September 8, 2026
Agenda Item No. 13
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
Seimone Jurjis, City Manager - 949-644-3001, [email protected] PREPARED BY:
Lauren Wooding Whitlinger, Real Property Manager - 949-644-3236, [email protected] TITLE:
Second Amended and Restated Ground Lease with Balboa Bay Club Ventures, LLC for the Tidelands Property Located at 1221 West Coast Highway ABSTRACT:
The Balboa Bay Club (BBC) is a resort hotel, membership club, marina, and apartment building located on filled and submerged state tidelands administered by the City of Newport Beach (City). Since an amended and restated ground lease with the City was approved by the City Council in 2013 (Lease), BBC’s ownership, Balboa Bay Club Ventures, LLC, (Tenant) has made extensive improvements to the property. In consideration of those improvements, the Tenant submitted a request in June 2023 to extend the term of the Lease. City staff has worked with the Tenant and State Lands Commission (SLC) staff on preparing a Second Amended and Restated Ground Lease (Amendment). The SLC reviewed and approved the Amendment at its meeting on August 25, 2026.
For the City Council’s consideration is authorization of the Amendment between the City and the Tenant, which primarily extends the ground lease term by 13 years, up to the maximum 50-year term allowed by the tidelands statutes.
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) Authorize the Mayor and City Clerk to execute the Second Amended and Restated Ground Lease by and between the City of Newport Beach and Balboa Bay Club Ventures, LLC for the tidelands property located at 1221 West Coast Highway, in a form substantially similar to the agreement prepared by the City Attorney’s Office.
DISCUSSION:
Since its construction in 1948, the BBC has operated as a resort hotel and membership club located at 1221 West Coast Highway, Newport Beach (Property). Set on approximately 15 acres along Newport Harbor, the improvements are located upon filled and submerged tidelands. The improvements at the Property include a 159-room resort hotel with restaurants, event space, and retail shops, a 130-slip marina, 145 apartment units, several pools and beach areas, and a private membership club.
The land is owned in fee by the State of California (State) and granted in trust to the City to be managed under the State Statutes, commonly known as the Beacon Bay Bill (Chapter 74, Statutes of 1978, as amended). The Beacon Bay Bill delegates authority to the City to allow private, third-party use of the tidelands pursuant to certain conditions, including negotiating leases for uses like BBC.
On October 22, 2013, the City Council authorized the Lease with the Tenant, which was also reviewed and approved by the SLC. The City and the Tenant subsequently entered into the Lease on October 29, 2013 (Attachment B) for a 50-year term, consistent with the maximum term allowed under the Beacon Bay Bill.
When initially approved, the Tenant projected they would invest approximately $12 million into the Property over the length of the Lease term. However, between 2015 and 2025, the Tenant spent over $58 million to renovate and update all aspects of the Property, with more investment planned in the coming years. This investment exceeds the minimum 4% annual maintenance and capital expenditure required by the Lease, which equates to a $30 million minimum investment over that same 10-year period.
The renovations have positioned the Property as a premier luxury destination for tourism and events. Its bars, restaurants and membership club continue to make it popular with residents and locals. Annual percentage rent payments to the City have risen steadily during the term of the Lease except for a slight dip in 2020 due to the COVID-19 pandemic. Over the last 10 years, the City has collected almost $60 million in Lease revenues, of which revenues have increased annually by an average of over 5.5% per year.
In addition to lease revenues, the City receives a 10% transient occupancy tax (TOT) revenue and sales tax revenue each year. TOT and sales tax revenue are confidential information and cannot be publicly disclosed by the City.
The Lease revenues are calculated based on a range of percentages of gross revenues from the categories outlined in the table below.
Rent Category
Percentage of Gross Revenue
Membership Dues
6%
Residential Apartments
16.5%
Marina
31%
Dry Storage
20%
Charter Commissions
20%
Charter Revenues
6%
Room Revenues
5%
Beverage Revenues
5%
Food Revenues
3%
Retail Revenues
5%
Miscellaneous Revenues
10%
Cell Tower
15%
Proposed Amendment
In June 2023, the Tenant submitted a request to the City (Attachment C) to extend the term of the Lease back to the statutory maximum of 50 years, for purposes of obtaining financing of their leasehold interest and to allow for sufficient time to recover their investments in the Property. The proposed Amendment extends the Lease by resetting the effective date upon execution to a term of exactly 50 years. Further, the Amendment would update the base rent consideration, modernize the insurance requirements and other legal language regarding force majeure, indemnification, taxes and assignment to a qualified manager. Additionally, language was added that requires the Tenant to either obtain a legislative amendment to extend the residential use of the apartment portion of the Property beyond 2044 no later than December 31, 2040, or to bring the nonconforming use into compliance with the Beacon Bay Bill.
The Amendment has been prepared by the City Attorney’s Office and is included as Attachment A. The Tenant has reviewed and agrees to the terms of the Amendment.
State Lands Commission Review
This matter was originally placed on the City Council’s agenda for its meeting on June 27, 2023; however, it was subsequently removed to allow City staff time to discuss the matter further with SLC staff and to bring it to the SLC for formal consideration and approval. At its meeting on August 25, 2026, the SLC reviewed and approved the proposed Amendment.
City Council Policy F-7 – Income and Other Property
City Council Policy F-7 and the Beacon Bay Bill require the City to collect fair market value rent in exchange for private use of the public lands and tidelands. While the Amendment updates the base rent to reflect the current adjusted amount, with the next adjustment scheduled for 2029, the Tenant will continue to pay the greater of base or percentage rent as described above. Additionally, the Amendment calls for an adjustment to the base rent based on an appraisal of fair market value in year 19 of the term, or 2045, if the Amendment is approved by City Council. Based on these factors, and the significant capital investment made by the Tenant, no additional changes to the financial terms of the Lease are proposed in exchange for the extension of term.
FISCAL IMPACT:
Approval of this item is not anticipated to have an impact on the current adopted budget. The adopted budget allocates revenues collected pursuant to the existing ground lease to the Tidelands Fund, account 10020205-551185, and the Tidelands Capital Fund, account 10103-551185.
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).
ATTACHMENTS:
Attachment A – Second Amended and Restated Ground Lease Attachment B – Amended and Restated Ground Lease (2013) Attachment C – Letter from Balboa Bay Club Ventures, LLC Second Amended and Restated Ground Lease with Balboa Bay Club Ventures, LLC for the Tidelands Property Located at 1221 West Coast Highway September 8, 2026
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