Administrative
Report
N.2., File # 22-3645 Meeting Date: 2/1/2022
To: MAYOR AND CITY COUNCIL
From: LAURIE KOIKE, ACTING WATERFRONT AND ECONOMIC DEVELOPMENT
DIRECTOR
TITLE
DISCUSSION AND POSSIBLE ACTION REGARDING AMENDMENTS TO THE SUBLEASE BETWEEN JACKBILT, INC. AND CHEESECAKE FACTORY RESTAURANTS, INC., THE GROUND LEASE BETWEEN THE CITY OF REDONDO BEACH AND JACKBILT, INC. AND THE MASTER LEASE BETWEEN THE CITY OF REDONDO BEACH AND ZIZLIS BOUTIQUE HOTELS, LLC.
APPROVAL OF THE CONSENT TO THE SIXTH AMENDMENT TO THE SUBLEASE BETWEEN JACKBILT, INC. AND CHEESECAKE FACTORY RESTAURANTS, INC. TO EXTEND THE TERM OF THE SUBLEASE FOR TEN YEARS TO AUGUST 5, 2033;
APPROVAL OF THE FOURTH AMENDMENT TO THE GROUND LEASE BETWEEN THE CITY OF REDONDO BEACH AND JACKBILT, INC. TO EXTEND THE TERM OF THE MASTER LEASE FOR FIVE YEARS TO AUGUST 5, 2033 AND TO RECONFIGURE AND MAKE ADDITIONAL IMPROVEMENTS TO THE SHARED TRITON PARKING LOT; AND
APPROVAL OF THE EIGHTH AMENDMENT TO THE MASTER LEASE BETWEEN THE CITY OF
REDONDO BEACH AND ZISLIS BOUTIQUE HOTELS, LLC TO RECONFIGURE SHARED TRITON PARKING LOT ACCESS.
EXECUTIVE SUMMARY
Jackbilt, Inc. (“Jackbilt”) is the current lessee of a ground lease with the City of Redondo Beach (“City”) dated August 6, 1973 (“Master Lease”), for the premises located at 605 N. Harbor Drive. The current Master Lease will expire on August 5, 2023 and includes an option (at Lessee’s discretion) for an additional five years. Jackbilt would like to exercise the five-year option and has requested an additional five-year extension from the City to accommodate a new 10-year sublease with the Cheesecake Factory. Under the Master Lease, the City, as Lessor, retains the right to consent to all subleases, amendments to subleases, and assignments within the leasehold. Jackbilt has requested the City’s consent to the Sixth Amendment to its sublease with Cheesecake Factory Restaurants, Inc. (“Cheesecake Factory”). The amendment will extend the term of the sublease from August 5, 2023 to August 5, 2033. As part of the lease extension, Cheesecake Factory will invest over three million dollars in improvements and replacements to both the interior and exterior of the restaurant building, patio and parking lot.
Additionally, and parallel with the Cheesecake Factory’s lease extension, Jackbilt’s proposed Fourth Amendment includes language that will extend its lease term by five-years to 2033 and amend the
N.2., File # 22-3645 Meeting Date: 2/1/2022
Amendment includes language that will extend its lease term by five-years to 2033 and amend the premises to allow for reconfiguration of the parking areas located at the corner of Harbor Drive and Portofino Way. The lease extension requires Jackbilt to make certain improvements to the parking lots which will improve the appearance of the lots and better define the parking management and maintenance responsibilities of the Cheesecake Factory and Shade Hotel. The reconfiguration of the parking areas requires an Eighth Amendment to Shade Hotel’s lease to redefine the Premises. The new configuration will allow for easier access for their patrons to the respective parking areas.
Council is being asked to approve the following three items: 1) Sixth Amendment to the sublease between Cheesecake Factory and Lessee, 2) Fourth Amendment to the Master Lease between the City and Lessee, and 3) the Eighth Amendment to the Master Lease between the City and Shade Hotel. It should be noted that there are no proposed changes to the current base rent or percentage rent terms in the lease agreements, and that the leaseholds are two of the City’s highest performers.
BACKGROUND
Jackbilt has requested the City’s consent to the Sixth Amendment to its sublease with Cheesecake Factory Restaurants, Inc. (“Cheesecake Factory”). The amendment will extend the term of the sublease from August 5, 2023 to August 5, 2033. As part of the lease extension, Cheesecake Factory will invest over three million dollars in planned improvements to the restaurant space including upgrades to the exterior façade, windows and roofing, back bar, lighting fixtures and patio areas.
Additionally, to parallel the Cheesecake Factory’s lease extension, Jackbilt’s proposed Fourth Amendment includes language that will extend its lease term to 2033 and will amend its premises to allow for a reconfiguration of the parking area at the corner of Harbor Drive and Portofino Way - commonly referred to as the “Triton Lot”.
The current parking lot configuration includes 50 parking spots allotted to Shade Hotel as part of their ground lease, all of which are landlocked and only accessible by driving through other leasehold properties (see Exhibit A). This reconfiguration will allow Jackbilt to acquire Shade Hotel’s current parking. In exchange Shade Hotel will shift its 50 parking spaces to the parking area previously subject to a parking agreement with Jackbilt. The new parking configuration results in multiple benefits including the increase in valet parking services for the Cheesecake Factory, the clear identification of parking lot maintenance responsibilities, implementation of more effective parking security measures, and additional self-park and employee parking for Shade Hotel. To complete this new parking configuration, an Eighth Amendment must also be made to Shade Hotel’s lease to amend the parking Agreement and premises.
Council is being asked to approve the following three items: 1) Sixth Amendment to the sublease between Cheesecake Factory and Lessee, 2) Fourth Amendment to the ground lease between the City and Lessee, and 3) the Eighth Amendment to the lease between the City and Shade Hotel.
COORDINATION
The Consent to Sixth Amendment of Sublease for Cheesecake Factory, Jackbilt Fourth Amendment and Shade Hotel Eighth Amendment were reviewed by the Waterfront and Economic Development
N.2., File # 22-3645 Meeting Date: 2/1/2022
and Shade Hotel Eighth Amendment were reviewed by the Waterfront and Economic Development Department and the documents were approved as to form by the City Attorney’s Office.
FISCAL IMPACT
The Consent to Sixth Amendment of Sublease for Cheesecake Factory will not have an immediate fiscal impact on the Harbor Uplands Fund. However, approval of the amendment will serve to retain one the City’s highest restaurant sales tax generators and millions of dollars in estimated Uplands Fund income through 2033.
The Jackbilt Fourth Amendment will not have an immediate fiscal impact on the Harbor Uplands Fund. However, approval will preserve and extend the current base and percentage rent through 2033 and result in significant reinvestment in the leasehold.
There is no fiscal impact associated with the Shade Hotel Eighth Amendment.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
Exhibit A: Triton Site Parking Reconfiguration - Before and After Exhibit B: Consent to Sixth Amendment of Sublease for Cheesecake Factory Exhibit C: Sixth Amendment to Sublease for Cheesecake Factory Exhibit D: Fourth Amendment to Jackbilt Master Lease
Exhibit E: Jackbilt Master Lease
Exhibit F: Eighth Amendment to Shade Hotel
Exhibit G: Shade Hotel Master Lease
Exhibit H: Shade Hotel Fourth Amendment and License Agreement