November 1, 2022
Economic Development
DATE: November 1, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Gabino Arredondo, Project Manager
Craig K. Murray, Development Project Manager II
Subject:
Marina Lease Amendment and Assignment
FINANCIAL IMPACT: The City of Richmond would receive $480,000 in property transfer tax.
PREVIOUS COUNCIL
ACTION:
July 1, 2000
STATEMENT OF THE
ISSUE:
City staff is requesting authorization to approve a lease assignment with Safe Harbor Marinas (SHM MBYH, LLC)
for the operation of the Richmond Marina as requested
by the current Marina Operator Richmond Bay Marina,
LLC and as authorized under the Marina Lease. SHM
MBYH, LLC agrees to continuously operate the
Richmond Marina under an amended and restated
Agreement Lease with a balance of 33 years of the
original 55-year term.
RECOMMENDED ACTION:
APPROVE an assignment of Marina Lease to Safe
Harbors Marinas (SHM MBYH, LLC); and APPROVE an
amended and restated Marina Lease between the City of
Richmond and Safe Harbors Marinas (SHM MBYH, LLC)
for the balance of the 55-year original lease term ending June 30, 2055 – City Manager’s Office (Craig Murray
307-8188).
AGENDA
REPORT
November 1, 2022
DISCUSSION:
The original Richmond Marina lease was entered into on July 1, 2000, between the City and Richmond Bay Marina, LLC (“Original Lease”) through negotiations with the City of Richmond and the former Richmond Redevelopment Agency to operate the public operation of the Marina and its facilities. The leased facilities included buildings such as the Harbor Master Building at 1340 Marina Way South, the Boathouse at 2580 Spinnaker Way, boat launch ramp, locker, and washroom facilities, associated parking lots and 850 slip Marina with associated gangways and docks and facilities. At the beginning of the Original Lease term, Richmond Bay Marina, LLC utilized the operator Westrec and then conducted the Richmond Marina operations itself.
On May 23, 2022, Mr. David H. Clark, President of Warmington Capital Marinas, LLC, forwarded a letter to the City Attorney’s Office and City Manager’s Office stating that Richmond Bay Marina, LLC is under contract to sell one-hundred percent (100%) of its leasehold interest to SH Marinas, LLC (Safe Harbor Marinas) and is requesting that the City of Richmond, as Landlord, consent to Richmond Bay Marina, LLC assigning its interest to Safe Harbor Marinas.
Staff from the City Attorney’s Office and the City Manager’s Office conducted a series of meetings with both the proposed Buyer and Seller during the due diligence period that ended on July 10, 2022. During these meetings, there were several discussions regarding the Original Lease. Both the current and proposed operators worked to clarify obsolete and expired provisions in the Original Lease that are reflected in the draft amended and restated lease (“Amended and Restated Lease”). Attorneys from all parties reviewed these proposed modifications and the proposal to consent to Safe Harbor Marinas as the new operator.
Other than several expired or obsolete provisions in the Original Lease, the new Amended and Restated Lease is similar to the Original Lease. The Amended and Restated Lease will allow the Landlord/City to have rights to the launch ramp and up to six (6) boat side-ties at no cost or expense to the Landlord. Richmond’s Police and Fire Boats have slip space in the Marina and the Fire Department has an additional storage container for their operations.
Land Econ Group performed a financial review and analysis of the proposed Marina Lease transfer for the City Manager’s Office. Land Econ Group reviewed the financial status of the proposed new Marina Operator Safe Harbor Marinas and reviewed three marinas it operates in northern California: (1) Ballena Isle Marina in Alameda; (2) Loch Lomond Marina in San Rafael; and (3) Emeryville Marina in Emeryville. This review illustrated that Safe Harbor Marinas has displayed a pattern of making investments to improve facilities and operation. Safe Harbor Marinas was acquired by Sun Communities, a real estate investment trust, for $2.11 billion in September 2020, and acquisition of Richmond Marina appears to be one implementation of this growth strategy. Safe Harbor owns 130 Marinas with nine Marinas in California that it owns or operates, and the
November 1, 2022
economic review notes that Safe Harbor is the largest and most diversified owner and operator in the United States.
The Richmond Marina Lease transfer from Richmond Bay Marina, LLC (Original Tenant) to Safe Harbor Marinas (SHB MBYH, LLC) will transfer at $16 million, and the terms of the Original Lease remain essentially intact. The economic review notes that Richmond’s Property Transfer Tax, Measure H passed in 2018, allowing for $30 for each $1,000 in transaction amount for property transfers over $10 million, will allow for a one-time payment to the City’s General Fund of $480,000 due to the $16 million transfer price. In addition, the Possessory Interest tax on leased public property, would amount to $68,000 per year and exceeds the current tax of just under $60,000 per year based on that formula. The Original Lease requires a base minimum rent of $243,504 per year to be paid to the City, plus the City will continue to receive additional percentage income adjustments for slip, dry boat, building, parking, and other gross income each year.
City staff is requesting approval of an assignment of Marina Lease to SHM MBYH, LLC and to approve an amended and restated Marina Lease between the City of Richmond and SHM MBYH, LLC for the balance of the 55-year original lease term ending June 30, 2055.
DOCUMENTS ATTACHED:
Attachment 1 - Marina Lease – City of Richmond and Richmond Redevelopment Agency and Richmond Bay Marina, LLC July 1, 2000
Attachment 2 - Amended and Restated Marina Lease – City of Richmond and SHM MBYH, LLC October 2022