brought by or in the name of City or any owner of the Premises. In that -18-
12-93
383
case, City shall join in the proceeding or contest or permit it to be brought in City's name and City shall execute any instrument or document necessary or advisable in connection with the proceeding or contest as long as City is not required to bear any cost nor be liable for payment of such Taxes. If requested Tenant, on final determination of the proceeding or contest, shall immediately pay such disputed tax and also discharge any decision or judgment rendered, together with all related costs, charges, interest and penalties and provide City with a copy of Tenant's payment and the underlying bill for such Taxes being paid with Tenant's next Rent payment. Tenant shall indemnify and Hold Harmless the City and its officers and employees from and against any liability, claim, demand, penalty, cost or expense arising out of or in connection with any contest by Tenant pursuant to this Section. Any such contest of Taxes by Tenant shall be concluded (meaning that such Taxes shall be fully paid or cancelled by the Tax Authority)· by Tenant, using Tenant's reasonable best efforts, within Eighteen (18) months of starting such action, or end of the Term, if earlier.
7.4 License. Tenant shall maintain in good standing all required licenses and permits required for operation of the business on the Premises, including but not limited to a City Business License.
8. UTILITIES AND REFUSE COLLECTION
(a) Basic Utilities. Tenant shall make all arrangements for and pay for all utilities furnished to or used on the Premises, including, without limitation, gas, electricity, water, telephone service, cable TV and janitorial service.
Any repair to utility lines within the Premises is the sole responsibility of Tenant. Tenant bears all risk of interruption, cancellation and/or disruption of utility services, as well as the cost of all utilities Tenant requires for its use of the Premises.
(b) Refuse Collection. Tenant shall make arrangements for and pay for all weekly refuse collection and also · Hazardous Materials disposal at least -19-
12-94
384
monthly (or more frequently if required by law). Tenant shall keep the Premises free and clean of rubbish and litter and shall deposit accumulated rubbish and litter in containers designated by City. Trash containers shall be kept in an approved enclosed area. Tenant shall comply with the provisions of the Newport Beach Municipal Code and all other Laws regarding the use, storage and disposal of Hazardous Materials. In no event shall Tenant allow Hazardous Materials related to the Premises to enter, be disposed of into, seep or otherwise be released into any sewer line, storm drain and/or adjacent bay waterway to the Premises.
9. AL TERA TIONS TO THE PREMISES
(a) Alterations Requiring Building Permits. Any alteration that requires a building permit from City shall require the written consent of the City Manager which shall not be unreasonably withheld so long as Tenant's Approved Use is not thereby being changed.
(b) Non-Structural Alterations. Tenant shall have the right to make, at its sole expense, such non-structural changes, alterations, improvements and additions in and to the interior of the buildings, or to the piers, slips, floats and ramps on Premises, and Tenant may install therein such trade fixtures and equipment as it may deem advisable for the conduct of its business for the Approved Use of the Premises.
(c) Alterations Costing More than $50,000. Tenant shall not make any Alterations ( other than non-structural Alterations costing less than Fifty Thousand Dollars [$50,000.00]) to the Premises without the prior written con.sent of the City Manager which shall not be unreasonably withheld if the Approved Use is not thereby changed. In granting or withholding consent to proposed Alterations by Tenant, the City Manager shall 12-95
385
(d)
(e)
(f)
consider the impact of the proposed Alterations on public views adjacent property owners, compliance of City codes and the impact of the proposed Alterations on space available for public use of the Balboa Yacht Basin. The City Manager may require, as a condition of approval, that Tenant agree to amendments to this Lease, including amendments increasing the amount of Rent payable under this Lease if the proposed Alterations would materially increase the floor area or size of the building structures on the Premises. The City Manager may also require Tenant to provide, at Tenant's expense, appropriate engineering and feasibility studies regarding the structural integrity of the Premises. Any damages or destruction to the structural improvements or Tenant equipment at the Premises shall not reduce or excuse Tenant's obligation to pay Rent in full and on time.
Quality of Work Performed. All work shall be performed in a good and workmanlike manner, shall substantially comply with the plans and specifications submitted to City and shall comply with all applicable governmental permits and Laws in force at.the time permits are issued.
Payment of Costs. Tenant shall pay all costs related to the construction of any Alterations by Tenant or its agents. Tenant shall keep the Premises free and clear of all mechanics' liens resulting from construction performed at the direction of Tenant. All construction improvements shall, upon completion, become part of the Premises, owned by City.
Indemnification. Tenant shall Hold Harmless City and its officers and employees with respect to any Damage or Damages related to any work performed on the Premises by Tenant. City shall promptly provide Tenant with a copy of any claim filed by any third party with respect to work performed by Tenant. City has no obligation to or liability to Tenant -21-
12-96
386
incident to City's approval of Tenant's plans or issuance of permits for any improvements to the Premises.
(g) Disposition of Alterations at Expiration or Lease Termination. Any Alterations made to the Premises shall remain on, and be surrendered with, the Premises on Expiration or Termination of this Lease (Excluding Tenant's fixtures, equipment, furniture, movable decorations and the like).
However, City may elect not less than Thirty (30) days prior to Expiration or Termination of this Lease, to require Tenant to remove, at Tenant's cost, any Alterations that Tenant has made to the Premises, except those Alterations existing as of the date of this Lease or approved by City excluding any Tenant related Hazardous Materials or other clean-up of any environmental contamination which shall remain a Tenant obligation.
If City requires removal of Alterations, Tenant shall, at its cost, remove the Alterations and restore the Premises to its condition prior to installation of such Alterations, ordinary wear and tear excepted, before the last day of the Term, or within Thirty (30) days after notice is given, whichever is later. Prior to Expiration or within Fifteen ( 15) days after Termination of this Lease, Tenant may remove any movable partitions, machinery, equipment, furniture, and trade fixtures previously installed by and solely paid for by Tenant, provided that Tenant repairs any damage to the Premises caused by removal and the structural future of the foundation and bulkhead areas of the Premises are not thereby worsened by such Tenant removal.
10. REPAIRS AND MAINTENANCE OF PREMISES
10.1 Maintenance and Repair by Tenant and City. Tenant agrees that it will maintain the Premises in Good Condition. City shall be responsible solely for the maintenance of the vertical bulkheads serving the Premises excluding damage or -22-
12-97
387
deterioration caused to any bulkhead by Tenant or Tenant's operations for which Tenant shall be responsible. Tenant shall also, at its sole cost and expense, at all times during the term hereof, maintain all other improvements and all Tenant equipment at the Premises and every portion thereof including, but not limited to, store fronts, entrances and exits, plate glass, roofs, doors, exterior and interior painted areas, HVAC equipment, electrical circuits and switchgear, and utility supply lines, plumbing and other fixtures, equipment, interior walls, ceilings and floors, piers, concrete foundations, fencing, gates, asphalt areas, slips, floats and ramps, in good order, condition and repair, and Tenant shall comply with all Laws, applicable thereto.
City may perform Maintenance or repairs in the event Tenant fails to commence required Maintenance or repairs within Fifteen (15) days after receipt of notice to do so.
The cost of any Maintenance or repairs by the City pursuant to this Subsection shall be payable upon billing by City as additional Rent with the Tenant's next monthly Rent payment.
(a)
(b)
Entry by City. City and its Authorized Representatives may enter upon and inspect the Premises at any reasonable time for Maintenance or other purposes. In case of emergency, City or its Authorized Representatives may enter the Premises by the master key if Tenant is not present to open and permit an entry. During entry City and its Authorized Representatives shall exercise reasonable care relative to the Premises and to Tenant's property.
Any entry to the Premises by City shall not be construed as a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof.
Additional Covenants of City Regarding Maintenance Obligations.
In addition to other provisions of this Lease:
12-98
388
(1) Written Notice, Interference with Business Operations, and Additional Improvements. City shall, at the earliest time reasonably possible given the circumstances that may then exist, provide Tenant with prior written notice of its intent to:
(i) perform any Maintenance, repair or remodeling of the Balboa Yacht Basin which may reasonably be expected to
adversely affect, by interference with access, visibility, availability of utilities or otherwise, Tenant's business operations at the Premises or any portion; or (ii) except in the case of an emergency, enter upon the Premises for any of the purposes set forth in this Lease. City agrees not to construct any additional improvements at the Balboa Yacht Basin that relate to any commercial enterprise which might conflict or compete with Tenant's business operations on the Premises so long as Tenant operates the Premises for the Approved Use.
(2) Due Diligence by City Regarding Repairs. Whenever City elects or is obligated to repair or restore the Premises or any portion of the Balboa Yacht Basin, City shall proceed, at City's cost and with due diligence to repair or rebuild the same, including any additions or improvements made by
City or by Tenant with City's consent, in accordance with the same plan and design as existed immediately before such City repairs and in accordance with all applicable Laws subject to force majeure and inability to use same materials by the City. The materials used in said repair or
-24-
12-99
389
reconstruction shall be as nearly like the original materials as may then be reasonably procured.
10.2 Tenant is the long-time operator of the Premises, fully aware of the condition of the Premises. Therefore, Tenant accepts the condition of the Premises as of the date of this Lease without any current City warranty, representation or repair obligation.
11. LIENS
Tenant shall not permit to be enforced against said Premises, or any part thereof, any mechanics', materialman's, contractors' or other liens arising from, or any claims for damages growing out of, any work or repair or alteration (except from the actions of City), and Tenant shall pay or cause to be paid said liens and claims before any action is brought to enforce the same against Tenant or the Premises, or shall adequately indemnify City and the Premises by payment bonds acceptable to City and as provided for by Law. Tenant agrees to Hold Harmless City and the Premises free and harmless from all liability for any and all such liens and claims and all costs and expenses in connection therewith. Tenant shall give City notice in writing before commencing construction of any kind on the Premises exceeding $2,500.00 and provide any additional Tenant insurance required by this Lease.
12. INDEMNITY AND EXCULPATION; INSURANCE
12.1 Exculpation of City. Except as otherwise expressly provided in this Lease, City shall not be liable to Tenant for any damage to Tenant or Tenant's property (including any boat owned by any Tenant customer) goodwill, increased Tenant operating costs, or loss of business or income by Tenant from any cause other than the gross negligent, intentional or willful acts of City or its Authorized Representatives.
Except as otherwise expressly provided in this Lease, Tenant releases and also waives all claims against City for Damages arising for any reason other than the gross negligent, intentional or willful acts of City or its Authorized Representatives. City shall -25-
12-100
390
not be liable to Tenant for any Damage to the Premises, Tenant's property, Tenant's goodwill, or Tenant's business income, caused in whole or in part by acts of nature including, without limitation, waves, wind and tidal flows.
12.2 Tenant Release and Hold-Harmless. Tenant releases the City and also agrees to Hold Harmless the City, its elected officials, officers and employees from any and all claims, liability, loss, Damage, or expenses resulting from Tenant's occupation and use of the Premises, specifically including, without limitation, any claim, liability, loss, or Damage arising by and Tenant assumes all corresponding risk because of:
(a) The death or injury of any Person caused or allegedly caused by the condition of the Premises or an act or omission of Tenant or an agent, contractor, employee, servant, sublessee or concessionaire of Tenant; and
(b) Any work performed on the Premises or materials furnished to the Premises at the request of Tenant or any agent or employee of Tenant, with the exception of Maintenance performed by City; and (c) Tenant's failure to perform any provision of this Lease or to comply with any requirement of Law or any requirement imposed on the Premises by any duly authorized governmental agency or political subdivision.
Tenant's obligations pursuant to this Subsection shall not extend to any claim, loss, liability, Damages, costs or fees that are proximately caused by the sole gross negligence, willful misconduct, or unlawful or fraudulent conduct on the part of the City or its officers or employees.
12.3 Insurance Limits.
(a) Liability Insurance. Tenant shall, at its own cost and expense, secure and maintain during the entire Term a broad form commercial general liability insurance policy issued by an -26-
12-101
391
insurance company reasonably acceptable to City covering the acts and omissions of Tenant, any Tenant employee, agent customer, independent contractor or visitor to the Premises. The policy shall name City, and its officers, employees and agents as additional insureds and protect, against loss or liability caused by or connected with Tenant's occupation and use of the Premises under this Lease in amounts not less than: combined single limit bodily injury and property damage, including products/complet,ed operations liability and blanket contractual liability, of Two Million Dollars ($2,000,000.00) per occurrence, subject to increased limits in accordance with Section 12.3(b) below.
(b) City's Ability to Increase Amount of Public Liability and Prope1rty Damage Insurance. Not more frequently than once every Five (5) years, Tenant shall increase the insurance coverage as reasonably required by City so that at all times, the amount of public liability and property damage insurance coverage maintained by Tenant reasonably and fully protects the City.
(c) Deductibles. Any deductible amount under each insurance policy shall not exceed Seven Thousand Five Hundred Dollars
($7,500.00), and Tenant is responsible for payment of such amount in the event of loss.
12.4 Fire Insurance on Building and Other Improvements. Tenant at its cost shall maintain on the Buildings and other improvements that are or become a part of the Premises a policy of standard broad form all-risk fire and extended coverage insurance, with vandalism and malicious mischief endorsements, to the extent of at least full replacement value, with coverage for demolition and compliance with future Building Codes in a form acceptable to the City's Risk Manager. The insurance policy 12-102
392
shall be issued in the names of City and Tenant, as their interests appear. The insurance policy shall provide that any proceeds shall be made payable to City and Tenant jointly.
12.5 Determination of Replacement Value. The "full replacement value" of the Buildings and other improvements to be insured under Section 12 shall be determined by the company issuing the insurance policy at the time the policy is initially obtained.
Not more frequently than once each year, either Party shall have the right to notify the other Party that it elects to have the replacement value re-determined by such underwriting insurance company. The re-determination shall be made promptly and in accordance with the rules and practices of the Board of Fire Underwriters, or a l ike board recognized and generally accepted by the insurance company. Each Party shall be promptly notified of the re-determination by the company. The insurance policy shall be adjusted according to the re-determination.
12.6 Loss of Rent Insurance. Tenant at its cost shall maintain loss of rent insurance ( or business interruption insurance) insuring that the Base Rent will be paid to City for a period up to Twelve (12) months if the Premises are destroyed or rendered unusable or inaccessible for commercial purposes by a risk insured under a special form property coverage policy including vandalism and malicious mischief endorsements.
12.7 Workers' Compensation. Tenant shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California and the applicable provisions of Divisions 4 and 5 of the California Labor Code.
12.8 Waiver of Subrogation. The parties release each other, and their respective Authorized Representatives, from any claims for Damage to any Person or to the Premises and to the fixtures, personal property, and Alterations of either in or on the Premises that are caused by or result from risks insured against under any insurance policies carried by the parties and in force at the time of any Damage or -28-
12-103
393
required to be carried under this Lease. Tenant shall cause each insurance policy obtained by it to provide that the insurance company waives all rights of recovery by way of subrogation against the City in connection with any Damage covered by any policy of property insurance. Neither party shall be liable to the other for any Damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. If any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by the payment of an additional premium charge above that charged by the .insurance company issuing policies without a waiver of subrogation, the Party undertaking to obtain the insurance shall notify the other Party of this fact. The other Party shall have a period of Twenty (20) days after receiving the notice either to place the insurance with a company that is reasonably satisfactory to the other Party and that will carry the insurance with a waiver of subrogation, or to agree to pay the additional premium. The Party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance involved if the insurance cannot be obtained with a waiver of subrogation or the other Party refuses to pay the additional premium.
shall:
12.9 Other Insurance Matters. All the insurance required under this Lease (a) Be issued by insurance companies authorized to do business in the State of California, with a minimum Best Insurance Guide or financial rating of A-VII unless otherwise approved in advance by City Risk Manager;
(b) Be issued as a primary policy;
(c) Be noncontributing with any insurance that may be carried by City; (d) Contain an endorsement requiring Thirty (30) days written notice from the insurance company to both Parties before cancellation or -29-
12-104
394
material change in the coverage, scope or amount of the policy; and
(e) Tenant shall maintain insurance for all boats being repaired or stored at the Premises to thereby protect City from any liability concerning such third party property located at the Premises.
Each policy, or a certificate of the policy, together with evidence of payment of premiums, shall be deposited with City and on renewal of the policy not less than Thirty (30) days before expiration of the term of the policy. Either Party may maintain for its own account any insurance not required under this Lease, but any such policy shall be separate from and non-contributory in the event of loss covered by insurance carried by the Party responsible for said loss as required by this Lease.
13. DAMAGE OR DESTRUCTION OF PREMISES
13.1 Destruction of Premises. If the Premises are totally or partially destroyed, rendering the Premises or any portion thereof totally or partially inaccessible or unusable, Tenant shall restore the Premises, at Tenant's sole cost and effort, to substantially the same condition as immediately prior to such destruction (including all trade fixtures, personal property, i mprovements and Alterations as are installed by Tenant, which shall be replaced by Tenant at its expense, unless Tenant elects toterminate this Lease under the conditions of this Section 13.1. T enant can elect to terminate this Lease by giving notice of such election to City within Sixty (60) days after the date of the occurrence of any casualty and also proving to the reasonable satisfaction of City that each of these conditions are satisfied: (a) the cost of the restoration exceeds the amount of any available insurance proceeds by at least twice the Total Annual Rent for the most recent Two (2) completed Lease Years; (b) at the time of such casualty Tenant maintained all insurance required by this Lease; and (c) no act attributable to Tenant voided insurance coverage otherwise available concerning said loss. If the Lease is so terminated: (x) all insurance proceeds applicable to -30-
12-105
395
reconstruction (excluding Tenant's personal property therein) shall assigned by Tenant to Landlord; (y) Tenant shall pay any policy deductible to City; and (z) quitclaim title to the Premises to City, as conditions of such termination. Notwithstanding such Lease termination, Tenant shall Hold Harmless the City from any expenses, liability or loss regarding damage or loss to boats being repaired or stored by Tenant at the Premises and any other liability or loss incurred by Tenant concerning such casualty and event.
13.2 Replacement of Tenant's Property. In the event of the damage or destruction of improvements located on the Premises not giving rise to Tenant's option to terminate this Lease under Section 13.1 , above, Tenant shall, at its own expense, replace and repair all Tenant's trade fixtures, equipment, machinery, furnishings, furniture and inventory as soon as reasonably possible to permit the prompt continuation of Tenant's business at the Premises for the Approved Use.
13.3 Destruction of Balboa Yacht Basin. In the event that all or a portion of the Balboa Yacht Basin or access to the Balboa Yacht Basin in areas to be maintained by the City either under this Lease or because City owns such other areas, is damaged, deteriorates or destroyed by fire or any other casualty not attributable to Tenant nor covered by Tenant insurance and as a result the Premises or a material portion of the Premises becomes inaccessible or commercially unusable for the Approved Use, and the Damage or destruction cannot reasonably be repaired within Twelve (12) months after the date of the casualty, City shall have the right, by notice to Tenant within Sixty (60) days of such casualty, to either:
(a) Terminate this Lease by giving to Tenant written notice (which notice shall be given, if at all, within Thirty (30) days following the date of the casualty), in which case this Lease shall be terminated Thirty (30) days following such City notice; or
(b) Within Thirty (30) days of such casualty confirm City's intention to repair such damage as soon as reasonably possible at City's -31-
12-106
396
expense, in which event this Lease shall continue in full force and effect; however, Rent shall be abated in accordance with the procedures set forth in Section 14, below. Tenant may terminate this Lease by giving City written notice at any time prior to the commencement of repairs if City agrees to repair the Balboa Yacht Basin pursuant to this Section 13.3(b) and City fails to commence repairs within One Hundred Twenty (120) days after giving Tenant written notice of its intention to repair. In such event, this Lease shall terminate as of the date of notice from Tenant to City, and City shall have no further liability to Tenant ·under th.is Lease.
13.4 City Liability After Casualty City has no liability to Tenant concerning such casualty or City election to repair or not repair except solely arising under Section 13.1, above.
14. ABATEMENT OF RENT
In the event of Damage or destruction of the Premises or (?amage to the Balboa Yacht Basin that impacts the· Premises and this Lease is not terminated, Tena_nt shall conti.nue to utilize the Premises for the operation of its business for the Approved Use to the. extent it may be practicable and commercially reasonable. Base Rent shall abate in proportion to the area of the Premises that is rendered unusable for the Approved Use. The abatement of Rent shall commence on the date that use of the Premises is impacted and continue until the ·completion of those repairs necessary to restore full use of the Premises and Tenant's re-opening of the Premises. Tenant's obligation to pay Taxes and other monetary obligations pursuant to this Lease shall not be abated or reduced. Rent shall not abate if the Damage or destruction to the Premises is the result of the negligence or willful conduct of Tenant or its employees, officers or agents. Tenant's right to abatement of Base Rent is contingent on payment -32-
12-107
397
of insurance proceeds, if any, equal to the amount of Base Rent pursuant to coverage required by Section 12.6, above.
15. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT, SUBLETTING AND
ENCUMBERING
15.1 Prohibition of Assignment. The Parties acknowledge that City is entering into this Lease in reliance upon the business experience and abilities of Tenant and its principals to operate the Premises for the Approved Use. Consequently, Tenant shall not voluntarily delegate, assign or encumber its interest in this Lease or in the Premises, or sublease substantially all or any part of the Premises, or allow any other person or entity (except Tenant's Authorized Representatives) to occupy or use all or any part of the Premises without the prior written consent of City, which may be withheld at the sole discretion of the City unless Tenant provides City with evidence reasonably satisfactory to City that the: (a) proposed transferee has financial strength and shipyard/boat repair experience comparable to Tenant so that such proposed assignee will not likely cause the Percentage Rent payable to be less than Percentage Rent paid for the most recent completed Lease Year; (b) the use of the Premises by the proposed transferee is consistent with the terms of this Lease and is for the Approved Use; (c) proposed transferee agrees to assume all current and future Tenant obligations and agrees that the City is not in default of the Lease; and (d) Tenant is not then in Material Default of this Lease. Except as otherwise expressly provided herein, any dissolution, merger, consolidation, reorganization of Tenant, or the sale or other transfer resulting in a transfer of a controlling percentage of the capital stock of Tenant, shall be deemed a voluntary assignment requiring City's consent above except for inter Family transfer related David L. New. However, the sale or transfer of a controlling percentage of the capital stock of Tenant pursuant to a public offering(s) of equity or debt instruments issued by Tenant, or other transfers of publicly traded capital stock or debt instruments shall not constitute a voluntary assignment and shall not require City's -33-
12-108
398
consent or approval if there is no change in the management of Tenant's business and if such successor otherwise maintains the Approved Use and satisfies the prior experience and business expertise tests above and is at least as creditworthy as Tenant at the time this Lease is signed. The phrase "controlling percentage" means the ownership of, or the right to vote, stock possession of at least Fifty Percent (50%) of the total combined voting power of all classes of Tenant's capital stock issued, outstanding, and entitled to vote for the election of directors, except for .ownership of publicly traded shares, warrants or similar equity interests in Tenant traded on a national exchange or over-the-counter markets.
15.2 Additional Consideration for Extension of Lease
(a) Lessee to pay all appraisal and administrative costs associated with Lease extension.
(b) If after satisfying City's approval rights in this Section 15 Tenant transfers, sells or conveys, all or any portion or interest in this Lease, Tenant shall pay City Five Percent (5%) of Tenant's gross proceeds of the sale to City upon the day of such transfer and also provide City with a signed copy of the original sale documents and an amendment to this Lease confirming: (i) Tenant's successor's assumption of all current and future Tenant obligations; and (ii) Tenant's continued liability under this Lease, including all obligations of transferee under this Lease. Excluded from such payment obligation is any Inter-Family transfer allowed under Section 15.1 above.
15.3 Exceptions. Notwithstanding the foregoing paragraphs or anything to the contrary contained herein, City's consent shall not be required for a transfer or assignment of any stock or interest by a share holder or member if the Approved Use of the Premises is maintained, Tenant and transferee provide City the Lease amendment -34-
12-109
399
described in Section 15.2(b), above, if such transfer is to a spouse, children or grandchildren or an assignment or subletting to an Affiliate, Subsidiary, or Successor of Tenant defined as follows:
(a) An "Affiliate" is any corporation or other entity which directly or indirectly controls or is controlled or is under common control with Tenant (for this purpose, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation or other entity, whether through the ownership of voting securities or by contract or otherwise);
(b) A "Subsidiary" shall mean any corporation or other entity not less than Twenty Five Percent (25%) of whose outstanding stock shall, at the time, be owned directly or indirectly by Tenant and which is at least as creditworthy as Tenant; and
(c) A "Successor" shall mean a corporation or other entity in which or with which Tenant is merged or consolidated, in accordance with applicable statutory provisions for merger or consolidation of corporations or a corporation or other entity acquiring a substantial portion of the property and assets of Tenant.
15.4 Continuing Effect. City's consent to any assignment, encumbrance, or sublease shall not relieve Tenant from its obligations or liabilities under this Lease nor act as a waiver of the requirement that such consent be obtained to any subsequent assignment, encumbrance or sublease.
15.5 Tenant Financing. If Tenant is not then in Material Default, and Tenant gives City Forty Five (45) days advance notice prior to City, then City shall sign a commercial reasonable non-disturbance and attornment agreement from an institutional commercial lender of Tenant's choice, in a form reasonably acceptable to the City -35-
12-110
400
Attorney. City's fee and leasehold interest shall be senior to and not security for such Tenant loan.
16. DEFAULT
16.1 Default by Tenant. The occurrence of any one or more of the following events shall constitute a "Material Default" of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant. (b) The failure by Tenant to make any payment of Rent or any other payment required by this Lease, as and when due, when such failure shall continue for a period of Ten (10) days after written notice of default from City to Tenant.
(c) The failure of Tenant to observe or perform any of the "material" (meaning costing Five Thousand Dollars ($5,000.00) or more to fully remedy covenants, conditions or provisions of this Lease to be observed or performed by Tenant where such failure shall continue for a period of Thirty (30) days after written notice thereof from City to Tenant; provided, however, that if the nature of Tenant's default is such that more than Thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said Thirty (30) day period and thereafter diligently prosecutes such cure to completion. However, no Thirty (30) day cure period is allowed for any Tenant caused environmental event involving Hazardous Substances at the Premises or otherwise caused by Tenant or Tenant's agents or customers which likely costs Fifteen Thousand Dollars
($15,000.00), or more, to fully remediate. Immediately following any such environmental event Tenant shall use Tenant's best efforts to fully remediate or prove to the reasonable satisfaction of -36-
12-111
401
City that remediation is underway and will be completed in Ninety (90) days without any risk of further environmental damage to the Premises and/or surrounding area.
(d) The making by Tenant of any general arrangement or assignment for the benefit of creditors.
(e) Tenant becomes a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in the case of a petition filed against Tenant, the same is dismissed within Sixty (60) days). (f) The appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such appointment is not discharged within Sixty (60) days.
(g) The attachment, execution or the judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged within Sixty (60) days.
16.2 Remedies.
(a) Cumulative Nature of Remedies. If any Material Default by Tenant shall continue to not be cured after notice and the cure period provided under this Lease, City shall have the remedies described in this Subsection, in addition to all other rights and remedies provided by law or equity, to which City may resort cumulatively or in the alternative.
( 1) Reentry without Termination. City may reenter the
Premises, and, without terminating this Lease, re-let all or a portion of the Premises. City may execute any leases made under this provision in City's name and shall be entitled to all -37-
12-112
402
rents from the use, operation, or occupancy of the Premises.
Tenant shall nevertheless pay to City on the dates specified in this Lease the equivalent of all sums required of Tenant under this Lease, plus City's expenses in conjunction with re-letting, less the proceeds of any re-letting or attornment.
No act by or on behalf of City under this provision shall constitute a Termination of this Lease unless City gives Tenant specific notice of Termination.
(2) Termination. City may terminate this Lease by giving Tenant notice of Termination. In the event City terminates this Lease, City may recover possession of the Premises (which Tenant shall surrender and vacate upon demand) and
remove all Persons and property. City shall be entitled to recover the following as damages:
(i) The value of any unpaid Rent or other charges that
are unpaid at the time of Termination;
(ii) The value of the Rent and other charges that would have accrued after Termination less the amount of
Rent and charges the City received or could have
received through the exercise of reasonable diligence
as of the date of the award;
(iii) Any other amount necessary to reasonably
compensate City for the detriment proximately caused
by Tenant's failure to perform its obligations under
this Lease; and
-38-
12-113
403
(3)
(iv) At City's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from
time-to-time by applicable California law.
City shall be entitled to interest at the rate of Ten Percent ( 10%) per annum on all Rent and other charges from the date due or the date they would have accrued. City shall also be entitled to an award of the costs and expenses
incurred by City in maintaining or preserving the Premises after default, preparing the Premises for re-letting, or repairing any damage caused by the act or omission of
Tenant.
Use of Tenant's Personal Property. City may use Tenant's personal property and trade fixtures located on the Premises or any of such property and fixtures without compensation or liability to tenant for use or damage. In the alternative City may store the property and fixtures at the cost of Tenant.
City shall not operate the Premises in any manner tending to indicate that the Premises is affiliated with, part of or operated in conjunction with Tenant's business.
(b) City's Right to Cure Tenant's Default. Upon continuance of any material default beyond applicable notice and cure periods, City may, but is not obligated to, cure the default at Tenant's cost. If City pays any money or performs any act required of, but not paid or performed by, Tenant after notice, the payment and/or the reasonable cost of performance shall be due as additional Rent not later than Five (5) days after service of a written demand accompanied by supporting documentation. No such payment or -39-
12-114
404
(c)
act shall constitute a waiver of default or of any remedy for default or render City liable for any loss or damage resulting from performance.
Waiver of Rights. Tenant waives any right of redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 or 1179, or under any other present or future law, in the event Tenant is evicted or City takes possession of the Premises by reason of any default by Tenant.
17. CONDEMNATION
17.1 Termination of the Lease. Tenant or the City shall have the right to terminate this Lease as of the date a public agency with lawful authority to condemn obtains possession or title to Ten Percent (10%), or more of the land area at the Premises, or the condemnation materially affects the conduct of Tenant's business in the Premises, or the Premises will no longer be suitable for the conduct of Tenant's business for the Approved Use. In the event of Termination pursuant to this Subsection, Base Rent shall be prorated to the date of Termination, any unearned Rent shall be refunded to Tenant and Tenant shall have no further obligations under this IL.ease. Tenant shall not grant a right of entry to any consent of City.
17.2 No Termination of Lease. If this Lease is not terminated under Section
17.1, above, then this Lease shall terminate as to the portion of the Premises taken upon the date which possession of said portion is taken, but this Lease shall continue in force and effect as to the remainder of the Premises. Tenant shall, in the event of a taking of any portion of the Premises, be entitled to a reduction in the Base Rent in reasonable proportion to the area of the Premises so taken verses its impact on Tenant's continued operations for the Approved Use.
-40-
12-115
405
17.3 Allocation of Award. In the event that an award is made for an entire or partial taking or for damage to the Premises or any interest therein in any action in direct or inverse condemnation or in the event of a taking under the power of eminent domain, the Parties hereto agree that their respective rights to the award or compensation paid shall be as follows:
(a) City shall be entitled to that Portion of the award received for the taking of the real property within the Premises, the value of this leasehold, including all buildings and other improvements to which City is entitled on Expiration or Termination of this Lease, and for severance damages.
(b) Tenant shall be entitled to any award that may be made for the taking of or injury to Tenant's business and profits, including any amount attributable to Tenant's personal property, fixtures, installations, or improvements in or on the Premises, Tenant's relocation expenses, but excluding any "bonus value" attributable to this Lease.
(c) Any interest payable on the total award shall be divided between City and Tenant in the same ratio as are the awards granted to them pursuant to the other provisions of this Section.
18. SUBJECT TO STATE LANDS COMMISSION GRANT
The Premises are located on property that is the subject of a grant from the State of California to the City that is administered by the State Lands Commission.
Tenant shall not take any action that would cause the City to be in violation of any provisions of that grant. If the State Lands Commission terminates this grant for any reason or prevents the Premises from being used for the Approved Use, this Lease terminates as a result and the Parties shall be released from all liabilities and obligations under this Lease.
-41-
12-116
406
19. WASTE OR NUISANCE
Tenant shall not commit or permit the commission of any waste on the Premises.
Tenant shall not maintain, commit, or permit any nuisance as defined in Section 3479 of the California Civil Code on the Premises. Tenant shall not use or permit the use of the Premises for any unlawful purpose.
20. PRIOR TENANT USE AND HAZARDOUS MATERIALS
The Parties acknowledge that Tenant has been in possession of the Premises pursuant to the provisions of a Lease since September 20, 1973. Tenant represents and warrants that, to the best of Tenant's knowledge: (i) Tenant's continued use of the Premises does not conflict with applicable Laws; (ii) the Premises is not and has not been operated in violation of any environmental laws, rules or regulations and Tenant's contemplated uses will not cause any such violation; and (iii) the land underlying the Premises is free of any and all Hazardous Materials as of the date of this Lease caused by the Tenant. In the event that the presence of any Hazardous Material caused by Tenant is detected in the land underlying the Premises or the bay or any tidelands ' areas adjacent to this Premises at any time during the Term of this Lease a:nd any Option Term all remedial or clean up work shall be immediately performed by Tenant at Tenant's expense to fully remediate such environmental condition so that the Premises and such affected area(s) are promptly brought into full compliance with all Laws. This clause and this lease does not restrict or limit Tenant's right to lawfully use Hazardous Materials on the Premises, if in strict conformance with all Laws.
21. CITY'S DEF AUL TS/TENANT'S REMEDIES
City shall be in Material Default if it fails to perform, or commence performance if Tenant gives notice of nonperformance specifying the nature of such default and/or City nonperformance and City either does not cure such noticed item(s) within Thirty (30) days or City does not commence such cure performance within said Thirty (30) days -42-
12-117
407
and then.diligently completes said cure to City's reasonable best efforts. In the event: of City's Material Default, Tenant may:
(a) Upon Fifteen (15) days notice to City cure any such default by City and City shall reimburse Tenant the amount of all costs and expenses incurred by Tenant in curing the default, together with interest and expenses at the maximum rate then allowed by law;
(b) Terminate this Lease if City's default materially interferes with Tenant's use of the Premises for their intended purpose and City fails to cure such default within Fifteen (15) days after a second demand by Tenant in which case Tenant shall hav_e no further or continuing obligations and City shall • have no liability to Ten ant; or
(c) Commence an action for specific performance and recover costs and expense, including reasonable attorney fees if Tenant is the prevailing party.
22. NOTICES
Any notice, demand, request, consent, approval or communication that either Party desires or is required to give shall be in writing and shall be deemed given Three (3) days after deposit into the United States registered mail, postage prepaid, by registere~ or certified mail, return receipt requested or upon delivery if personally served o~ upon transmission if sent by fa_csimile. Unless notice of a different address has beeri given in accordance with this Section, all notices shall be addressed as follows:
If to City:
If to Tenant:
-43-
CITY OF !NEWPORT BEACH •
Attention: City Manager
3300 Newport Boulevard
Newport Beach, CA, 92658
Facsimile: 949-644-3020
BASIN MARINE, INC.
Attention: David L. New
829 Harbor Island Drive, #1
Newport Beach, CA, 92660
12-118
408
Facsimile: 949-673-0625
23. SURRENDER OF PREMISES
At the Expiration or earlier Termination of this Lease, Tenant shall surrender to City the possession of the Premises. Tenant shall leave the surrendered Premises, required personal property and fixtures in good and broom-clean condition, reasonable wear and tear excepted. All property that Tenant is not required to surrender, but that Tenant does abandon shall, at City's election, become City's property at Expiration or Termination.
24. WAIVER
The waiver by City or Tenant of any breach of this Lease by the other shall not be deemed to be a waiver of any term, covenant, or condition or any subsequent breach. The acceptance of Rent by City shall not be deemed a waiver of any breach by Tenant other than the failure to pay the particular rent accepted.
25. PARTIAL INVALIDITY
If any term or Provision of this Lease is declared invalid or unenforceable, the remainder of this Lease shall not be affected.
26. GOVERNING ·LAW
This Lease shall be governed by the· laws of the State of California. Neither City's execution of this Lease nor any consent or approval given by City in its capacity as landlord shall affect City's powers and duties as a governmental body. Any consent or approval Tenant is required to obtain from City pursuant to this Lease is in addition to any permits or approvals Tenant is required to obtain pursuant to law or ordinance.
However, City shall attempt to coordinate its procedures for giving contractual and governmental approvals so that Tenant's requests and applications are not unreasonably denied or delayed.
27. ENTIRE AGREEMENT: MODIFICATION
-44-
12-119
409
This Lease contains the entire agreement between the Parties. No verbal agreement or implied covenant shall be held to vary the provisions of this Lease. Each Party has relied on its own inspection of the Premises and examination of this Lease, the counsel of its own attorney or other advisors, and has a complete understanding of the overall warranties, representations, and covenants in this Lease. The failure or refusal of either Party to inspect the Premises, to read this Lease or other documents, or to obtain legal or other advice relevant to this transaction shall not be the basis for later claim that all or part of this Lease is not enforceable or was not understood by a Party when this Lease was signed. No provision of this Lease may be amended or . varied except by an agreement in writing signed by the Parties or their respective Successors. Upon execution of this Lease by both Parties, the OLD Lease will be terminated and of no further force and effect.
28. TIME OF ESSENCE
Time is of the essence with respect to the performance of every Provision of this Lease in which time of performance is a factor. All time deadlines are meant to be strictly construed. A "day" means a calendar day, with extension if a deadline occurs on a weekend or day when banks are not open in California.
29. SUCCESSORS
Subject to the Provisions of this Lease on assignment and subletting, each and all of the covenants and conditions of this Lease shall be binding on and shall inure to the benefit of the heirs, successors, executors, administrators, assigns, and personal representatives of the respective parties.
30. NO BROKERS
Each party warrants to and for the benefit of the other than it has had no dealings with any real estate broker or other agent (attorneys excepted) in connection with the negotiation or making of this Lease, and that no commission, fee or other compensation is owed regarding this Lease by such other Party. -45-
12-120
410
31. GENDER; NUMBER
The neuter gender includes the feminine and masculine, the masculine includes the feminine and neuter, and the feminine includes the neuter, and each includes corporation, partnership, or other legal entity whenever the context requires. The singular number includes the plural whenever the context so requires.
32. EXHIBITS
All exhibits to which reference is made in this Lease are incorporated by reference. Any reference to "this Lease" includes matters incorporated by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first written above.
ATTL
~nneHa~s~
City Clerk
R 1 . Clauson
Assistant City Attorney
F :\users\cat\sh ared\da\Balboa YachtBasin\080601 Fina l.doc -46-
CITY OF NEWPORT BEACH ("City"),
a Municipal Corporation
By: C ~~~!1...-:::..-,-._,_._•=-•1.._ __
G~a;;ro~ld~B:-. °"'KA::id~am~s1, M~ay~,tF~------
BASIN
A Califo
By:
E, INC.
orporation ("Tenant")
id L. New
President
By: =tt1~~ oe E, /1L&J eatrice E. l\lew
Its: Secretary and Treasurer
12-121
411
.. . . .
. . ·, .: . - ........ ·
CITY OF NEWPORT BEACH
PUBLJC WORKS DEPARTMENT
84 t:. 6'0 .4 ~4 C ,.t-ir BL! 9 / tU
,BOLi r YA .20 L E..d9E
. ,, ,
• 5C.4,t.£.· / ~
iPEYISEO 2--27~~.a.
OR.AWN W.· - DATE 5 - -
APPROVED
PUBLIC WORKS OIRECTOR i:
R.E. NO. '
oRAWING No.R/N-348 / -L i
12-122
412
829 H:albor IIAancl Ori-c • N~n Bead! • Cabfomia 9"..660 • (7U ) 673-ll'.l60 • Fu (714) 673•0625
CITY OF NEWPORT BEACH
•• FINANCE D:SP • ..&.TMENT
3300 NEWPORT BLVD.
NEV.'PORT BEACH, CA 92663
SALES' VOLUME REPORT MA'f l 1ll RU MAY 31, 2000
SALES
1. ACCOUN'I'SRHCEIVABLESAI.ES S 174,54~J;lj
2. STORE SALES s 3.112.40
3. OUTSIDE LABOR AND MATERIALS s 2,573.87
4. TOTAL (ADD UNE 1,2, & 3 S 180~34.42
I
S. LESS MfNIMUM RENTAL PAID FOR. PSR.1OO COVERED
6. TOTAL PERCJ!NTAOB RENT PAY ABLE
7. O'!'HBRPAYMENTS INCLU'PE:
MINlMUM RENT FOR CURJlENl' PERIOD
8. TOT AL AMO'U?-l"I' DUB ON THE :
LESSEE: BASIN MAlUNE, INC.
BY:
DATE: _ _ ____ _
EXHIBIT
~ .WNJAL
04% s 6,9~1.93
OS¾ s 155.62
10% $ 257.39
S 7.~.94
• 4,Z66.66 •
$ 3;138.28 ·
NIA
S ~,266.66
$ 7,404.94
'
,.
12-123
413
SDll"llc• "'11939
829 Harbor Island Drive• Newpon Beach • California 92660 • (949) 673-0360 • Fax(949) 673-0625 . .
BASIN MARINEl INC.
SUMMARY OF ANNUAL RENTAL REPORT 2000
GROSS SfLES :
RECOVERY :·
RENTAL% :
SUBTOTAL SALES:
(SEE SCHEDULE A)
SUBTOTAL PAID:
(SI;!; SCHEDULE Bl •
BALANCE:
SUMMARY:
SCHEDULE A: TOTAL DUE
SCHEDULE B: TOTAL PAID
ACCOUNTS
RECEIVABLE
SALES
$ 2,473,434.31
NIA
4%
$ 98,937.37
$· 92,755.87
$ 6,181.50
TOTAL DUE OR (CREDIT DUE)
OUTSIDE
LABOR AND
STORE .SALES MATERIAL
$42,216.07 $ (20,697.15)
NIA NIA
5% 10%
$ 2,110.80 $
$ 2,047.44 $ 13,366.74-
$ 63.36 $ (13,366.74)
EXHIBIT C
$
$
$
$
$
$
TOTAL
2,494,953.23
101,048.1 7
108,170.05
. . - ·
(7,121.88)
101,048.17~
108,170.05
(7,121.88)
12-124
414
Attachment C
Tenant Lease Renewal Letter
12-125
415
12-126
416
12-127
417
12-128
418
Attachment D
City Council Policy F-7
12-129
419
F- 7
1 INCOME AND OTHER PROPERTY
The City owns and manages an extensive and valuable assortment of property including streets, parks, beaches, public buildings and service facilities. The City also owns or ground leases and/or operates a yacht basin, resort hotel and apartment property, a luxury residential development and various other income - producing properties. Much of the income property is tidelands, filled tidelands or waterfront.
Unencumbered fee value of income property is substantial.
As owner/manager of property, the City is the steward of a public trust, and state law requires the City to maximize its returns on state-managed property or be subject to a charge of making a gift of public funds.
Nevertheless, the City Council recognizes the importance of this property not only as a revenue generator, but also as a means to provide otherwise financially less feasible uses and facilities that benefit the community.
In managing its property, the City will continually evaluate the potential of all City owned property to produce revenue. This may include leasing or licensing unused land, renting vacant space, and establishing concessions in recreation areas or other similar techniques. The City Council will evaluate the appropriateness of establishing new income generating opportunities on City controlled areas using sound business principles and after receiving input from neighbors, users and the public.
The policy of the City Council is that income and other property be held and managed in accordance with the following:
A. Whenever a lease, license, management contract, concession or similar action regarding income property is considered by the City, an analysis shall be conducted to determine the maximum or open market value of the property. This analysis shall be conducted using appraisals or other techniques to determine the highest and best use of the property and the highest income generating use of the property.
B. All negotiations regarding the lease, license, management contract, concession, or similar action regarding income property shall include review of an appraisal or analysis of the use being considered for the property conducted by a reputable and independent professional appraiser, real estate consultant, or business consultant.
C. The City shall seek, whenever practical and financially advantageous, both in the short and long term, to operate or manage all property and facilities directly with City staff or contractors, provided staff have the expertise needed to competently do so, or to oversee the work of contractors.
D. In most negotiations regarding the lease, license, management contract, concession, or similar action regarding an income or other property, the City shall seek revenue equivalent to the open market value of the highest and best use; and, whenever practicable the City shall conduct an open bid or proposal process to ensure the highest financial return.
12-130
420
F- 7
2 E. However, in some circumstances the City may determine that use of a property by the public for recreational, charitable or other nonprofit purpose is preferred and has considerable public support, in which case the City may determine that non -financial benefits justify not maximizing revenue from such property. In such circumstances, the City has a vested interest in ensuring that the lessee of such property operates the activities conducted on or from the property in the manner that has been represented to the City throughout the duration of any lease or contract with the City.
F. Whenever less than the open market or appraised value is received or when an open bid process is not conducted, the City shall make specific findings setting forth the reasons thereof. Such findings may include but need not be limited to the following:
1. The City is prevented by tideland grants, Coastal Commission guidelines or other restrictions from converting the property to another use.
2. Redevelopment of the property would require excessive time, resources, expertise and costs, which would outweigh other financial benefits.
3. Converting the property to another use or changing the operator, manager, concessionaire, licensee, or lessee of the property would result in excessive vacancy, relocation or severance costs, real estate commissions, tenant improvement allowances, expenses or rent concessions which would outweigh other financial benefits.
4. Converting residential property to another use or opening residential leases to competitive bid would create recompensable liabilities and other inequities for long-term residents.
5. The property provides an essential or unique service to the community or a clearly preferred use that enjoys substantial support in the community that might not otherwise be provided were full market value of the property be required.
6. The property serves to promote other goals of the City such as affordable housing, preservation of open space, uses available to the public or marine related services.
G. Generally, lengths of licenses, leases, management contracts, concessions, or similar agreements will be limited to the minimum necessary to meet market standards or encourage high quality improvements and will contain appropriate reappraisal and inflation protection provisions. Also, all agreements shall contain provisions to assure complete audits periodically through their terms.
H. All negotiations regarding the license, lease, management contract, concession or similar action regarding income property shall be conducted by the City Manager or his/her designee under the direction of any appropriate City committees.
I. To provide an accurate accounting of actual net revenues generated by the City’ s income property, all costs directly attributable or allocable to the management of a specific income property shall be charged against the gross revenues collected on that property in the fiscal year the costs are incurred.
Costs so chargeable include, but are not limited to, property repairs and maintenance, property appraisals, and consultant fees, as authorized by the City Council, City Manager, or by this Income Property Policy.
12-131
421
F- 7
3 J. The City Manager or his/her designee is authorized to sign a license, lease, management contract, concession, or similar agreement or any amendment thereto, on behalf of the City. Notwithstanding the foregoing, the City Manager or his/her designee, or a City Council member, may refer any license, lease, management contract, concession or similar agreement or any amendment thereto, to the City Council for its consideration and/or action.
K. The City’s portfolio of quality income producing properties adds an element of diversification to a portfolio otherwise invested primarily in financial assets. Certain of those income properties are restricted from sale by their terms of grant, state agency regulations or rules, other federal and state guidelines, private covenant or agreement or otherwise. For those properties not so restricted from sale, an analysis shall be prepared to determine the following prior to such income producing property being offered for sale:
1. The maximum open market value of the City’s interest in the property in its as is condition.
2. If the property is in an important location, a determination of the possible future consequences of the City no longer controlling that property.
3. If the current rent is contractually low and significant rent increases are likely within a finite period.
4. The likelihood of significant increases in the ability of the property to generate income after the expiration of any current lease of the property.
5. The likelihood of a lease extension being requested by the tenant and the ability to substantially increase rents or require significant improvements to enhance the utility and the value of the property as consideration for granting such an extension.
6. The value of the revenue stream from (i) lease income over the life of an existing lease and/or (ii) likely lease revenue if an existing lease were to be renewed or the property re- let to a different tenant; and/or (iii) lease income from the property if it were to be converted to its highest and best use, compared with the financial benefits of the use of the proceeds of a sale and if, considering the totality of the circumstances, such use of the proceeds of a sale is preferable to retaining the property in question.
History
Adopted F-24 – 7-27-1992
Amended F-24 – 1-24-1994
Amended F-7 – 2-27-1995
Amended F-7 – 2-24-1997
Amended F-7 – 5-26-1998
Amended F-7 – 8-11-2009
Amended F-7 – 5-14-2013
Amended F-7 – 2-12-2019
Amended F-7 – 11-14-2023
12-132
422
Attachment E
Appraisal Report
12-133
423
APPRAISAL REPORT
Basin Marine, Inc
829 Harbor Island Drive, Newport Beach, CA
CR File Number: 14558-20
12-134
424
5901 W. Century Blvd., Suite 1230 Los Angeles, CA 90045 T: 310.215.0482 F: 3 10.215.3089 www.CurtisRosenthal.com
Basin Marine, Inc
829 Harbor Island Drive, Newport Beach, CA
12-135
425
5901 W. Century Blvd., Suite 1230 Los Angeles, CA 90045 T: 310.215.0482 F: 3 10.215.3089 www.CurtisRosenthal.com December 9, 2020
Lauren Wooding Whitlinger,
Real Property Administrator
City of Newport Beach,
Community Development Department
100 Civic Center Drive,
Newport Beach, CA 92660
RE: APPRAISAL REPORT
Basin Marine, Inc
829 Harbor Island Drive, Newport Beach, CA
CR File # 14558-20
Dear Ms. Whitlinger,
Per your request, we have appraised the above-referenced property. Our appraisal is intended to conform to:
• The Uniform Standards of Professional Appraisal Practice (USPAP) Our analyses and conclusions are contained in this Appraisal Report which is intended to comply with the reporting requirements set forth in USPAP Standards Rule 2-2.
In conformance with the Scope of Work rule of USPAP, the sections below describe the Scope of Work for this assignment.
Client - The client for this assignment is City of Newport Beach, Community Development Department, c/o Lauren Wooding Whitlinger, Real Property Administrator.
Intended User - The intended user of this report is exclusively the Client. There are no other authorized users of this report.
Intended Use - The intended use of this assignment is to assist the City with negotiations to rene w the lease agreement with current tenant Basin Marine, Inc.
Purpose of this Assignment - The purpose of this assignment is to estimate the Fair Market Rent Value, as defined in the Addenda , of the ownership interest(s) in the subject property stated in the valuation table below, as of the stated effective date(s) of value.
Effective Date of Value - The valuation table below includes the date of value for each valuation premise included in this assignment.
12-136
426
Ms. Lauren Wooding Whitlinger
Relevant Characteristics of the Subject Pro perty - The subject property is the Basin Marine, Inc. at 829 Harbor Island Drive, Newport Beach and is owned by the City of Newport Beach. The APN # is 050-431-25 and contains 32,990.71 square feet of Landside Area and 9,071.4 square feet of water portion with a total of 42,062.11 square feet or 0.9656 acre. This parcel is within the Balboa Yacht Basin.
Basin Marine Inc. is the current tenant of the property. The main structure is a commercial showroom/retail store selling items and hardware related mostly to yachts/ sailing/boating, plus boat slip rentals, and shipyard repairs. The building also houses unisex restroom, breakroom, accounting office, private executive office, yard office, carpenter’s shop, mechanic’s shop, and shipyard employees’ locker, and restroom. The Site Plans received from the client show the building contains 3,560 square feet.
The exterior area is shipyard with concrete slab decking, hoist equipment to extract the ya chts from the water onto drydock for repairs, painting, and refinishing of fiberglass material . The shipyard has water treatment with “Living Water Environmental M-CAT” automated system.
The City of Newport Beach Planning Department zone for the subject property i s Special Purpose Zoning/Public Facilities (PF).
Analytical Approach- Our analysis included an inspection of the subject property, research of general data relating to the subject locale, research of transactions in the subject market area, as well as research of other market-related influences affecting the subject property. In our analysis, we gave consideration to the applicability of each of the traditional approaches to value including the Cost, Sales Comparison, and Income approaches. The methodology and data used in our valuation of the subject property are detailed in the Valuation Section of this appraisal report
Conditions of this Assignment - The analyses and conclusions in this assignment are subject to the Scope of Work described above, the General Assumptions and Limiting Conditions that are contained within this appraisal report, and the following:
• Extraordinary Assumptions , which USPAP defines as assignment-specific assumptions as of the effective date regarding uncertain information used in an analysis w hich, if found to be false, could alter the appraiser's opinions or conclusions.
1. The subject site is zoned PF, Public Facility land uses. After discussions with City of Newport representatives, it is our opinion that the highest and best use of the subject site “as if vacant” is Mixed Use (MU) Commercial/Residential zone.
• Hypothetical Conditions, which USPAP defines as conditions directly related to a specific assignment, which are contrary to what is known by the appraiser to exist on the effective date of the assignment results but are used for the purpose of analysis.
1. None
• Special Limiting Conditions, which are assignment-specific conditions that limit the use of the report.
1. Market concerns regarding the COVID -19 coronavirus have resulted in substantial volatility in the capital markets, increasing uncertainty in the real property marketplace. It is difficult to predict what may happen in the capital markets going forward. As a result, it is difficult to predict what may happen to real property values over time. Our valuation of the subje ct property considered the best information that was available at the time of our analysis. Due to on-going volatility in the marketplace, users of this appraisal should consider the current market uncertainty when determining the level of confidence, they choose to place on these analyses 12-137
427
Ms. Lauren Wooding Whitlinger
and conclusions. Users are reminded that the appraisal conclusions in this report are effective as of the state date(s) of valuation.
Significant Valuation Issues- The following are assignment-specific issues which we found to be significant in this valuation assignment.
1. As discussed previously, the current/ongoing Covid-19 global pandemic is having reported impact on financing rates/lender spreads, lowered loan -to-value (LTV) ratios, landlord and tenant cash flows, etc. Given the rapidity of events related to the pandemic that have affected real estate sales, the present risks (as of the effective date of value) appear to be financing related and broad uncertainty in global/national/local economics in the near term. This being the case, price/value discounting for the subject is prudent.
2. Only the site improvements pertaining to the real estate are co nsidered in this valuation. The furniture, fixtures and equipment within the parcel are not included in the valuation of thi s appraisal.
3. Reportedly, the State of California will not allow residential uses in the filled tideland areas (land held in trust). (Source: Lauren Wooding Whitlinger)
As a result of our investigation and analysis, the table below presents our Fair Market Rental valuation opinion(s) for the subject property as of the stated effective date(s) of valuation.
Valuation
Premise
Interest
Appraised
Effective Date
of Value
FINAL
Value
Conclusion
Fair Market Rent Value Leased Fee 10/21/2020 $492,000
Thank you for the opportunity to have been of service to you. If you have any questions regarding the material presented in this report, or if you require any further assistance please give us a call.
Sincerely,
CURTIS-ROSENTHAL, INC.
Joe J. Villegas, MAI
CA #AG004648
[email protected]
David M. Rosenthal, MAI, FRICS
CA #AG001641
[email protected]
12-138
428
Ms. Lauren Wooding Whitlinger
Table of Contents
EXECUTIVE SUMMARY .................................................................................................................................. 1 MARKET AREA ANALYSIS ............................................................................................................................... 2 Neighborhood Description ...................................................................................................................... 15 Property Market Overview ..................................................................................................................... 19 SITE DESCRIPTION ....................................................................................................................................... 29 IMPROVEMENT DESCRIPTION .................................................................................................................... 37 HIGHEST AND BEST USE .............................................................................................................................. 56 VALUATION TECHNIQUES AND METHODOLOGY ........................................................................................ 58 Valuation Methodology Used in This Assignment .................................................................................. 59 COST APPROACH ......................................................................................................................................... 60 Land Valuation ........................................................................................................................................ 61 FAIR MARKET RENTAL VALUE ..................................................................................................................... 79 RECONCILIATION ......................................................................................................................................... 80 EXPOSURE TIME .......................................................................................................................................... 82 CERTIFICATION ............................................................................................................................................ 83 ADDENDA .................................................................................................................................................... 84
12-139
429
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 1
EXECUTIVE SUMMARY
Balboa Yacht Basin
829 Harbor Island Drive
Newport Beach, CA 92660
14558-20
City of Newport Beach,
Community Development Department
c/o Lauren Wooding Whitlinger
Real Property Administrator
Refer to Legal Description
ASSESSOR PARCEL NUMBER & LAND AREA:
APN: 050-431-25
Land 0.9656 acre/42,062.11 square feet
32,990.71 sq.ft, landside/9,071.4 sq.ft. water
Building 3.560+/- square feet total.
2,300 sq.ft. Showroom/1,260 sq.ft. shops
Retail Sales, Offices, Repair Shop/Shipyard
Special Purpose Zoning District
Public Facilities (PF)
As If Vacant Mixed-Use Commercial/Residential
Date of Inspection October 21, 2020
Date of Value October 21, 2020
INTEREST APPRAISED: Lease Fee
Fair Market Rent Value
492,000$
Our analyses and conclusions are based on the described Scope of Work and the General Assumptions and Limiting Conditions that are made a part of the attached appraisal report.
FAIR MARKET RENT VALUE:
OPINION OF VALUE CONCLUSION LEASED FEE VALUE
ZONING:
HIGHEST AND BEST USE:
PROPERTY IDENTIFICATION:
LEGAL DESCRIPTION:
FILE NUMBER:
INTENDED USER:
PROPERTY TYPE:
CRITICAL DATES:
12-140
430
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 2
MARKET AREA ANALYSIS
GREATER LOS ANGELES AREA
Components of Greater Los Angeles
The Los Angeles Metropo litan Area is widely considered to comprise the five counties of Los Angeles, Orange, Riverside, San Bernardino, and Ventura. The map below shows the components of Greater Los Angeles, which form four-Metropolitan Statistical Areas (MSA). These are as follows: Los Angeles, Orange County, Oxnard-Ventura, and Riverside-San Bernardino.
A map of the region is located below.
Counties Comprising the Los Angeles Region
The region is well served by several international airports (including Los Angeles Internati onal), Amtrak (the national passenger rail service), and several east -west and north-south interstate highway systems.
Intra-regional transportation service includes a network of freeways, a commuter rail system, several bus systems, and a small but growing system of “subway” and “light-rail” trains. .
Los Angeles County
Orange County
Riverside County
San Bernardino County
Ventura County
12-141
431
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 3
ORANGE COUNTY
Orange County is in the heart of Southern California, with Los Angeles County to the north and San Diego County to the south. There are currently 34 cities within the county, which extends north to the cities of La Habra and Brea, east to the city of Rancho Santa Margarita, west to the cities of Los Alamitos and Seal Beach, and south to the city of San Clemente. Several cities in Orange County have been incorporated within the last decade . The most recent cities to incorporate were the cities of Laguna Woods (1999), Rancho Santa Margarita (2000), and Aliso Viejo (2001). While the unincorporated lan d area and related populations remain significant, they are declining in size and number due to recent annexation and incorporation activities.
Population
Orange County is second only to Los Angeles County in population for California counties. Accordin g to the Department of Finance’s population January 2020 estimates, the county’s population exceeded 3.1 million, essentially unchanged from January 2019 estimates. The County’s cities had fractional gains and losses over the previous year estimates. Santa Ana and Anaheim are Orange’s largest cities with populations of over 357,000 and 335,000, respectively.
The tables below show current population figures, forecasts, and trends for Orange County. 12-142
432
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 4
Source: Site to do Business 2020
12-143
433
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 5
E-1: City/County Population Estimates with Annual Percent Change January 1, 2019 and 2020
City 1/1/2019 1/1/2020 Change City 1/1/2019 1/1/2020 Change County 3,192,987 3,194,332 0.0 Lake Forest 84,576 84,711 0.2 Aliso Viejo 49,815 50,044 0.5 La Palma 15,572 15,492 -
0.5 Anaheim 356,669 357,325 0.2 Los Alamitos 11,576 11,567 -
0.1 Brea 44,879 45,629 1.7 Mission Viejo 94,766 94,267 -
0.5 Buena Park 82,422 81,998 -0.5 Newport Beach 85,706 85,780 0.1 Costa Mesa 114,634 114,778 0.1 Orange 140,410 140,065 -
0.2 Cypress 48,976 49,272 0.6 Placentia 51,750 51,494 -
0.5 Dana Point 33,212 33,146 -0.2 Rancho Santa Margarita 49,051 48,793 -
0.5 Fountain Valley 56,099 55,878 -0.4 San Clemente 64,541 64,581 0.1 Fullerton 141,931 141,863 0.0 San Juan Capistrano 36,149 36,318 0.5 Garden Grove 175,052 174,801 -0.1 Santa Ana 337,639 335,052 -
0.8 Huntington Beach 201,239 201,281 0.0 Seal Beach 25,080 24,992 -
0.4 Irvine 277,462 281,707 1.5 Stanton 39,097 39,077 -
0.1 Laguna Beach 22,445 22,343 -0.5 Tustin 80,491 80,382 -
0.1 Laguna Hills 31,674 31,508 -0.5 Villa Park 5,786 5,766 -
0.3 Laguna Niguel 65,363 65,316 -0.1 Westminster 92,737 92,421 -
0.3 Laguna Woods 16,329 16,243 -0.5 Yorba Linda 68,458 68,650 0.3 La Habra 63,319 63,371 0.1 Balance of County 128,082 128,421 0.3 Source: Site to do Business (2020)
12-144
434
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 6
California Economy1
The California economy was on fairly solid fo oting heading into the COVID -19 pandemic. After adding 29,100 jobs in January, employers added 29,000 more in February. What’s more, hiring was running at a
1.7% year-over-year rate, on par with the nation. The unemployment rate was unchanged at a record low of 3.9%. February predates the COVID -19 crisis and does not capture the coming tsunami of job losses since mid-March. In order to suppress the spread of COVID-19, nonessential businesses have been forced to shut down and residents have been ordered to shelter-in-place, which together have caused economic activity to ground to a halt in many industries.
A clearer indication of what is likely to unfold is provided by the most recent initial unemployment insurance claims, which are released every week. Nationally, jobless claims surged to a record 3.3 million for the week ending March 21, which is 12 times higher than the level registered just one week earlier.
Claims in California more than tripled from about 57,600 to 186,800. Even with this record increase, these numbers are likely understated as many states had difficulty processing the extraordinary flood of new applications. More recent reports put the number of claims filed in California over the past two weeks at over one million. Unfortunately, this represents just the tip of the iceberg. Large parts of the California economy remain closed for business. Tourism, travel, and entertainment spending is down 80% or more across the state, resulting in massive l ayoffs in the state’s large hospitality secto r. Retailers have also largely shut down, necessitating massive job cuts. Manufacturing and construction are faring somewhat better but will struggle the longer virus-related shutdowns hold down overall economic activity.
The sheer size of the California ( if it were a separate country, it would have the fifth largest economy in the world) makes the state particularly vulnerable to the adverse effects of the spread of COVID -19. The outbreak began relatively early in the state but has not been nearly as bad as in New York. The shutdowns have been fairly extensive, however. And with immigration tightening, the state’s large agriculture sector may have even greater difficulty finding workers.
California’s leisure & hospitality industry is likely to be most directly impacted by COVID-19. As residents either “stay at home” or “shelter in place,” many restaurants, hotels and bars have begun to lay off or furlough workers. In addition to domestic travel grinding to a sta ndstill, all nonessential international
1 Wells Fargo Economics Group, Commentary: March 27, 2020 and April 17, 2020 12-145
435
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 7
travel has essentially been banned. Hotels have been particularly hard hit and occupancy rates in Los Angeles and San Francisco have collapsed. For the week ending March 21, occupancy rates averaged just 29% in Los A ngeles and 16.6% in San Francisco. This time last year, occupancy rates were above 80% in both markets.
International trade is also likely to take a hit. Container traffic through the Port of Los Angeles and Port of Long Beach fell sharply in February, although those declines were tied to the timing of the Chinese Lunar New Year. Activity will also likely be off sharply on a year-over-year basis in March, reflecting dislocations tied to the COVID -19 outbreak in China, and remain soft through the first half of this year, reflecting sluggish demand in t he United States and slower growth overseas. We currently expect global GDP to decline 2% this year and look for U.S. GDP to decline 2.4% on an annual basis, although we forecast output will fall at a 14.7% annual rate in the second quarter and a 6.3% pace in the third quarter. The slowdown in global trade will fall heaviest on Southern California’s transportation and logistics sector, much of which is in the Inland Empire.
California’s tech sector should hold up reasonably well, although we would expect to see hiring slow at healthier firms and look for layoffs at some of the more thinly capitalized firms. The unusual nature of this recession, which has resulted in large portions of the workforce working remotely , has increased the demand for technology ser vices. Social media and digital streaming have also seen a surge in demand.
Advertising revenues for social media and search engines will likely take a hit, however, which may lead to some belt tightening. Capital may also become harder to lock down for some businesses.
We expect California’s economy to largely track the nation. The business cycle likely peaked in February, as the economy turned down sharply during the second half of March, likely producing a net drop in output for that month as a whole. We expect the recession to be unusually sharp but fairly short. Overall job losses will likely be worse than during the Great Recession, but the composition will be different.
Housing, which was at the center of t he last recession, should be less impacted du ring the current downtown and will play a critical role in the recovery. Housing is severely underbuilt throughout California today, and home construction has been deemed an essential industry. Moreover, a great deal of construction work can be done while adhering to the CDC guidelines on social distancing. To be certain, home sales will weaken this spring and home price appreciation will slow, but neither should create a problem. Affordability was already stretc hed in California’s major metropolitan areas and some relief would be welcomed. Manufacturing should also hold up reasonably well, with demand for semiconductors and related equipment expected to remain strong, despite the slowdown in global economic growth.
12-146
436
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 8
California’s Economy Succumbs to COVID-19 Cutback (April 17, 2020)
California’s longest uninterrupted run of employment gains came to an abrupt end in March, when businesses began to slash payrolls in response to new social distancing guidelines a nd stay -at-home orders. Restaurants, bars, and entertainment facilities, including movie theaters, theme parks and casinos, all took an immediate hit —losing 67,200 jobs in March. Business, household and personal services and construction also posted notable job losses during the month. On the plus side, government payrolls rose modestly in March and the state’s important information sector posted modest gains. Information includes new media such as internet search, software, and digital streaming, as well a s motion pictures and slower growing portions of traditional media, such as printed publications and landline telecommunications.
With more than two-thirds of the state’s job losses occurring in the leisure & hospitality sector, mostly at restaurants & bars, job losses were heavily skewed toward Cali fornia’s largest metropolitan areas.
Southern California was particularly hard hit. Los Angeles -Long Beach -Glendale lost 39,600 jobs and Orange County lost 16,500 jobs. Job losses were more modest in the Inland Empire (-4,100), and Ventura County (-500). In total, greater Los Angeles lost 60,700 jobs during the month, while San Diego also had a bad month, posting a net loss of 14,500 jobs.
The San Francisco Bay area saw widespread job losses as well. While the Bay area is full of tech companies whose services are in high demand, the region’s important tourism sector appears to have been the weak spot. San Francisco lost 13,700 jobs and Marin County lost another 1,400. Job losses were slightly less prevalent in East Bay and South Bay, with Oakland losing 3,300 jobs and San Jose losing 8,400 jobs. As bad as March was, we know job losses are set to surge even further in coming weeks. Weekly initial unemployment claims have surged over the past four weeks, totaling 2.8 million since mid-March. While in a typical recession there would not be a one -for-one decrease in nonfarm employment for each new jobless claim, the relationship is likely to be tighter this go -round because there are so few jobs being created. Jobless claims are also being pushed higher by contrac t workers, however, which will not be reflected as much in the monthly payroll data.
12-147
437
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 9
California’s economy began to deal with COVID -19 earlier than the rest of the country, and the state’s mitigation efforts appear to have produced positive results ahead of many other areas. Restarting the economy will be difficult, however, particularly given that social distancing guidelines are likely to remain in place for quite some time. Tourism and entertai nment spending will also take longer to get back on track, particularly from overseas visitors. International trade is also likely to be soft spot until growth rebounds in the U.S. and around the world.
County Economy2
• As one of the wealthiest counties in the region, Orange County has also benefited from lower than average unemployment. This trend, and associate strong real wage growth, is expected to continue.
• Employment growth in the county is expected to take place in the middle- and high-skill portions of the education, health and professional services sectors with leisure and hospitality continuing to also be a locus of county job growth.
• The high ratio of median home prices to median household income will continue to put pressure on low- and middle-income earners.
2 LAEDC Economic Forecast, 2020
12-148
438
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 10
Current County Economic Conditions3
The unemployment rate in Orange County was 3.6 percent in March 2020, up from a revised 2.8 percent in February 2020, and above the year -ago estimate of 3.0 percent. This compares with an unadjusted unemployment rate of 5.6 percent for California and 4.5 percent for the nation during the same period.
Between February 2020 and March 2020 , total nonfarm employment decreased from 1,677,800 to 1,664,600, a decline of 13,200 jobs.
• Professional and business services posted the largest employment decline with the loss of 5,500 jobs. Fifty-eight percent of the drop occurred in professional, scientific, and technical services (down 3,200 jobs). Administrative and support services decrea sed by 2,400 jobs which includes temporary help firms.
3 California Labor Market Information Division, Anaheim/Santa Ana/Irvine (Orange County), for April 2020 12-149
439
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 11
• Leisure and hospitality decreased by 3,000 jobs. All the payroll decline was in accommodation and food services (down 3,100 jobs) and was offset by a small increase of 100 jobs in arts, entertainment, and recreation.
• Four other sectors reported month -over employment declines. Construction (down 2,200 jobs), trade, transportation, and utilities (down 1,900 jobs), manufacturing (down 1,200 jobs), and other services (down 300 jobs).
• Three sectors increased over the month: government (up 500 jobs) and financial activities and educational and health services (up 200 jobs each). Mining and logging and information remained unchanged.
Between March 2019 and March 2020, total nonfarm employment increased by 3,600 jobs, or 0.2 percent.
Financial activities posted the largest year -over increase wit h an overall gain of 5,400 jobs.
Eighty-seven percent of the gain was in finance and insurance (up 4,700 jobs), led by advances in credit intermediation and related activities (up 3,900 jobs).
• Educational and health services reported a gain of 3,700 jobs. Additions in educational services (up 2,100 jobs) accounted for fifty-seven percent of the increase. Health care and social assistance added 1,600 jobs over the year.
• Eight sectors declined over the year. The largest employment loss was in manufacturing (d own 2,600 jobs), with 92 percent of the decline in nondurable goods (down 2,400 jobs). 12-150
440
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 12
12-151
441
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 13
Largest Employers
Employer Name Location Industry
Allergan Inc Irvine Drug Millers (mfrs)
American Funds Irvine Services NEC
Anaheim City Hall Anaheim Government Offices-City/Village & Twp Auto Club of S California Costa Mesa Automobile Clubs
B Braun Medical Inc
Irvine Physicians & Surgeons Equip & Supls-Mfrs
Boeing Co Seal Beach Aerospace Industries (mfrs)
Boeing Co Huntington Beach Aircraft-Manufacturers
Broadcom Corp Irvine Semiconductors & Related Devices (mfrs) California State Univ Fllrtn Fullerton Schools-Universities & Colleges Academic Choc Children's Orange Hospitals
Edwards Lifesciences Corp Irvine Biotechnology Products & Services Fairview Developmental Ctr Costa Mesa Hospitals
Fountain Valley Regional Hosp Fountain Valley Hospitals Hoag Hospital Newport Beach Newport Beach Hospitals
James R Glidewell Dental Crmcs Irvine Dentists
Kaiser Permanente Orange Anaheim Hospitals
Laguna Woods Village Cmnty Ctr Laguna Woods Senior Citizens Service Media Relations Dept-Ca Dept Anaheim Government Offices-State Mflex Irvine Electronic Equipment & Supplies-Mfrs
Quest Diagnostics San Juan Cpstrno Laboratory Analytical Instruments (mfrs) St Joseph Hospital Orange Hospitals
St Jude Medical Ctr Fullerton Hospitals
University of Ca-Irvine Irvine Schools-Universities & Colleges Academic University-Ca Irvine Anteater Irvine Stadiums Arenas & Athletic Fields Walt Disney Parks & Resorts US Anaheim Amusement & Theme Parks Source: America's Labor Market Information System (ALMIS) Employer Database – 2020 County Transportation
Freeways: The region is serviced by the San Diego Freeway (I-405) / Golden State Freeway (I-5) that runs north/south between Los Angeles to the north and San Diego to the south. Other major north/south freeways include SR-73 and SR-55. Major east/west freeways include SR-22 and SR-91.
Air: The flourishing John Wayne International Airpor t provides air freight and passenger service.
Additional air services are provided by Los Angeles International Airport (LAX), which is a major transportation hub both for passengers and cargo; and has experienced substantial growth over the past 15 years. In fact, LAX ranks third in the world for the number of passengers and t onnage of air cargo handled.
Rail: Orange County is served by the Metrolink, which provides access to the Los Angeles metropolitan area, as well as other areas in the region.
12-152
442
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 14
CONCLUSION – Market Area Analysis
The size, centrality, and diversity of the Greater Los Angeles’ economic base is expected to insulate it from the harshest effects of a national recessionary climate. The City of Los Angeles has held a premier position in the world for several years due to its leading role among the trading nations of the Pacific Rim, its extensive and still -developing transportation systems, its vast marketplace in terms of total purchasing power and diversity of consumers, and the establishm ent of various industrial and commercial headquarters in the city. The region is well positioned to continue economic leadership in the Pacific Rim and the rest of the state and country. Ultimately, the positive features of the Greater Los Angeles area including favorable climate, cultural appeal, and historic presence as a le ading metropolitan area are considered to be beneficial traits and are expected to be sufficient to maintain the region as a leading commercial and economic center and should serve as a means of sustaining future economic growth.
12-153
443
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 15
Neighborhood Description
The subject property known as the “Marine Basin Inc.” in the City of Newport Beach, in Orange County.
Newport Beach is bordered on the west by Huntington Beach at the Santa Ana Rive r; on the north by Costa Mesa, John Wayne Airport, the City of Irvine and UC Irvine; and on the east by Crystal Cove State Park and Laguna Woods, and to the south is the Pacific Ocean. Newport Beach was incorporated September 1, 1906 and has an area of 52.92 square miles of which 29.13 square miles is water area. The average elevation of Newport Beach is 10 feet above sea level.
Today, Newport Beach is known for surfing and sandy beaches, it once supported maritime industries’ however, today it is mostly recreational. Newport Beach is known for its regional shopping center known as “Fashion Island” . Along its major arterials example businesses are unique shops for one-of-a-kind merchandises, restaurants, beach front businesses, interior design/accessories an d furnishing, new car sales and yacht sales.
The subject property is in Lower Bay of Newport formed by sand brought along by ocean currents, which constructed the offshore beach that is now recognized as the Balboa Peninsula of Newport Beach.
Newport Harbor is a semi -artificial harbor formed by dredging Newport Bay in the 1900’s. The harbor supported maritime industries such as boatbuilding, shipbuilding and commercial fishing, but today it is used mostly for recreation with private upscale homes and pri vate docks and is one of the largest recreational boat harbors on the U.S. west coast.
Surrounding community areas include the following:
• To the North: Costa Mesa, John Wayne Airport, City of Irvine, and UC Irvine • To the South: Pacific Ocean
• To the West: City of Huntington Beach at the Santa Ana River in Los Angeles County • To the East: Crystal Cove State Park and Laguna Woods According to esri, the 2020 population of the subject within a 1-mile radius is 10,106, 2-mile radius is 99,969 and 5-mile radius is 229,736.
Entrance into the subject neighborhood is from East Coast Highway, a major arterial of Newport Beach and traveling south on Bayside Drive to the terminus of Harbor Island Drive. This area is upscale custom single-family residential in the millions of dollars range, these homes have private boat slips on their north rear property line at Promontory Bay . To the north of Bayside Drive and across Promontory Bay on Promontory Drive which has a higher elevation are multi-family residential properties, some with ocean views. The subject Basin Marine is just south of the terminus of Harbor Island Drive in the Balboa Basin Yacht Club which has the Galley Restaurant across the street and west of the subject property followed by the Balboa Club Yacht sales office. Boat slips occupy the area to the south. To the east of the subject property is the Promontory Bay with more high-end residential properties and private boat slips, because of the water, this area cannot be accessed from Harbor Island Drive . At the south end of the subject property is Balboa Island North Channel and Harbor Island is to the west and accessed by a bridge.
Vehicular ingress/egress is provided from Harbor Island Drive. The subject is not close to freeway access.
Harbor Island Dr ive is a paved east/west two -lane collector street with curbs, gutters, sidewalks , and street lighting. Street parking is allowed on both sides of the street. Inside the Balboa Yacht Basin, the street is paved with curbs, gutters, sidewalks, a nd street lig hting. The subject property has 2 private parking spaces within the Balboa Yacht Basin Marina , they are directly north of the subject building. All other vehicles must park in the public marked spaces.
12-154
444
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 16
The City of Newport Beach Planning Department zoning for the subject property is PF (Public Facilities).
Balboa Yacht Basin Marina is a Cooperative Project funded by the State Department of Boating and Waterways from Boaters Fuel Taxes and operated and maintained by the City of Newport Beach.
Property uses immediately surrounding the subject site are:
• To the North: Custom built upscale single-family homes with private boat slips on Promontory Bay • To the South: Balboa Island North Channel (Waterway)
• To the West: Eaton Wash
• To the East: Promontory Bay (Waterway) and custom built upscale single -family homes with private boat slips across the waterway.
12-155
445
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 17
Location Maps
12-156
446
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 18
Aerial Photos
12-157
447
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 19
Property Market Overview
12-158
448
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 20
12-159
449
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 21
12-160
450
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 22
12-161
451
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 23
12-162
452
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 24
12-163
453
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 25
12-164
454
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 26
12-165
455
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 27
12-166
456
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 28
12-167
457
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 29
SITE DESCRIPTION
Address 829 Harbor Island Drive, Newport Beach, CA
Assessor
Parcel No.
050-431-25
Legal
Description
050-431-25: Abbreviated Description: N Tr 3867 Blk Lot F Source: DataTree S TWP 6 RGE 10 Sec 35 Sec T 6 R 10 Tide Land Strip in Sec Source: City of Newport Beach Site Area Landside Area is: 32,990.71 square feet
Water Area is: 9,071.4 square feet
Total area: 42,062.11 square feet or 0.9656 acre
Site Shape “L” Shaped
Topography Level with gradual slope to south.
Improvement
s
Basin Marine, Inc., showroom and workshops.
Vehicular
Access
Harbor Island Drive (paved 2 lane east/west arterial) and Balboa Yacht Basin (paved 2- lane east/west road)
Pedestrian
Access
Harbor Island Drive and Balboa Yacht Basin have concrete sidewalks, curb gutters, and public sidewalks.
Zoning
The Planning Department of the City of Newport Beach zoning for the subject property is PF (Public Facilities). Public Facilities is listed in Special Purpose Zoning Districts, Chapter 20.26. Further, it is our opinion that the subject site has a potential zoning of Mixed Use (MU) Commercial and Residential use. (Source: Laura Wooding Whitling er, Real Property Administrator, City of Newport Beach).
The Special Purpose Zoning District proposes the individual special pu rpose zoning districts and the way they are applied. The Special Purpose Zoning Districts are OS (Open Space), PC (Planned Community), PF (Public Facilities), PI (Private Institutions), and PR (Parks and Recreation. The PF (Public Facilities) Zoning Distri ct is intended to Provide for areas appropriate for public facilities including community centers, cultural institutions, government facilities, libraries, public hospitals, public utilities, and public schools.
Permitted Use in PF (Public Facilities) is limited to Minor utilities. Uses with MUP (Minor Use Permit) are: Assembly/Meeting Facilities, Cultural Institutions, Parks an d Recreation Facilities both active and passive, Schools, Public and Private, Day Care, General, Residential Care, Government Fac ilities, Marine Services - Boat Storage and Boat Yard, Parking Facilities, Heliports and Helistops, Marina Support Facilities, and Accessory Structures and Uses.
Development
Standards
Development standards for PF (Public Facilities) are established d uring review of the required permit (conditional use permit or minor use permit). Newport Beach Municipal Code is current through Ordinance 2020-23 passed September 22, 2020.
12-168
458
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 30
Zoning
Compliance
The subject property is legal conforming as to zoning requirements.
Utilities All utilities are available at 829 Harbor Island Drive.
Flood Zone
Two Zones: Land Area is Zone X, Water Area (Boat Slips Area) is Zone AE. The Panel is 06059C0382K, dated 3/21/2019. Zone X is an area that is determined to be outside the 100- and 500-year floodplains. Zone AE is an area inundated by flooding, for which BFEs or average depths have been determined. Flood insurance is required in AE Zone.
Source: FEMA
Earthquake
Zone
Properties in California are subject to some d egree of earthquake risk. The subject is not known to be in the Alquist -Priolo Earthquake Special Study Zone for seismic activity. The parcel is within the Newport-Inglewood Earthquake Fault Zone. According to the California Department of Conservation the parcel is in a Fault Zone, Landslide and Liquefaction Zone. We are not seismic engineers and we are not qualified to determine earthquake hazards. Our appraisal assumes that the subject is not adversely impacted by atypical earthquake risk. We recommend obtaining a geologic study to determine any potential earthquake hazard that might impact the subject site
Soil
Conditions
No soil report has been provided to us. Our on-site inspection of the subject property revealed no obvious evidence of adverse geologic or soil conditions on the subject site.
We are not geologists or soil engineers and we are not qualified to detect geologic or soil related problems. Our appraisal assumes that no detrimental geologic or soil - related conditions impact the subject proper ty. We recommend consultin g with a qualified geologist or soil engineer to determine whether detrimental geologic or soil conditions exist on the subject site.
Environment
al Conditions
No environmental report has been provided to us. Our on-site inspection of the subject property revealed no obvious or apparent evidence of soil contamination or the presence of toxic or hazardous substances. We are not environmental engineers and we are not qualified to detect environmental contamination. Our appraisal assumes the subject site is clean with no contamination. We recommend consulting with a qualified environmental engineer to determine whether environmental contamination exists on the subject site.
Easements
and
Encumbrance
s
We are not aware of any easement s or encumbrances impacting the subject. Other easements may be those imposed by local government and quasi-government agencies for common utilities, public rights-of-way, etc. Our appraisal assumes the subject to be free and clear of any negative easements, restrictions, and encumbrances impacting the subject site.
12-169
459
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 31
Beacon Bay
Bill
The State of California granted to the City of Newport Beach and its successors all of the right, title and interest of the State of California that portion of the tidelands and submerged lands, whether filled or unfilled , bordering upon and under the Pacific Ocean or Newport Bay in the County of Orange. A State Tidelands Map is included for reference below. The blue area is identified as the Fill Tidelands. The southeastern portion of the subject site is impacted by the land held in trust. Reportedly, the State of California will not allow residential uses in the filled tideland areas (land held in trust) . (Source: Lauren Wooding Whitlinger)
12-170
460
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 32
The City of Newport Beach may grant franchises thereon for a period not exceeding 50 years for wharves and other public uses and purposes and may lease the lands, or any part thereof, for terms not exceeding 50 years for purposes consistent with the trust upon which the lands are held by the State of California. The consideration received by the City for such leases shall be the fair market rental value of such lots as finished subdivided lots with streets constructed and all utilities installed. All money received by the City from existing and future leases of those lots shall be deposited in the City Trust Funds as provided in Section 2. The City shall establish a separate tidelands trust f und, and the city shall deposit in the fund or funds all money received directly from, or indirectly attributable to, the granted tidelands in the City. 80% of the money received shall be deposited in the Tideland Capital Fund and in the Tideland Operation and Maintenance Fund, the allocation between those funds to be determined by the City of Newport Beach.
Plat Map
12-171
461
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 33
Exhibit A Plat Map
12-172
462
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 34
Lot Size Map
12-173
463
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 35
FEMA Flood Map
12-174
464
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 36
Earthquake Data Map
12-175
465
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 37
IMPROVEMENT DESCRIPTION
Overview
Type of Use Basin Marine, Inc
Year Built Estimated originally constructed in 1945. Source: David New, President, Basin Marine, Inc. Based on pictures of the building and cars in photos.
Reconstructed 1985. Source: City of Newport Beach
Gross Building Area
3,560 square feet
GBA Source
Net Rentable Area
Source
Building Area
City of Newport Beach Site Plans
3,560 square feet
City of Newport Beach Site Plans and appraisers measurements.
For exact measurements, we recommend retaining a surveyor.
12-176
466
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 38
Comments The appraisers where escorted through the building on October 2 1, 2020 by David L. New, President , Basin Marine Inc. The entire property was toured and described as follows:
Mr. New took the appraisers through a quick tour of the property, explaining the various operations and then returning to the Basin Marine Hardware Store for a more detailed inspection.
Beginning at the interior entry of the Basin Marine Hardware there are dual white wood French doors and an entry tile and pebble design of a fish with black border and ceramic tile for the rest of the flooring in the retail area. The ceiling is T -B with acoustic tile and indirect fluorescent lighting. Windows are white vinyl with dual glazed panes. The northwest corner of the room has a conversation a rea with leather couches and coffee table. The southwest corner is the cust omer service counter with white enameled wood paneling and white upper display cabinets with glass sliding doors and a pegboard merchandise area for small hanging items on the back wall. There are adequate windows including a bay window on the north wall.
The northeast corner of the area has a unisex restroom with manufactured wood flooring, white enameled wood wainscot and chair rail and blue painted drywall above with white painted drywall ceiling. The restroom has a wall mount wash basin with wrapped pipes, commercial grade toilet with grab bars, incandescent lighting, mirror, and paper towel holder, etc.
The southeast corner of the commercial retail area has a breakroom with white upper and lower kitchen cabinets with 2 countertops of Formica materi al. The ceiling is T-Bar with acoustical tiles and indirect fluorescent lighting. The flooring in this room is ceramic tile. Appliances include refrigerator, electric 4 burner stove and oven, micro -wave, stainless steel bar type sink and an area for 2 bar stools, and coffee maker area.
The two accounting offices are at the center of the south wall. Entry into this office is through dual white French doors. Flooring in this area is manufactured wood flooring. The clerical office has a white wood reception and work desk that matches the front customer service counter and has a grey Formica counter-top, a computer area and file cabinets, photo -fax machine are at a 2 nd counter area.
The ceiling has T -Bar with acoustic tiles and indirect fluorescent lighting. Th e private accounting office is like the above office with “U” shaped desk to match the décor of the offices and 2nd countertop cabinet area on the north wall.
There is a centr al hall that leads to the Executive Office on the west side of the hall and to the south the hall leads to the Shipyard Offices.
The Executive Office has manufactured wood flooring, it is a larger office with windows to the west. The office has the same ceiling T-Bar system as the rest of the office areas. The executive desk and st orage cabinet, display cabinetry is at the east end of the room with area rug in the middle of the room and 2 large leather couches at the west end next to the windows. Wide blade white shutters are the window treatment. Walls are white painted drywall. 12-177
467
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 39
The interior commercial retail area of Basin Marine Hardware has been designed to co-ordinate together in an attractive nautical design that flows from one area into another, which is neat, clean, and attractive.
The above-mentioned central hall has a solid core passage door with lock that when open leads three steps down into the Yard Office, and Carpentry Shop.
There is a skylight in this area. The Yard Office is where work orders, job sheets, and employee time sheets are kept. The room has white painted drywall ceilings and walls, epoxy coated (black and white specks on grey background) cement flooring, fluorescent lighting fixture mounted to sloped ceiling. There are waist - high white lower wood cabinets along the west wall with white Formica countertops and a stool for sitting. Windows are above this clerical area. The north wall has electrical power supply and breaker panel. The south wall is partitioned off with a storage area and then the passage door that opens onto the Shipyard.
To the east of t he Yard Office is the Carpentry Shop. This can be accessed from the Central Hall or from the Shipyard. The Carpentry Shop has a 15’ x 9’ roll-up metal overhead door that allows entry from the Shipyard and a passage door from the interior central hall. Walls, ceilings, and lighting are the same as the Yard Office. The flooring is cement. There is a built -in wood cabinet at the north wall with wood countertop. The shop is designed for saws, drills, plastic wrapping, and storage. At the northwest corner of the room is the passage door to the hall and an area for electric extension cords of various sizes and shapes. An air hose reel is at the ceiling next to the Mechanical Shop. A sliding glass patio door gives access to the Mechanic’s Shop to the east as well as the exterior roll-up overhead door at the south wall.
Mechanical Shop has the same walls, ceiling, lighting , and flooring as th e Carpentry Shop. The southeast corner of the shop has a dust collector for sawdust. This shop also has a metal roll -up door 15’ x 9’ at the south exterior wall. On the east wall is a glass enclosure with glass door that houses a Kaeser Compressor Si5 Sigm a. The shop has 2 cabinets with wood countertops that provide foundations for vices to hold objects, and drills. Pegboard s holds hand tools. There is a small GE elec. water heater and compressor tanks.
Shipyard Marina
The exterior area east of the Mecha nical Shop and west of the boundary block wall that is the east property line of the subject property is a concrete pathway with a drinking fountain mounted to the building, refrigerator/freezer with ice maker and 3 microwaves. There is an Enviro Water Separator for the Mechanical Shop and compressor equipment, and wrapped tank.
Three steps up from this area is a privacy area with white lattice covering an area above the block wall. This area is for employee lockers, fresh uniform shirt open closet. An o pen doorway unisex restroom is on the west side of the path. The restroom has linoleum flooring in a stone pattern, large pl astic utility sink, rubberized floor bas, mirror, paper towel holder and soap dispenser. Walls are waterproof paneling in white. Lighting is ceiling mount fluorescent fixture. There 12-178
468
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 40
is 1 urinal, 1 regular commode enclosed stall. This restroom is not handic ap equipped, no wrapped pipes or grab bars.
The Shipyard Marina area south of the building and immediately along the exterior east block wall is the lunch, break area with 3 picnic tables and canopy cover for shade. Directly west of this area is the Shipyard Repair/Drydock platform area where large yachts are under repair, polishing, and painting. At the time of the appraisers’ inspection the yachts farther to the south were smaller and approximately 15 yachts, a sail ship and boats were on the Drydo ck platform for various repairs and/or painting.
At the south center of the parcel is a dock and ramp to pull boats from the water, this is done with a hoist by Marina Travelift . The 2 ramps are each 90 feet in length and 5’ in width and are constructed of concrete and are in a “U” shape.
One ramp is for the operation of the Marina Travelift and the second ramp in the same area is for access to the boat slips on the east and west of the equipment.
The second ramp is constructed of wood with concrete pavers and has metal handrails for safety. The Travelift is a large piece of personal equipment owned by Basin Marine Inc.
Another hoist is a large Devault hoist (also personal property) attached to the concrete of shipyard platform at the southwest corner of the parcel. To the north of this area on the east side of the platform ar e two portable woodsheds. Shed One is used in refinishing Fiberglass surfaces. Shed Two is used in repair of Fiberglass surfaces and storage of needed equipment and the exterior serves as storage for ladders, etc. Each shed measure 10’ x 30’, they have unfinished wood walls, ceilings, and wood flooring with skylights.
The Lean-to structure on the southeast corner of the parcel is divided into two partitions. The Lean-to is “L” shape d. The construction is 5’ height of concrete block, and 3’ high of fiberglass panels with metal roof support framing and fiberglass panels serving as the roof. The south end partition stores various paint supplies and materials with a fiberglass door. The north partitioned area contains the Living Water Environmental MCAT automated water treatment system which delivers 22 gallon per minute into holding tanks. This portion of the Lean To measures 12’ x 23’ part concrete is 5’ height and 3’ height fiberglass. The north side of this part of the lean-to is open.
Note: The personal property of furniture, fixtures and equipment described within section are not part of the Fair Market Rent Value of the Real Property of this appraisal report.
Exterior
There are dual chain-link gates to the southern area of the Shipyard Marina area from the public parking approach of the Balboa Basin Yard. There is another dual chain-link driveway gate into the Shipyard Marina area just to the south of the Basin Marine building. The parcel has wrought iron and block walls that provide the property line on both the east side and the west side of the parcel from the water channels.
12-179
469
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 41
Mr. New stated his desire is to replace the Shipyard platform concrete flooring which has many cracks throughout, he estimates the cost will be $300,000.
Exterior of Basin Marine Building
The exterior of the building is a board and batt wood siding in a light blue grey with white trim. White vinyl windows with side shutters, a bay window on the north sid e. At the northeast corner of the building is ev idence of the original masonry building, the brick in this area has been painted to match the wood siding. The roof is metal. The building has downspouts and gutters, exterior security lighting and security cameras. There are floral planted and maintained planter boxes around the building, an entry ramp for handicap and two private parking spaces to the north of the building.
#. of Buildings One plus 2 portable sheds and two Lean-to sheds
#. of Stories One
#. of Tenant Spaces One
Floor Area Ratio 0.0846
Exterior Shell
Building Structure Wood frame and siding and considered (Class D), with reinforced concrete slab foundation.
Exterior Walls Wood trim and wood siding and small area at northeast corner of building is masonry finish.
Exterior Windows Dual Wood French Doors, Dual Glazed White Vinyl Windows with White molding, White wood shutters trim on some windows and additional trim work at some windows. One bay window on the north side of the building.
Roof Metal Roofing
12-180
470
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 42
Interior Finish
Floors Ceramic Tile, Wood types of flooring, Linoleum, Epoxy coated cement, and cement.
Ceilings Drywall, T-Bar acoustic tiles
Walls/Partitions Drywall
Lighting Recessed lighting, Indirect fluores cent lighting, ceiling mount fluorescent light fixtures.
Systems
HVAC Central heating and air conditioning
Plumbing
Assumed Adequate. There are two restrooms, one is the unisex restroom in the commercial/retail area and the other is the shipyard employees’ restroom at the east side of the building.
Electrical 600 amps, 3 phase, 4 wire.
Fire Protection Smoke Detectors and Fire Extinguishers
Parking
# of Spaces and
Type
The subject has two marked private spaces for Basin Marine, Inc. Customers use the public parking spaces available in the Balboa Yacht Basin Marina
12-181
471
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 43
Parking Ratio 2 private marked and paved spaces with a Parking Ratio of 0.56
Site Improvements
The exterior planters and landscaping around the building are well maintained.
The common area street parking is asphalt paved, and the two private spaces are marked, and asphalt paved. The property is overall well maintained and very attractive.
Fencing
Measurements
1. 47 lineal feet x 6’ wide concrete block wall.
2. 65 lineal feet x 3 ‘wide concrete block wall.
3. Wrought iron 65 lineal feet x 3’ wide
4. Chain-link 3’ Bar with screen slats 15 lineal feet x 6’ (Roll Type)
5. 313 lineal feet x 5’ Block wall at south side perimeter
6. 28 lineal feet x 4’ block wall
7. 18.5 lineal feet x 6’ plus 12.4 x 6’
Marina Travelift
Ramp #1: 90 lineal feet x 5’ concrete
Ramp #2. 90 lineal feet x 5’ concrete
Concrete area between ramps 40’ x 20’
8. Chain-link sliding gate with slats 30’ x 6’
Docks/Ramps
1. Ramp #1 Southside 26 lineal feet x 3 feet (wood & concrete pavers) Metal handrails.
2. Dock #2: 46 lineal feet x 4 feet wide, concrete plank
3. Boat slip 25’ wide x 46 lineal feet.
4. Dock #3: 35 lineal feet x 4 feet, concrete plank
5. Boat slip 25’ wide x 46 lineal feet.
6. Dock #4: 46 lineal feet x 4 feet, concrete plank
7. Boat slip 30’ wide x 62 lineal feet.
8. Dock #5: 50 lineal feet x 4 feet, concrete plank
9. Dock #6: 64 lineal feet x 4 feet, concrete plank
10. Dock #7: 39 lineal feet x 4 feet, concrete plank
11. Dock #8: 56 lineal feet x 4 feet, concrete plank
12. Ramp #2 North side 26 lineal feet x 3’ with metal handrails 3’ height and 26 lineal feet (wood & concrete pavers).
13. Dock #9: 26 lineal feet x 4 feet concrete plank
14. Dock #10: 66 lineal feet x 4 feet concrete plank
15. Dock #11: 45 lineal feet x 4 feet concrete plank
Portable Sheds
Paint room is 10’ x 30’.
Repair, equipment, and storage room 10’ x 30’
Lean-to’s
6’ x 19’ Part concrete.5’ height, part fiberglass 3’ height. 12’ x 23’ part concrete 5’ height, 3 height fiberglass.
12-182
472
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 44
Appraiser Observations
Quality Good
Condition Good
Deferred Main. None
Functional Utility Conforms with typical market standards
General Comments The subject improvements are considered good for overall quality of construction including the basic structural system, the exterior wa lls and roof, mechanical systems. The overall condition of the property is considered good.
Improvements-Age/Life, Depreciation (includes parking structure) Actual Age 35 years
Effective Age 20 years, per our observation and estimate Economic Life 45 years, per Marshall and Swift Valuation Service Remain. Econ Life 25 years, per our observation and estimate Depreciation Effective Age / Economic Life = Depreciation % 20 years / 45 years = 44%
12-183
473
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 45
FLOOR, ELEVATION, AND SITE PLANS
12-184
474
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 46
12-185
475
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 47
12-186
476
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 48
Photographs of the Subject Property Taken October 21, 2020
Street view of Harbor Island Drive
Front Elevation of Basin Marine
Front customer service counter
Retail Hardware Store
Retail/Office Unisex Restroom
Retail/Office Breakroom
12-187
477
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 49
Photographs of the Subject Property Taken October 21, 2020
Private Accounting Office
Executive Office
Yard Office
Carpentry Office
Mechanical Office
Shipyard Employees Restroom
12-188
478
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 50
Photographs of the Subject Property Taken October 21, 2020
Narrow Boat Slip (not a part)
Large Slip with 2 Boats @ southeast corner
Boat Slip A-1 Rental (not a part)
Boat Slip looking south, Hoist Platform to left
Boat Slip A-3 Rent (not a part)
Travelift Hoist that pulls ships up to drydock for
repairs
12-189
479
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 51
Photographs of the Subject Property Taken October 21, 2020
2 Portable Sheds /southwest corner of parcel
Fiberglass Refinishing @ Shed One
Shed Two – Fiberglass Repair & Storage
Ladder storage @ exterior of Shed 2
Southwest Paint & Storage Area
Water Treatment Area
12-190
480
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 52
Photographs of the Subject Property Taken October 21, 2020
Boat Slip on east side
Boat Side-tie Slip on east side
Southeast corner of parcel & boat slip
Boat slip on east side
Looking north at property at water treatment
tanks and hoist
Public Parking Lot looking south to shipyard
12-191
481
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 53
Photographs of the Subject Property Taken October 21, 2020
Looking south at Shipyard from Carpentry Shop
Shipyard looking south, Public Parking to right of
vehicle gate
Basin Marine looking northeasterly
Basin Marine 2 Private Parking Spaces
12-192
482
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 54
Real Estate Taxes
Current property tax information is shown below.
The subject property is exempt from real property taxes as it is owned by the City of Newport Beach, CA.
According to California Proposition 13, real estate taxes in California are limited to 1.00% of assessed value plus limited amounts for b onded indebtedness. Properties are reassessed upon sale or transfer of over 50% of the ownership interest, and when significant remodeling or new construction is completed. The new assessed value would be based on the current market value of the property on the date of sale, which typically corresponds with the purchase price paid for the property, or on the date of reassessment.
Since the definition of value for this assignment assumes a sale of the proper ty, our valuation analysis uses a property tax liab ility based on our appraised value estimate for the subject property as though a sale had occurred.
Our inquiry with the County Tax Assessor’s Office did not reveal any past-due taxes currently impacting the subject property. The property is exempt of real property taxes.
Our appraised value estimate of the subject is higher than the current assessed value due to improved market conditions since the date of acquisition.
Ownership History
The following table presents the current ownership and recent ownership history of the subject property.
Ownership History
Transaction Doc. No. Buyer Seller Date of
Sale Sale Price
N/A N/A City of Newport
Beach, CA N/A N/A N/A
We are not aware of any other sales, listings, escrows or pending sales of the subject property during the past three years.
APN Land Improvement Total Total Taxes
050-431-25 N/A N/A $0 Exempt
TOTALS $0 $0 $0 $0
TAX RATE AREA: 07-001
TAX RATE: 1.052850%
DIRECT ASSESSMENTS: $0.00
ASSESSED VALUE (2020-2021)
12-193
483
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 55
Discussion of Contract Rent
The subject property is leased to Basin Marine, Inc., a California Corporation (lessee) and between the City of Newport Beach, a Municipal Corporation (lessor) as of January 1, 2001. Th e original lease term was 15 years plus two 5 -year options to extend the lease. The base term was 15 years and expired December 31, 2015. The first 5-year option commenced January 1, 2016 and expires December 31, 2020.
The 2nd option will commence January 1, 2021. A portion of the site area is currently being used by tenant for a shipyard/boat repair facility with a marine hardware store. The marine hardware store improvements contain a gross area of approximately 2,300 square feet plus workshop area o f 1,260 square feet which is leased at a base rent of $11,399.58 per month plus a percentage rent as follows.
Gross Sales Percentage Rates:
1. Shipyard/boat repair (labor, service and materials) at 4% of gross sales.
2. Outside labor and materials at 10% of gross commissions and fees received by tenant.
3. Equipment and hardware sales, exclusive of internal sales to boat repair business at 5% of gross sales.
Periodic Adjustment of Rent
At the end of every 3rd lease year the annual base rent shall be adjusted to the greater of either: 75% of the average reconciled annual total rent for such just ended 3 lease year period or the annual base rent for the just concluded lease year.
The appraisers reviewed the existing Lease Agreement. The complete lease for the tenant was provided to the appraisers. The Lease Agreement is triple net which means the tenant is responsible for all real estate taxes, fire and public liability insurance , all utility services and all repairs and maintenance . The tenant, in addition to paying rent, at tenant’s sole expense shall do the following.
1. Haul out and re-launch, each lease year, up to four of the vessels owned and maintained by the City, of a size capable of being handled by tenant’s equipment provided, however all such four City vessels shall be hauled out no more than two vessels at a time.
2. Transport the vessels to an area on the Premises suitable for purposes of repairs or maintenance.
3. Allow each such vessel to remain on the Premises for a period of two weeks immediately after haul-out.
4. Permit access to the vessels by employees or representatives of the City for the purpose of repairs and maintenance, which shall be performed by City at no cost or liability to tenant.
12-194
484
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 56
HIGHEST AND BEST USE
Highest and Best Use is defined as follows:
“The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the Highest and Best Use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.”
An analysis of Highest and Best Use must consider a property As If Vacant and As Improved.
Analysis of Land, As If Vacant
Physically Possible: The subject site is level with access from Harbor Island Drive. No physical impediments were observed that would prevent the subject site from being developed to its Highest and Best Use.
Legally Permissible: The zoning of the subject site PF, Public Facility District . Based on the zoning of the subject site, legally permissible uses of the site would include a mixed-use development of residential and commercial uses. Reportedly, the State of California will not allow residential uses in the filled tideland areas (land held in trust). (Source: Lauren Wooding Whitlinger) Financially Feasible: The subject’s immediate neighborhood primarily consists of an area of upscale single family and multi-family residences and limited commercial retail uses. The general composition of uses in the subject area is generally consistent with the legally permissible uses as prescribed by local zoning standards. Therefore, if the subject was vacant and suitable for development, it is our opinion that the most financially feasible alternative would appear to be represented by the development of a mixed-use single-family or multi-family residential and commercial use.
Maximally Productive: The maximally productive use is that use which provides the greatest return an d the most profitable alternative. Physically the subject site would not specifically preclude any type of development. Legally the zoning allows for v arious types of uses as discussed above. From the legally permissible uses, it is our opinion that financ ially feasible uses would include mixed use residential and retail uses. Our analysis indicates that of the financially feasible uses, the maximally productive use of the subject site would be mixed-use single-family or multi-family residential and commercial use.
Note, that the subject site has water area that include boat docks and slips. With respect to the water areas, given that water parcels or parcels containing both land and water areas, rarely sell, the rental value of the water areas is based on a direct rental comparison approach, considering other boat slip rental rates in the immediate and general subject area.
Therefore, it is our opinion that the Highest and Best Use, As If Vacant of the subject site would be single- family or multi-family residential and commercial use.
12-195
485
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 57
Analysis of the Property, As Currently Improved
The analysis of the subject property, As Improved, relies on the sa me basic criteria outlined in the discussion of Highest and Best Use of the subject site assumed vacant. However, the current discussion focuses on whether the existing improvement program offers any contributory value.
The subject is generally functional for its intended use and is operating successfully under a ground lease dated January 1, 2001 . A review of the subject’s physical traits did not suggest any specific items or modifications that would need to be completed in order to achieve the subject’s Highest and Best Use.
Our analysis indicates that the existing improvement program offers substan tial contributory “value in use” over and above the underlying land value.
Therefore, it is our opinion that the Highest and Best Use, As Currently Improved of the subject property, is to continue the existing use of the property as presently configured.
12-196
486
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 58
VALUATION TECHNIQUES AND METHODOLOGY
Valuation Techniques
Three approaches to value form the foundation for current appraisal theory. These approaches are C ost Approach, Sales Comparison Approach, and Income Capitalization Approach.
Cost Approach - Utilized
This approach is based on the proposition that an informed purchaser would pay no more for a property than the cost of producing a substitute property wi th the same utility. It is particularly applicable when the subject property involves relatively new improvements that represent the Highest and Best Use of the land, or when relatively unique or specialized improvements are located on the site for which there exist no comparable properties in the market.
Sales Comparison Approach - Utilized
This is an appraisal procedure in which the market value estimate is predicated upon prices paid in actual market transactions and current listings. The former fixes the lower limit of value in a static or advancing market (price-wise) and fixes the higher limit of value in a declining market. The latter fixes the high limit in any market. It is a process of analyzing sales of similar, recently sold properties in order to derive an indication of the most probable sales price of the property being appraised.
The reliability of this technique is dependent upon:
1. The availability of comparable sales data;
2. The verification of the sales data; and,
3. The degree of comparability or extent of adjustment necessary for time differences affecting the sales price.
Income Capitalization Approach – Not Utilized
This approach is widely applied in appraising income -producing properties and ground leased land .
Anticipated present and future income, as well as any future reversions, is discounted to the present value through a Discount Cash Flow Analysis.
12-197
487
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 59
Valuation Methodology Used in This Assignment
Our valuation of the subject property includes the following analyses:
• Cost Approach Valuation
Significant valuation issues we addressed are cited below:
1. The valuation of the subject improvements does not include furniture, fixtures and hoist equipment, per our scope of work we were not asked to appraise the furniture, fixtures and hoist equipment only the site improvements pertaining to realty.
2. Note, that the subject site has water area that include boat docks and slips. With respect to the water areas, given that water parcels or parcels containing both land and water areas, rarely sell, the rental value of the water areas is based on a direct rental comparison approach, con sidering other boat slip rental rates in the immediate and general subject area.
3. As discussed previously, the current/ongoing Covid-19 global pandemic is having reported impact on financing rates/lender spreads, lowered loan -to-value (LTV) ratios, landlor d and tenant cash flows, etc. Given the rapidity of events related to the pandemic that have affected real estate sales, the present risks (as of the effective date of value) appear to be financing related and broad uncertainty in global/national/local economics in the near term. This being the case, price/value discounting for the subject is prudent.
4. Reportedly, the State of California will not allow residential uses in the filled tideland areas (land held in trust).
12-198
488
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 60
COST APPROACH
The Cost Approach is based on the economic princi ple of substitution. A cornerstone of this valuation approach is the premise that an info rmed buyer would not pay more for a property than the cost of acquiring a comparable vacant site and constructing an improvement program of similar utility.
The fundamental steps of the Cost Approach are outlined below:
1. Estimate the value of the site as sumed vacant and available for development to its Highest and Best use.
2. Estimate the total reproduction or replacement costs associated with the improvement program. These costs include direct or hard costs such as building materials and labor, as well as indirect or soft costs such as financing charges, real estate taxes during construction, professional fees, carrying charges, etc.
Reproduction costs are used when it is necessary to estimate the costs to exactly replicate a building in every detail. Typically, a replacement cost estimate is more appropriate and useful. The replacement cost estimate is based on the expense associated with developing a similar buildin g of equal utility and function.
3. Estimate an appropriate level of entrepreneurial prof it. This cost reflects the required return to the developer for assuming the time, coordination, and risk associated with project development. This cost is distinct from contractor’s profit and overhead which is incorporated as a direct cost.
4. Add together the total construction costs (i.e. -direct costs, indirect costs, and entrepreneurial profit) associated with development.
5. Subtract any observed levels of depreci ation impacting the subject property. Depreciation may stem from physical deterioration, functional obsolescence, or economic obsolescence. The total construction cost adjusted for accrued depreciation yields the Replacement or Reproduction Cost less Depreciation.
6. Add the total depreciated improvement value to the estimated land value to derive the value indicated by the Cost Approach.
In this assignment the Cost Approach is applicable for the following reasons: The subject property is a viable boat repair yard, showroom/retail sales building and site improvements. The site improvements pertain to realty.
12-199
489
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 61
Land Valuation
Our Land Valuation analysis uses the Sales Comparison Approach which is a method of valuation that compares prices paid for similar properties in an open and free marketplace.
We surveyed the market in the subject area in order to locate comparable sales of similar sites which would aid in forming an opinion of land value for the subject property. Our search parameters are summarized below.
Primary Search Parameters for Land Sale Comparables
Location Newport Beach & Surrounding Cities
Sale Date January 2019 to November 2020
Property Type ¼ acre to 1 Acre of Residential and Mixed-Use Land
Method of Analysis
Price Per SF Our research indicated most investors
analyze land sale comparables on this basis.
12-200
490
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA 92660 Page 62
Map of Comparable Land Sales
12-201
491
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 63
ITEM SALE DATE ZONE CASH EQV. PRICE
DOCUMENT NO. SQUARE FEET PRICE PSF
ASSESSOR'S PARCEL NUMBER SELLER ACRES PRICE PACRE
BUYER
1 41 Strand Beach Drive September 29, 2020 R1 12,500,000$ Dana Point, CA 92629 533798 10,215 1,223.69$
672-641-29 Donna & Douglas Neff & OCCF 0.23 53,303,965
Bryan & Pyeatt Taylor Living Tr.
2 1514 E. Balboa Blvd. September 25, 2020 R1 6,150,000$ Newport Beach, CA 92663 525579 9,540 644.65$
048-182-13 So. Cal Land Co. LLC 0.22 28,081,132
Golden Opportunity No. 17 LP
3 130 Irvine Cove Court October 21, 2019 R1 4,000,000$
Laguna Beach, CA 92651 411254 11,930 335.29$
496-191-15 The Sue J. Gross Living Trust 0.27 14,605,197 Brighton Road Investments, LLC
4 2820 Lafayette Ave. Under Contract MU-H2 3,550,000$
Newport Beach, CA 92663 N/A 4,800 739.58$
047-023-01 & 02 2820 Lafayette LLC 0.11 32,216,250
Not Disclosed (net usable area)
5 504 29th St. Listing MU-H2 2,395,000$
Newport Beach, CA 92663 N/A 4,500 532.22$
047-051-07 2820 Lafayette LLC 0.10 23,183,600
Not Disclosed
SUMMARY OF EFFECTIVELY VACANT LAND SALES
STREET ADDRESS
CITY STATE ZIP
12-202
492
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 64
Photographs of Comparable Sales
Sale Number One
Sale Number Two
Sale Number Three
Sale Number Four
Listing Number Five (Google Photo)
12-203
493
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 65
Plats of Comparable Land Sales
Sale Number One
Sale Number Two
Sale Number Three
Sale Number Four
Listing Number Five
12-204
494
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 66
Land Sale Adjustment Grid
SUBJECT One Two Three Four Five
Sale Price N/A $12,500,000 $6,150,000 $4,000,000 $3,550,000 $2,395,000 Site Size (sf) 32,990.71 10,215 9,540 11,930 4,800 4,500 Acres 0.76 0.23 0.22 0.27 0.11 0.10
$ SF N/A $1,223.69 $644.65 $335.29 $739.58 $532.22
Rights Conveyed 0% 0% 0% 0% 0% 0%
Adjusted $ SF N/A $1,223.69 $644.65 $335.29 $739.58 $532.22 Financing Terms 0% 0% 0% 0% 0% 0%
Condition of Sale 0% 0% 0% 0% 0% -10%
Adjusted $ SF N/A $1,223.69 $644.65 $335.29 $739.58 $479.00 Date November-20 0.0% 0.0% 0.0% 0.0% 0.0%
Adjusted $ SF N/A $1,223.69 $644.65 $335.29 $739.58 $479.00 General Location Newport Beach similar similar similar similar similar Specific Location Harbor Island Drive Water Front similar inferior inferior similar inferior Site Configuration Interior Site similar superior similar superior superior Site Shape "L" Shape superior superior similar similar superior Topography Level similar similar similar similar similar Utility Status Water, Power, Gas similar similar similar similar similar Zone/Density Best Use (Potential Mixed Use) inferior inferior inferior similar similar Filled Tidelands No Residential Use superior superior superior superior superior Site Improvements Assume Vacant similar similar similar similar inferior
0.76 superior superior superior superior superior
Subtotal of Adjustments -40% -40% -30% -55% -50%
FINAL INDICATORS Adjusted $ SF $734.21 $386.79 $234.70 $332.81 $239.50 Overall Comparability Superior Superior Inferior Superior Inferior
ADJUSTMENT OF COMPARABLE LAND DATA
Site Size (ac)
12-205
495
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 67
Valuation Analysis
Our analysis of the comparable sales takes into account features of comparison that a knowledgeable buyer in the subject marketplace would consider. The adjustments applied are not based on paired-data analysis and they are not intended to be viewed in a precise or absolute context. Rather, they are intended to offer general insight with regard to the order of magnitude afforded each of the adjustment categories, based on our research in the subject marketplace.
Market Conditions (Time)
According to Trends 2020 in Retail Rent Growth as o f the 3 rd quarter of 2020 was reported by Costar at -0.06%. Multi-family Residential land Rent Growth increased in the last 12 months was reported by Costar at +1.4%. Further, the appraisers considered the opinion of Evan Forre st, Senior Consultant with Metro Study, that land prices are flat in 2020 due to COVID19 Pandemic and that land sales in 2018 and 2019 increased slowly. Therefore, no time adjustments are warranted.
Our discussion of each of the Comparable Sales is presented below.
Comparable Sale Number One – refers to a closed sale in September 2020. The parcel is zoned R1, one dwelling unit per parcel . This property has water frontage and level from within a gated residential community known as the Strand at Headlands. There is water, sewer and power in the street. The shape is rectangular. The parcel is a finished lot. The buyer’s intended use is for future single-family residential development. According to Maleny Rodriquez assistant for Tim Smith, listing ag ent and the Regional MLS, the sale was confirmed at $12,500,000 with no concessions to the buyer.
The comp’s general location is similar to the subject. The specific location is similar to the subject property. The comparable’s utilit ies (water, sewer and power) are similar to the subject property. The comp is an interior site and rated similar to the subject. The comp has a lesser highest and best use than the subject’s MU zoning. The rectangular shape/utility of the comp is s uperior to the subject property.
The level topography is similar to the subject. The comparable has paved road access and is similar to the subject property. The parcel is a vacant finished lot and is simila r to the subject property. The smaller size of the comp is supe rior to the subject property (economies of scale). The lack of residential use in the filled tideland areas are rated superior to the subject. All factors considered; the subject property’s unit value is below this indicator.
Comparable Sale Number Two – refers to a closed sale in September 2020. The parcel is zoned R-1, one dwelling unit per parcel. This property is a corner site without water frontage. There is water, sewer and power in the street. The shape is rectangular. The parcel is three contiguous finished lots. The buyer’s intended use is for single family development on each lot. According to Kimberly Bibb, listing agent and the Regional MLS, the sale was confirmed at $6,150,000. There is a tennis court on the site.
The comp’s general location is similar to the subject. The specific location is inferior to the subject. The comparable’s utilities (water, sewer and power) are similar to the subject property. The comp is a corner site and rated superior to the subject. The comp has a lesser highest and best use than the subject’s MU zoning. The rectangular shape/utility of the comp is s uperior to the subject property. The level topography is similar to the subject. The comparable has paved road access and is similar to the subject property. The parcels are vacant finished lots and is similar to the subject property. The smaller size of the comp is superior to the subject property (economies of scale). The lack of residential use in the filled tideland areas are rated superior to the subject. All factors considered; the subject property’s unit value is below this indicator.
12-206
496
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 68
Comparable Sale Number Three – refers to a closed sale in October 2019. The parcel is zoned R1, single family residential of one dwelling unit per parcel. This property has no water frontage and is accessible from the gated residential community known as Irvine Cove. The site is a vacant finished lot with ocean views. There is water, sewer and power in the street. The shape is irregular. The buyer’s intended use is for future residential development. According to Kathryn White, listing agent and the Regional MLS, the sale was confirmed at $4,000,000. There is gated paved road access to the site.
The comp’s general location is similar to the subject. The specific l ocation is inferior to the subject property. The comparable’s utilit ies (water, sewer and power) are similar to the subject property. The comp is an interior site an d rated similar to the subject. The comp has a lesser highest and best use as compared to the subject’s MU zoning. The irregular shape/utility of the comp is s imilar to the subject property. The level topography is similar to the subject. The comparabl e has paved road access and is similar to the subject property. The smaller size of the comp is superior to the subject property (economies of scale) . The lack of residential use in the filled tideland areas are rated superior to the subject. All factors considered; the subject property’s unit value is above this indicator.
Comparable Sale Number Four – refers to a Pending sale due to close escrow in November 2020. The parcel is zoned MU-H2, mixed use commercial and residential zone. This property is a level corner site with water frontage. The site is within the Cannery Village. There is water, sewer and power in the street.
The shape is irregular. The parcel is a finished lot consisting of 6,900 gross square feet with a net land area of 4,800 square feet . The buyer’s intended use no plans for development. According to Chris Maddy, listing agent and LoopNet, the Pending sale was confirmed at $3,550,000 . There is paved road access to the site.
The comp’s general and specific locations are similar to the subject. The comparable’s utilit ies (water, sewer and power) are similar to the subject property. The comp is a corner site and rated superior to the subject. The comp has a similar zoning. The irregular shape/utility of the comp is s imilar to the subject property. The level topography is similar to the subject. The comparable has paved road access and is similar to the subject property. The parcel is a vacant finished lot and is rated similar to the subject property. The smaller size of the comp is superior to the subject property (economies of scale). The lack of residential use in the filled tideland areas are rated superior to the subject. All factors considered; the subject property’s unit value is below this indicator.
Comparable Listing Number Five – refers to a current listing. The parcel is zoned MU-H2, mixed use commercial and residential zone. This property is a level corner site without water frontage. The site is within the Cannery Village. There is an older commercial building which will be demolished (no value assigned to the improvements). There is water, sewer and power in the street. The shape is rectangular.
The parcel is a finished lot consisting of a net land area of 4,500 square feet. The buyer’s intended use is for an automobile storage garage. According to Chris Maddy, listing agent and the MLS, the listing was confirmed at $2,395,000. There is paved road access to the site.
This comparable listing was adjusted downward from the listing price to a n estimated closed sale price.
The comp’s general location is similar to the subject. The specific location is inferior to the subject property due to its lack of water frontage. The comparable’s utilities (water, sewer and power) are similar 12-207
497
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 69
to the subject property. The comp is a corner site and rated superior to the subject. The comp has a similar zoning. The rectangular shape/utility of the comp is s uperior to the subject prop erty. The level topography is similar to the subject. The comparable has paved road access and is similar to the subject property. The parcel is improved with an older commercial building and is rated inferior to the subject property relative to demolition costs after the purchase. The smaller size of the comp is superior to the subject property (economies of scale) . The lack of residential use in the filled tideland areas are rated superior to the subject. All factors considered; the subject property’s unit value is above this indicator.
Sales Comparison Approach Conclusion
The adjusted value range is from $234.70 per SF to $734.21 per SF. Consideration has been given to each of the comparable sales. Greatest weight is given to Sale Four and Listing Five. Listing Five suggests the lower value range of $239.50 per SF for the subject property. Sale Four suggests the upper value range of $332.81 per square foot for the subject property. The appraisers reconciled the preceding value range at $250.00 per square foot.
Land Size
(SF)
X
Unit Value
($/SF)
=
Value
Conclusion
32,990.71 X $250.00 = $8,247,677.50
Covid-19 Market Impact
As discussed previously, the current/ongoing Covid-19 global pandemic is having reported impact on financing rates/lender spreads, lowered lo an-to-value (LTV) ratios, landlord and tenant cash flows, etc. Given the rapidity of events related to the pandemic that have affected real estate sales, the present risks (as of the effective date of value) appear to be financing related and broad uncertainty in global/national/local economics in the near term. This being the case, price/value discounting for the subject is prudent.
Based on published information on the virus impacts avai lable to us and our discussions with industry professionals, it is c onsidered that an applied 5% risk discount for the subject is warranted and prudent. This being the case, an adjusted value for the subject that considers this nominal risk discount is estimated as $8,247,677.50 X .95 = $7,835,294, rounded to $7,835,000.
Sale
Number
Overall
Comparison Adjusted $/SF
1 Superior $734.21
2 Superior $386.79
4 Superior $332.81
Subject
5 Inferior $239.50
3 Inferior $234.70
VALUE ARRAY
12-208
498
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 70
Based on the data and analysis presented above, it is our opinion that the following value is indicated for the subject property according to the Sales Comparison Approach.
Value Conclusion – Sales Comparison Approach
“Fair Market” Value Conclusion $7,835,000
12-209
499
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 71
Cost Data
The analysis of the subject development via the Cost Approach has been undertaken utilizing a study based on cost data published by Marshall Valuation Service. The replacement cost and physical depreciation estimates presented are based on cost data from Marshall Valuation Service, a national cost estimating service, together with other cost data maintained in our files. These costs include direct costs, overhead, and contractor’s profit. The replacement cost new for the showroom/workshop building areas, Section 14, pages 31 and 32, dated February 2020, equipment shed buildings, Section 17, page 12 dated May 2019. The concrete paving and asphalt paving costs were found in Section 66, page 1, dated December 2019. The chain link fencing and gate costs were found in Section 66, page 4, dated December 2019. The masonry wall cost were found in Section 66, page 4, dated December 2019. The deck and ramp costs were found in Section 67, page 6, dated December 2019. The handicapped ramp were found in Section 66, page 2, dated December 2019. Current Cost multiplier of 1.05 were found in Section 99, page 3 and Local Cost Multiplier of 1.25 was found in Section 99, page 6 dated September 2020 and July 2020, respectively.
The cost factors from the Marshall Valuation Service of Marshall & Swift are based on a survey of actual, final costs to the owner. These costs include the following:
1. Architect’s and Engineer’s fees, which in turn includes plans, plan check, building permits, and surveys to establish building lines and grades;
2. Normal interest on building funds during the period of construction. These financing costs have been extrapolated and deducted from the base cost factor used in our analysis. They are added back in as separate items for explanatory purposes;
3. Sales taxes on materials;
4. Normal site preparation including excavation for foundation and backfill;
5. Utilities from structure to lot line (figured for typical setback);
6. Contractor’s overhead and profit, including job supervision, workmen’s compensation, fire and liability insurance, unemployment insurance, etc.
A detailed breakdown of the direct and indirect costs applied in the Cost Approach via Marshall & Swift is provided on the following page.
12-210
500
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 72
ESTIMATION OF DIRECT COSTS
Component Sq. Ft. $/Sq. Ft.
Building Improvements (Showroom) 2,300 x 176.00$ = 404,800$ Building Improvements (Workshops) 1,260 x 63.00$ = 79,380$ Portable Shed Improvements 600 x 30.00$ = 18,000$ Site Improvements 0 x -$ = 355,963$
TOTAL DIRECT COSTS 858,143$
ESTIMATION OF INDIRECT COSTS
Financing Cost During Construction
Loan Amount 858,143$
Construction Period (months) 12
Average Outstanding Balance 65%
Interest Rate 5.00%
Total Interest Payment 27,890$
Points to Secure Financing 2.00% 17,163$
Lease-Up Costs
Rentable Area
Average Market Rent psf -$
Typical Lease Term (months)
Broker's Fee 0.00%
Total Lease-Up Cost -$
Contingencies (change orders, etc.) 2.00% 17,163$
Real Estate Taxes During Construction
Land Value 7,835,000$
Construction Period (months) 8
Tax Rate 1.052850% 54,994$
TOTAL INDIRECT COSTS (12%) 117,209$
TOTAL COST NEW PRIOR TO DEVELOPER'S PROFIT (100%) 975,352$ PLUS DEVELOPER'S PROFIT 15% = 146,303$
TOTAL COST NEW INCLUDING DEVELOPER'S PROFIT 1,121,655$
LESS ACCUMULATED DEPRECIATION
Effective Age 20 Years
Economic Life 45 Years
Physical 44% = 498,513$
Functional 0% = -$
Economic 0% = -$ 498,513$
ESTIMATED REMAINING IMPROVEMENT VALUE 623,142$
PLUS LAND VALUE 7,835,000$
VALUE INDICATED BY COST APPROACH 8,458,142$
ROUNDED 8,500,000$
according to the Cost Approach, is: $ 8,500,000
Therefore it is our opinion that the Market Value of the subject property as of the stated date of valuation,
SUMMARY OF COST APPROACH ANALYSIS
12-211
501
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 73
The base factor utilized in our analysis is based on Marshall & Swift’s category for Class-S, Metal and Class D wood frame Construction properties. Effective age for the showroom and workshop building, were estimated at 20 years and a total economic life of 45 years which results in 44% physical depreciation.
Physical depreciation is calculated based on the effective age/life method as follows:
Effective age divided by estimated economic life equals depreciation percentage. The subject property is proposed. Therefore, the amount of depreciation is applicable.
Functional Obsolescence stems from features intrinsic to the subject property such as poor design features, building inadequacies, or features of the property that are deemed super -adequate. The subject improvements as designed do not reflect Functional Obsolescence.
Economic Obsolescence is loss in value stemming from sources outside the subject property such as changes in surrounding uses, declination in market conditions, or offensive byproducts or pollution emanating from nearby uses. There are no external surrounding uses that reflect External Obsolescence.
Developer’s profit is th e economic return required by a developer as compensation for taking on the entrepreneurial risk of development. Developers typically calculate profit based on any of the following relationships: As a proportion of direct costs; as a proportion of direct plus indirect costs; as a proportion of direct, indirect and land costs; and finally, as a proportion of the total value of the proj ect. The same dollar value of profit could result in a wide range of proportions due to differing basis of comparison. A survey of developers for properties similar to the subject in its general area indicated that profit is typically calculated as a percentage of total direct and indirect costs. This survey dictated a typical required profit of 10% to 20% of that base. Thi s method of calculation has been used in our Cost Approach analysis, assuming a 15% required profit.
Conclusion of Market Value – Cost Approach
Therefore, in our opinion the Market Value of the Leased Fee Interest in the subject landside property, as of our date of inspection, is rounded to $8,500,000.
12-212
502
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 74
Landside Area:
RATE OF RETURN
Upon determining the market value of the l andside area and related land improvements (showroom, workshops and site improvements) a rate of return was employed to estimate the market rental value.
The rate of return employed in the subject case is derived based on Capitalization Rates (1) Costar Newport Beach Submarket retail and multi-family rates (2) Realty Rates.Com retail and apartment land leases and (3) Price Waterhouse Real Estate Investor Survey (PWC) of Net Lease Investments and apartment investments.
Retail Market Cap Rates
Multi-family Market Cap Rates
12-213
503
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 75
The preceding Market Cap Rate graph for retail properties was reported by Costar at 4.5% and for Multi- family properties at approximately 4.0%.
Realty Rates.com
The preceding Market Cap Rate graph for retail land leases was reported by RealtyRates.com at an average of 5.73% and for Multi-family properties land lease rates was reported at an average of 5.18%.
12-214
504
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 76
PWC Real Estate Investor Survey
The preceding Market Cap Rate graph for retail Net Lease properties was reported by PWC at an average of 6.22% and for Multi-family properties in the Pacific Region at an average of 4.80%.
The PWC survey is more broadly based survey, and typically involves major income producing properties.
Primary weight has been assigned to (1) the capita lization rates de rived from the Newport Beach Submarket survey, having a range from 4.0% to 4.5% for both property types and (2) the RealtyRates.com Investor survey, having a range from 5.18% to 5.73%.
Given that the subject property represents a net leas e investment and considering that the value is derived from the Cost Approach, a rate at the upper end of survey’s (1) and (2) is employed herein. The indicated rate of return applied to the subject landside area, inclusive of the underlying land value, building and site improvements, is estimated at an annual rate of return of 4.5%. 12-215
505
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 77
Water Area:
As stated, the rental value of the water area is based on a Direct Rental Comparison Approach. The water area of the subject site is typically suitable to support boat slips. As is typical with water parcels, many of which are developed with marinas, the rental rate for the water area is based on the boat slip rental rates, typically expressed as a rate per lineal foot. The boast slip rental rates are all inclusive of the water area, boat slips and the dock improvements.
A survey was conducted of certain other marinas in the immediate subject area to determine the rental rate (per lineal foot) applicable to boat slips. It should be noted that given there is gen erally greater demand for larger slips, the greater the slip length, the higher the rate per lineal foot.
The reader is referred to the summary of certain boat slip rental rates below.
Boat Slip Survey:
Balboa Yacht Basin, Newport Beach
Slip Length 2020-2021 Slip Rate (per foot per
month)
20’ $25.82
25’ $26.78
31’ $29.35
32’ $29.84
34’ $34.14
35” $34.14
37’ $34.24
40’ $37.75
50’ $46.84
60’ $51.69
75’ $54.79
Lido Yacht Anchorage Marina
Slip Length 2020-2021 Slip Rate (per foot per
month)
40’ $48.00
45’ $40 to $49.00
60’ $57.00
Marina at Dana Point
Slip Length 2020-2021 Slip Rate (per foot per
month)
40’ $19.68
45’ $20.07
50’ $20.80
60’ $22.90
12-216
506
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 78
Newport Marina at Bayshore Drive
Slip Length 2020-2021 Slip Rate (per foot per
month)
45’ $40.00
Balboa Marina
Slip Length 2020-2021 Slip Rate (per foot per
month)
58’ $44.83
With respect to the subject water areas, the City of Newport Beach owner of the water area) constructed all landside and water improvements. Hence, it is necessary to estimate the rental value of the effective “unimproved” water areas. For the unimproved water area, is typically based on a percentage rent of the total gross revenue derived from the boat slips . According to Section 9 (e) “all construction improvements shall, upon completion, become part of the Premises, owned by the City of Newport Beach,” (costs pertinent to the docks/slips).
AS noted, the boat slip rental rates are within a generally tight range, when considering the overall rate per lineal foot and slip length. In the case of the subject property, there are three boat slips and one side- tie slip. The side-tie slip according to Chris Miller, City of Newport Beach Public Works Department would be leased at the same rental rate as the boat slips. The sizes are restated below with our estimate of fair market rent for the slips.
Sizes Rent Per Lineal Foot Monthly Rent
1. 46-lf by 25’ wide $40.00 $1,840
2. 46-lf by 25’ wide $40.00 $1,840
3. 62-lf by 30’ wide $52.00 $3,224
4. 46’ side-tie dock $40.00 $1,840
Following is a survey of percentage rental rates for boast slips at various marinas in the Southern California area:
Port of Los Angeles 20% to 25%
Dana Landing Marina 25%
Marina del Rey 25%
Port of San Diego 22% to 25%
Balboa Yacht – Newport Beach 31%
As noted, the percentage rates range from 20% to 31%. The 31% rate at Newport Beach is deemed far superior given the location. The vast majority of percentage rates at Marina del Rey (20+/- master lessee tenants) is 25%. The majority of the percentage rates at Port of San Diego owned marinas is 22%.
Given the subject is located in the Newport Beach Harbor Marina, a percentage rate of 3 0% is deemed applicable to the subject slips. Note, that the 30% percentage rate is applied to the fair market annualized gross slip rental rates set forth above.
12-217
507
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 79
FAIR MARKET RENTAL VALUE
Water Rental Value:
Boat Slip Slip Rate/year Water % Rent Annual Land Rent
1. 46-lf by 25’ wide $22,080.00 0.30 $ 6,624
2. 46-lf by 25’ wide $22,080.00 0.30 $ 6,624
3. 62-lf by 30’ wide $38,688.00 0.30 $11,606
4. 46’ side-tie dock $22,080.00 0.30 $ 6,624
Subtotal: $31,478
Plus, Land-Side Area (Cost Approach) Rate of Return Annual Landside Rent $8,500,000 0.045 $382,500
Total Fair Market Base Rent: $413,978
Historical Percentage Rent Paid:
Year End – 2018 $73,727.24 or $6,144 per month (average) Year End – 2019 $70,360.29 or $5,863 per month (average) Average Annual Rent Paid: $72,043.76
Average Monthly Rent Paid: $6,003.65
February 2020 $ 6,655.83
March 2020 $ 8,888.01
April 2020 $ 9,536.69
May 2020 $ 2,189.05
June 2020 $15,367.87
July 2020 $ 8,201.93
August 2020 $ 9,050.68
Total (7 months) $59,890.06
Average Monthly Rent Paid: $ 8,555.72
The economic impact by the Corona Virus Pandemic from March thru August 2020 suggest that the percentage rent is more in-line with the average annual rent paid in 2018 and 2019 of $72,043.76.
Therefore, we have reconciled the annual 2020 rent at $6,500 or $78,000 per year.
Reconciled Monthly Percentage Rent: $ 6,500.00
Reconciled Annual Percentage Rent: $ 78,000.00
Plus, Base Rent: $413,978.00
Fair Market Rent: $491,978.00
Rounded to: $492,000.00
12-218
508
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 80
RECONCILIATION
Our valuation analyses presented in this appraisal report concluded to the following opinions:
Valuation Approach Value Conclusion
Cost Approach $8,500,000
Sales Comparison Approach Not Applicable
Income Capitalization Approach Not Applicable
The Cost Approach is considered to be a strong indicator of value in recently constructed buildings, particularly when current construction costs are available and there is recent comparable land sale data that would lead to an accurate estimate of the underlying site value. This approach is weakened, however, as a building grows older because of the difficulty in accurately measuring physical depreciation. On special purpose properties, t he Cost Approach can provide a reasonable return on the land and improvements.
The Cost Approach is applicable to this assignment for the following reasons:
• The subject property is improved land and,
• A reasonable annual return rate is the conventional approach relied upon by participants in the subject’s marketplace for the land and improvement valuation.
The Sales Comparison Approach can be a strong indicator of value when there is an adequate number of comparable property sales that are similar to the subject in physical, functional, economic and location characteristics. This approach i s weakened when the quantity or nature of available market data is insufficient for purposes of direct comparison.
We gave primary consideration to the Sales Comparison Approach for the land valuation.
The Income Capitalization Approach via the Discount C ash Flow analysis considers the future expectations of investors for properties such as the s ubject. It considers current market rate -of-return requirements through the selection of a market -derived discount rates. This approach is most relevant when there are adequate market data from which to determine market discount rate requirements.
We gave primary consideration to the Cost Approach and applicable annual return rates for the subject property because the subject property is encumbered by a short-term ground lease (five years remaining).
12-219
509
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 81
CONCLUSION
Our research indicates that the Cost Approach should be given the greatest consideration in our final determination of the Leased Fee value.
Therefore, based on the data and analysis above, the table below presents our final valuation conclusion(s) of the stated ownership interest, as of the stated date(s) of valuation.
Valuation
Premise
Interest
Appraised
Effective Date
of Value
FINAL
Value
Conclusion
Fair Market Rental Value Leased Fee 10/21/2020 $492,000
12-220
510
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 82
EXPOSURE TIME
Exposure Time is defined as "The estimated length of time the property interest being appraised would have to have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.”
The following table shows exposure times for each of the land comparable sales reported in the Sales Comparison Approach.
Sale Comp # Exposure Time
1 1 day
2 1 day
3 367 days
4 188 days
5 89 days
In addition, we inquired with knowledgeable local brokers about a reasonable exposure time that would have been required to sell the subject property as of the date of valuation. Our research indicates that a reasonable exposure time estimate for the subject property would have been 3 to 4 months.
12-221
511
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA Page 83
CERTIFICATION
We certify that to the best of our knowledge and belief:
• The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial, and unbiased professional analyses, opi nions, and conclusions. • We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.
• We have no bias with respect to the property that is the subject of this r eport or to the parties involved with this assignment.
• Our engagement in this assignment was not contingent upon developing or reportin g predetermined results.
• Our compensation for completing this assignment is not contingent upon the development or report ing of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
• Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. • The reported analyses, opinions, and conclusions were developed, and this report has bee n prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.
• The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
• As of the date of this report, Joe Villegas, MAI and David Rosenthal, MAI have completed the continuing education program for designated members of the Appraisal Institute. • We have had ample experience with the subject property type and marketplace, and we possess the requisite knowledge to perform this appraisal assignment competently. • Joe Villegas , MAI and Naomi Jean Bonner have made a personal inspection of the property that is the subject of this report. David Rosenthal, MAI, FRICS has not made a personal inspection of the property that is the subject of this report.
• Joe Villegas, MAI has performed the selection of comparable properties, collection and verification of data, and preliminary analysis. David Rosenthal, MAI, FRICS has reviewed and approved the final selection of comparable properties, and the final analysis and conclusion of value. Other than those mentioned, no one provided significant real property appraisal assistance to the person(s) signing this certification. • We have not performed appraisal services, as appraisers regarding the property that is the subject of this report, immediately preceding acceptance of this assignment.
Joe J. Villegas, MAI
CA #AG004648
[email protected]
David M. Rosenthal, MAI, FRICS
CA #AG001641
[email protected]
12-222
512
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
ADDENDA
DEFINITIONS
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
APPRAISER QUALIFICATIONS AND LICENSES
PARTIAL LIST OF CLIENTS
12-223
513
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Definitions
Definitions are cited from The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), published by the Appraisal Institute, unless otherwise noted) Appraisal – “1. The act or process of developing an opinion of value. 2. An opinion of value.” As Is Market Value - “The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.”
Extraordinary Assumption – “An assignment -specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trends; or the integrity of data used in an analysis.” (USPAP 2018-2019) Fair Market Value - "The price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” (IRS Regulations 26 CFR 20.2031-1b and 26 CFR 25.2512-1) Fee Simple Estate - “Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.”
Ground Lease – “A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor at the end of the lease term.” Hypothetical Condition – “A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results but is used for the purpose of analysis . Comment: Hypothetical co nditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.” (USPAP 2018-2019) Leased Fee Estate – “A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).” Leasehold Estate – “The tenant’s possessory interest created by a lease.” Market Rent - "The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs)."
12-224
514
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Market Value - The following definition of Market Value is used by agencies that regulate federally insured financial institutions in the United Stat es (U.S. Code Title 12, CF R Banks and Banking, Part 323.2 as published in the Federal Register):
"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
a. buyer and seller are typically motivated;
b. both parties are well -informed or well -advised, and acting in what they consider their best interests;
c. a reasonable time is allowed for exposure in the open market; d. payment is made in terms of cash in U.S. dollars or in terms of finan cial arrangements comparable thereto; and
e. the price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”
Prospective Opinion of Value – “A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.”
Retrospective Value Opinion – “A value opinion effective as of a specified historical date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection w ith property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., “retrospective market value opinion.” Sandwich Leasehold Estate – “The interest held by the original lessee when the property is subleased to another party; a type of leasehold estate.”
Stabilized Occupancy – “An expression of the expected occupancy of a property in its particular market considering current and forecasted supply and demand, assuming it is priced at market rent.”
12-225
515
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
General Assumptions and Limiting Conditions
This appraisal report has been made with the following General Assumptions:
1. No responsibility is assumed for the legal description or for matters includi ng legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated.
2. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated.
3. Responsible ownership and competent property management are assumed.
4. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.
5. All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property.
6. It is assumed that there are no hidden or apparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.
7. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report.
8. It is assumed that there is compliance with all applicable zoning and land use regulations and restrictions unless nonconformity has been stated, defined, and considered in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based.
10. It is assume d that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report.
12-226
516
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
This appraisal report has been made with the following General Limiting Conditions:
1. The distribution, if any, of the total valuation in this report between land and improvements, applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.
2. Possession of this report, or a copy thereof, does not carry with it the right of publication.
3. The appraisers, by reason of this appraisal, are not required to give furt her consultation, testimony, or be i n attendance in court with reference to the property in question, unless arrangements have been previously made.
4. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or the firm wi th which the appraisers are connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser.
5. Any value est imates provided in the report apply to the entire property, and any proration or division of the total into fractional interests will invalidate the value estimate unless such proration or division of interests has been set forth in the report.
6. The appraisers assume that the reader or user o f this report has been provided with copies of available building plans and all leases and amendments, if any, encumbering the property.
7. No survey was furnished so the appraisers relied on the assessor’s plat map to asce rtain the physical dimensions and ac reage of the subject property. Should a survey prove these characteristics inaccurate, it may be necessary for this appraisal to be adjusted.
8. The forecasts, projections, or operating estimates contained herein are based upon current market conditions, anti cipated short-term supply and demand factors, and a continued stable economy. These forecasts are, therefore, subject to changes in future conditions.
9. Complete building plans and specifications were not available f or use in the preparation of this appraisal. The analysis, therefore, is subject to review of the final plans and specifications when available.
10. Any proposed improvements are assumed to have been completed unless otherwise stipulated. Any construction is assumed to conform to the building plans referenced in the report.
11. Since earthquakes are not uncommon in the area, no responsibility is assumed due to their possible effect on individual properties, unless detailed geologic reports are made available.
12. No te rmite inspection report was available. The appraisers personally inspected the subject property and found no significant evidence of termite damage or infestation. No guarantee that none exists, however, should be construed.
13. No consideration has been given in this appraisal to the value of propert y considered by the appraisers to be personal, located on the premises, or the cost of moving/relocating such personal property. Only the real estate has been considered.
12-227
517
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
14. In this appraisal assignment, the existen ce of potentially hazardous materials used in the construction or maintenance of the building, such as the presence of asbestos or urea formaldehyde foam insulation, and/or the existence of toxic waste, which may or may not be present on the property, has not been considered. The appraisers are not qualified to detect such substances. We urge the client to retain an expert in the field if desired.
15. Unless otherwise stated, no responsibility is assumed for any damage sustained in connection with actual or potential deficiencies or hazards such as, but not limited to, inadequacies or defects in the structure, design, mechanical equipment or utility services associated with the improvements, air or water pollution, lead paint, noise, flooding, storms or wind, traffic and other neighborhood hazards, radon gas, asbestos, natural or artificial radiation, or hazardous materials or toxic substances of any description, whether on or off the property appraised. The appraisers are not qualified to detect hazardous waste or materials on, in or under the land or t he improvements. Such a determination requires the investigation of a qualified expert in hazardous materials and assessment. In this appraisal assignment, the existence of potentially hazardous material used in the construction or maintenance of the building, such as the presence of asbestos or urea formaldehyde foam insulation, and/or existence of toxic waste, which may or may not be present on the property, has not been considered. The appraisers are not qualified to detect such substances. We urge the client to retain an expert in this field if desired.
16. The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of the subject property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. Since compliance matches each owner’s financial ability with the cost -to-cure the property’s potential physical characteristics, the real estate appraiser cannot comment on compliance with ADA. A brief summary o f the subject’s physical aspects is included in this report; however, this does not suggest ADA compliance by the current owner. Given that compliance can change with each owner’s financial ability to cure non- accessibility, the value of the subject does n ot consider possible non-compliance. Specific study of both the owner’s financial ability and the cost -to-cure any deficiencies would be needed for the Department of Justice to determine compliance.
17. The appraisers made no engineering survey of the subject property. Except as specifically stated, data relative to size and area has been taken from sources considered reliable, but no guarantee of accuracy is expressed or implied. Interested parties should retain a surveyor or other qualified professional for exact measurements of the subject property.
12-228
518
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
SPECIAL ASSUMPTIONS AND CONDITIONS
The applicability of Extraordinary Assumptions, Hypothetical Conditions or Special Limiting Conditions is addressed in the Scope of Work section of this report.
Market concerns regarding the COVID-19 coronavirus have resulted in substantial volatility in the capital markets, increasing uncertainty in the real property marketplace. It is difficult to predict what may happen in the capital markets going forward. As a result, it is difficult to predict what may happen to real property values over time. Our valuation of the subject property considered the best information that was available at the time of ou r analysis. Due to on -going volatility in the marketplace, users of t his appraisal should consider the current market uncertainty when determining the level of confidence, they choose to place on these analyses and conclusions. Users are reminded that th e appraisal conclusions in this report are effective as of the stated date(s) of valuation.
12-229
519
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Appraiser Qualifications
Professional Qualifications of JOE VILLEGAS, MAI
EDUCATION
Bachelor of Arts Degree, 1974
California State University, Fullerton, Fullerton, California Major in Art and History
PROFESSIONAL DESIGNATIONS
Appraisal Institute No. 9196
MAI Member
State of California, Bureau of Real Estate Appraisers
Certified General Real Estate Appraiser (#AG004648)
State of California, Real Estate Broker
(License # 00380118)
International Right of Way Association
Member and Past President of Inland Empire Chapter 57
EXPERIENCE
CURTIS - ROSENTHAL, Inc., 2016 to date – Regional Manager Inland Empire Perform field appraisals, and review appraisals for public and private sector clients. Properties appraised include: residential, apartments, commercial, industrial, special purpose, vacant land and part takes.
Villegas Appraisal Co., -1987-2015 Real Estate Appraiser Responsible for the appraisal of retail shopping centers, office buildings, restaurants, motels, apartment complexes, cold storage facilities, mixed use commercial projects and residential subdivisions.
Completed hundreds of appraisal assignments for public and private sector clients throughout Southern California. Experience includes providing reviews of commercial and residential appraisal reports for the banking industry. Extensive experience providing expert witness services including deposition and trial testimony.
EXPERT WITNESS
Accepted as an expert witness in Los Angeles County Superior Court and Orange County.
PROJECT EXPERIENCE
• California High-Speed Rail Authority, First Construction Section, Fresno County, CA
• De Anza Boulevard Realignment Project, City of Calexico, CA
• Caltrans, Region 7, 710 Freeway Corridor Project, Cities of South Pasadena, Pasadena and Los Angeles, CA
• Southern California Gas Company Pipe Line Upgrade Project, San Luis Obispo County and City of Pismo Beach,
CA
• Southern California Gas Company Pipe Line Upgrade Project, Kings County, CA
• Yucaipa Boulevard Widening Project, City of Yucaipa
• Palm Canyon Drive Widening Project, City of Palm Springs
• Alder Avenue Widening Project, City of Rialto
• Avenue E Roundabout Project, City of Yucaipa
• Renaissance Parkway Project, City of Rialto
• Former Youth Correction Facility, Paso Robles for the CA Department of General Services
12-230
520
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Current Appraiser License
12-231
521
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Professional Qualifications of DAVID M. ROSENTHAL, MAI, FRICS
PROFESSIONAL DESIGNATIONS
Appraisal Institute
MAI Member, Appraisal Institute (MAI #8024)
Member of the Regional Ethics & Counseling Panel, 1994-1997, 2000-2003
Royal Institution of Chartered Surveyors
Fellow of the Royal Institution of Chartered Surveyors, (FRICS #1291058) State of California, Bureau of Real Estate Appraisers
Certified General Real Estate Appraiser (#AG001641)
EDUCATION
Master of Management Degree (MBA), 1980
J.L. Kellogg Graduate School of Management, Northwestern University, Evanston, Illinois - Concentrations in Finance and Accounting
Bachelor of Science Degree, 1978
University of Florida, Gainesville, Florida
Major in Business Administration - concentration in Finance
EXPERIENCE
CURTIS - ROSENTHAL, Inc., 1983 to present – President & CEO Founding principal of regional commercial real estate appraisal and consulting firm.
Perform field appraisals and review appraisals for: Commercial Mortgage Lenders (Banks, Life Insurance Companies, CMBS, Pension Funds), Public Agencies (City Governments, Transit Agencies), Law Firms (Real Estate Litigation, Estate and Trust, Lease Negotiation), Corporations (Valuation for Financial Reporting), and Accounting Firms. Properties appraised include: retail, office, industrial, apartments, condominiums, mixed-use, special purpose, and vacant land. Areas of experience include southern and northern California, Arizona and Nevada.
Security Pacific National Bank, 1981-1982 - Corporate Loan Officer Responsible for portfolio of loans consisting primarily of real estate companies. Projects financed included construction and renovation of income properties and development of new residential tracts.
EXPERT WITNESS
Accepted as an expert witness in the following courts:
Federal Bankruptcy Court - California Central District
Superior Court - Los Angeles County and Orange County
Municipal Court - Orange County
INSTRUCTOR
Loyola Marymount University, 1987 - 2016
College of Business Administration, Finance Department - Guest Instructor
Federal Reserve Bank of San Francisco, 2015
Risk Connection 2015, Risks with Construction Development Lending-Guest Trainer
University of California at Los Angeles, 1988
UCLA Extension, Financial Institutions Management Program - Guest Instructor 12-232
522
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Professional Qualifications of DAVID M. ROSENTHAL, MAI, FRICS (Cont’d)
PROFESSIONAL AFFILIATIONS
Appraisal Institute, 1989-present
Strategic Planning Committee, Chairman 2014
IRS Valuation Summit, Los Angeles, Conference Co-Chair 2013; Washington D.C., Planning Committee 2014 California Bankers Association, Affiliate Member 2009-present California Mortgage Bankers Association (CMBA), Affiliate Member, 2001-2014, 2017, 2018 Planning Committee for Commercial Real Estate Finance Conference, 2003–2014 Entrepreneurs Organization (EO, formerly YEO/WEO), 1997 to 2007 International Council of Shopping Centers (ICSC), 2011, 2017 Los Angeles Economic Development Corporation, 2004
Los Angeles Estate Planning Council (LAEPC), 2009-present; Program Chair 2009-2010 Los Angeles Mortgage Association (LAMA), Co-Founder, Co-Chair 2000–present Royal Institution of Chartered Surveyors, 2010-present
Society of Chief Appraisers (SCA), Planning Committee, 2009-present Southern California Real Estate Alliance (SCREA), 1987-present; Co-Chair 1995-1996, 2003 Western Independent Bankers, Affiliate Member 2009-2011
SPEAKING ENGAGEMENTS
Appraisal Institute
IRS Valuation Summit, Conference Co-Chair 2013; Moderator-Partial Interest Valuation Panel 2013, 2014 Western Regional Conference, 1996-1999
SF Bay Area Fall Conference, 1998
California Bankers Association, Chief Credit Officers Symposium, 2008-2010 California Bar Association, Real Property Law Section, 2011 California Mortgage Bankers Association, Commercial Real Estate Finance Conference, 2003-2009, 2014 California CPA Education Foundation, 1998
CREFC Capital Markets Conference, 2014
Crittenden National Conference, 2009
ICSC/LAMA Capital Markets Conference, 2011-2012
IMN Troubled Assets Conference, 2010
Institute of Management Accountants, 1997
International Right of Way Association, IRWA/AI Joint Conference, 2002, 2008 Los Angeles Estate Planning Council, 2009
National Council of Real Estate Investment Fiduciaries (NCREIF), National Conference, 2005 Society of Chief Appraisers 2009-2015
Special Assets Management Association, 2010-2012
Western Independent Bankers, Troubled Asset Forum, 2009, 2011
PUBLICATIONS
California Mortgage Bankers Association Legal News
Valuation Clauses in Leases, Ground Leases and Purchase Options, September 2011 California Mortgage Finance News
Silicon Beach, The New Frontier, September 2015
Life Company Risk-Based Capital for Commercial Mortgages, September 2013 Understanding the New Interagency Appraisal and Evaluation Guidelines, May 2011 California Real Estate Journal
Telling the Story – A Solutions Approach to Appraisal, September 2003 Real Estate News Television (RENTV.com)
Economic Update, Regular Column 2002 to 2015
Real Estate Southern California
What Happened to CMBS? September 2007
The ABC’s of CDO’s, September 2006
The CMBS Market Comes of Age, March 2006
Real Estate Cycles – A Long Term Perspective, September 2005 Western Independent Bankers – Lending and Credit Digest Evaluations in Compliance with the Interagency Appraisal and Evaluation Guidelines, June 2012 Assessing Collateral Values, October 2010
Commercial Bank Appraisal Administration, July 2010
12-233
523
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Current Appraiser License
12-234
524
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Partial List of Clients Served
COMMERCIAL BANKS
American Continental Bank
Americas United Bank
Bank of America
Bank of Manhattan
Bank of Hemet
Bank of the Ozarks
Bank of Santa Clarita
Bank of the West
Bank One Arizona
BofI Federal Bank
Borel Private Bank & Trust Co.
Boston Private Bank & Trust Co.
Builders Bank
California Business Bank
Capital One Bank
Cathay Bank
Centennial Bank
Citigroup
Citizens Business Bank
City National Bank
City State Bank
Coast National Bank
Community Bank
CTBC Bank
Eastern International Bank
East West Bank
EverTrust Bank
Far East National Bank
Farmers and Merchants Bank
FDIC
First Commerce Bank
First Foundation Bank
First General Bank
First National Bank of Northern California
First National Bank of Southern California
First Republic Bank
Grandpoint Bank
Greater Bay Bancorp
Habib American Bank
Hanmi Bank
Heritage Oaks Bank
Independence Bank
JP Morgan Chase Bank
Key Bank
Korea Exchange Bank
La Jolla Bank
Luther Burbank Savings Bank
Macquarie Bank
Marshall & Isley Bank
Mellon First Business Bank
Mercantile National Bank
MidFirst Bank
Mission Bank
Mission Valley Bank
NARA Bank
National Bank of California
Northern Trust Bank
Pacific Alliance Bank
Pacific Capital Bancorp
Pacific City Bank
Pacific Commerce Bank
Pacific Mercantile Bank
Pacific Premier Bank
Pacific Western Bank
Philippine National Bank
Popular Community Bank
Preferred Bank
Premier Business Bank
Premier Commercial Bank
Provident Bank
Provident Savings Bank
Rabobank
Regents Bank
Royal Business Bank
Saehan Bank
Security Bank of California
Silvergate Bank
Sunwest Bank
The Private Bank of California
United Business Bank
Universal Bank
US Bancorp
US Metro Bank
Vibra Bank
Wells Fargo Bank
Wilshire Bank
Zions Bank
CREDIT UNIONS
Altura Credit Union
American First Credit Union
California Coast Credit Union
California Credit Union
Extensia Financial
Kinecta Federal Credit Union
LA Fireman’s Credit Union
Mission Federal Credit Union
NuVision Credit Union
Orange County’s Credit Union
Premier America Credit Union
Southland Credit Union
12-235
525
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Partial List of Clients Served (Cont)
INSURANCE COMPANIES
AEGON USA
Allianz Life Insurance Company
Allstate Investments, LLC
American Equity Investment Life Insurance Co.
American National Insurance Company
American United Life Insurance Company
Assurant Inc.
Chubb Group of Insurance Companies
Columbian Mutual Life Insurance Company
Genworth Financial
Golden State Mutual Life
Great West Life Insurance Company
Hartford Insurance Company
Home Life Insurance Company
IDS Life Insurance Company
ING Life Insurance Company
John Hancock Real Estate Finance
Kansas City Life Insurance Company
Lafayette Life Insurance Company
Lincoln National Life Insurance Company
MetLife Capital Financial Corporation
Nationwide Insurance Company
Principal Global Investors
Protective Life Insurance Company
Prudential Mortgage Capital
Riversource
Southern Farm Bureau Life Insurance
Stancorp Mortgage Investors, LLC
State Farm Insurance Company
Sun Life Insurance Company
SunAmerica Insurance Company
Symetra Financial
Thrivent Financial for Lutherans
Union Central Life Insurance Company
Union Labor Life Insurance Company
United Farm Family Life Insurance Company
United Olympic Life Insurance Company
United Security Insurance Company
MULTI-FAMILY LENDERS
ABN/AMRO Apartment Lending
Ameriprise Financial
Amerisphere Multi-Family Finance
Arbor National Mortgage
Beech Street Capital
Centerline Capital Group
CW Capital
Deutsche Bank Mortgage Capital
Mark One Capital, Inc.
PNC/ARCS Commercial Mortgage
Prudential Huntoon Paige
Walker & Dunlop
COMMERCIAL MORTGAGE BANKERS/ BROKERS
Alison Mortgage Company
Amherst Real Estate Capital
Balboa Financial
Barry S. Slatt Mortgage Company
Berkadia Commercial Mortgage
Bond Street Capital
Buchanan Street Partners
Burnham Capital Markets
Cohen Financial
George Elkins Mortgage Banking Company
George Smith Partners, Inc.
Grandbridge Real Estate Capital
Highland Realty Capital, Inc.
Holiday Fenoglio Fowler, LP
iCap Realty Advisors
Koss Financial Corporation
Love Funding Corporation
Marcus and Millichap Capital Corporation
Mason McDuffie Financial Corporation
Meridian Capital Group, Inc.
Newmark Realty Capital, Inc.
NorthMarq Capital, Inc.
Pacific Southwest Realty Services
Partners Realty Capital, LLC
Pathfinder Mortgage Corporation
Q10 National Mortgage Co.
Sunrise Mortgage & Investment Company
Terrix Financial Corporation
Walker and Dunlop
PENSION FUNDS / ADVISORS
Alcatel Lucent Asset Management Corp.
American Realty Advisors
CALPERS
California State Teachers Retirement System
Construction Laborers Pension Trust
Crosson Dannis, Inc.
Emerson International
Equitable Real Estate Investment Mgt., Inc.
Essex Property Trust
Guggenheim Trust Company, LLC
Heitman/JMB Institutional Realty Advisors
J.P. Morgan Investment Management
Olympic Realty Advisors
Principal Real Estate Investors
Standard Management Company
12-236
526
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Partial List of Clients Served (Cont)
CMBS SPECIAL SERVICERS
C-III Asset Management, LLC
Key Bank
LNR Partners, LLC
Midland Loan Services
Helios AMC, LLC
Berkadia Commercial Mortgage
TriMont Real Estate Advisors
CMBS LENDERS
Barclays Capital Real Estate, Inc.
Bridger Commercial Funding
CIBC World Markets Corp.
Credit Suisse
CW Capital
Deustchebanc Mortgage Capital
JP Morgan Mortgage Capital
Key Commercial Mortgage
Morgan Stanley
Natixis Real Estate Capital, Inc.
RBS Greenwich Capital
Redwood Trust
UBS Securities, LLC
CORPORATIONS
Alta Hospital System
ATT Wireless Services, Inc.
Best California Gas Co.
Bridgestone Retail Operations
Brotman Hospital
California Sports, Inc.
Chevron Oil Company
Getty Oil Company
IMAX Corporation
Los Angeles Orthopedic Hospital Foundation
Mercury Air Cargo, Inc.
Mobil Oil Corporation
Neiman-Marcus Group, Inc.
Pandemic Studios
Rite Aid Corporation
Safeway Corporation
Salvation Army
Santa Monica Home Owners Corporation
Thrifty Oil Company
Wal-Mart Stores, Inc.
Whirlpool Financial Corporation
PUBLIC AGENCIES
California Housing Finance Association
Carson Redevelopment Agency
City of Adelanto
City of Chino
City of Colusa
City of Gardena
City of Grand Terrace
City of Inglewood
City of Los Angeles
City of Montebello
City of Norco
City of Palos Verdes
City of Pasadena
City of Rialto
City of Riverside
City of San Louis Obispo, Housing Authority
City of San Mateo
City of Santa Monica
City of Vernon
City of Whittier
City of Yukaipa
Coachella Valley Mountains Conservancy
Compton Unified School District
Consulate General of Poland
County of San Mateo
Inglewood Redevelopment Agency
Inglewood Unified School District
Los Angeles Community College District
Los Angeles Housing Department
Los Angeles Unified School District
Los Angeles World Airports (LAWA)
Metropolitan Transit Authority (MTA)
Mountains Recreation & Conservation Authority
Newport Harbor Nautical Museum
Oakland Community Housing, Inc.
Philippine Consulate
Rosamond Community Services District
San Fernando Valley Economic Development Corp.
Santa Monica College
Santa Monica-Malibu Unified School District
Simi Valley Unified School District
The Port of Long Beach
The Port of Los Angeles
US General Services Administration
US Postal Service
12-237
527
APPRAISAL REPORT: 829 Harbor Island Drive, Newport Beach, CA ADDENDA
Partial List of Clients Served (Cont)
PARTIAL LIST OF CLIENTS SERVED 1 of 4
ATTORNEYS
Akin Gump Strauss Hauer & Feld, LLP
Allen Matkins Leck Gamble Mallory & Natsis
Arter & Hadden
Barnes & Thornburg LLP
Bird Marella
Booth, Mitchel & Strange, LLP
Brownstein, Hyatt, Farber, Schreck, LLP
Bryan Cave
Burhenn & Gest, LLP
Cadden & Fuller, LLP
Charlston, Revich, & Williams
Chrystie and Berle
Coudert Brothers, LLP
Cox, Castle, & Nicholson
DeCastrow, West, Chodorow, Glickfield & Nass
Engstrom, Lipscomb and Lack
Frandzel Robins Bloom & Csato, LC
Gianelli and Morris
Gibson, Dunn and Crutcher, LLP
Goodson and Wachtel
Greenberg, Glusker, Fields, Claman and Machtinger
Greenberg Traurig
Haight, Brown, & Bonesteel
Hoffman, Saban and Watenmaker
Holt Ney Zatcoff & Wasserman, LLP
Inman, Weisz, & Steinberg
Jeffer, Mangels, Butler, & Mitchell
K&L Gates, LLP
Kane, Ballmer & Berkman
Katten, Muchin, Zavis and Weitzman
King, Holmes, Paterno & Berliner, LLP
Levin & Seligman
Levinson & Lieberman
Loeb and Loeb
Luce, Forward, Hamilton & Scripps LLP
Manatt, Phelps & Phillips, LLP
Marlin and Saltzman
McDermott, Will & Emery
McGuire Woods
McNicholas & McNicholas, LLP
Mindlin and Tigerman
Mitchell, Silberberg, & Knupp, LLP
Morris, Polich and Purdy, LLP
Munger, Tolles, & Olson
Murchison & Cumming
Musick, Peeler & Garrett, LLP
Nixon Peabody, LLP
O’Melvany and Meyers
Orbach Huff Suarez & Henderson, LLP
Parker Milliken
Pillsbury, Madison, and Sutro
Pircher, Nichols, and Meeks
Resch Polster & Berger, LLP
Robinson, Diamant, & Brill
Rodi, Pollock, Pettker, Christian & Pramov
Rucker and Clarkson
Shapiro, Poesell, & Close
Shiotani & Inouye
Sidley and Austin
Smith and Hilbig
Thomashow, Brown and Paiallii, LLP
Tilem and Gole
Troy and Gould
Weinstock Manion
White & Case
Wolf, Rifkin, Shapiro & Shulman
Youngerman and McNutt, LLP
DEVELOPERS
Athena Group, LLC
California Landmark Development
Catellus Development Corporation
Champion Real Estate Services
CIM Group
Cloverfield Group
Combined Properties
Daiwa House Corporation
First City
Goldrich and Kest Industries
Haseko, Inc.
HB Drollinger Company
Held Properties, Inc.
Jamison Services, Inc.
Kennedy Wilson
Koar Development Group, LLC
O&S Holdings
Regency Centers
Roberts Companies
Soboroff Partners
Trammel Crowe
12-238
528
January 28, 2025, City Council Agenda Comments
The following comments on items on the Newport Beach City Council agenda are submitted by:
Jim Mosher ( [email protected] ), 2210 Private Road, Newport Beach 92660 (949-548-6229) Item III.A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
I continue to think the City could improve transparency by disclosing why it is interested in leasing or buying properties under negotiation in closed session.
It is a particular mystery to me why the City would be interested in the 1.2 acre office parcel at 3848 Campus Drive, a property facing the airport at the corner of Campus and Quail. According to the CIty’s What's Going on in My Neighborhood? map, the owner is pursuing an application, PA2023-0145, to build a 78,000 square foot self-storage operation on the site.
What is the City’s interest in the property?
If it is considering building a new fire station to serve the residential development anticipated in the Airport Area, this seems unusually close to the existing station in Santa Ana Heights.
Item 1. Minutes for the January 14, 2025 City Council Meeting The passage shown in italics below is from the draft minutes with a suggested correction shown in strikeout underline format. The page number refers to Volume 66.