City Council Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-01250 June 28, 2022
Title: Assignment of Ground Lease with YPD Sacramento CJDR, LLC (City Agreement No. 2014-0091)
Location: 3610 Fulton Avenue, District 2
Recommendation: Pass a Motion authorizing the City Manager or the City Manager’s designee to execute the Assignment of Ground Lease by which YPD Sacramento CJDR, LLC, assigns the Ground Lease to Sacramento CJDR, LLC.
Contact: Sabrina Tefft, Development Project Manager, 916 808- 3789, [email protected]; Leslie Fritzsche, Economic Investment Manager, 916 808-5450, [email protected], Office of Innovation and Economic Development Presenter: None
Attachments:
1-Description/Analysis
2-Assignment of Ground Lease from YPD Sacramento CJDR, LLC, to Sacramento CJDR, LLC Description/Analysis
Issue Detail: In April 2014, North Sacramento CJD was the owner of Sacramento Chrysler Dodge Jeep Ram, located at 3610 Fulton Avenue, and it leased an adjacent 2.787-acre parcel from the City for use in storing inventory (City Agreement No. 2014-0091). In 2015, North Sacramento CJD merged with Potamkin Automotive to form a new company, YPD Sacramento CJDR, and assigned the lease to the new entity. The City consented to the assignment of the lease in November 2015 (City Agreement No. 2015-1740). YPD Sacramento CJDR has asked that the City consent to its assignment of the lease to a new entity, Sacramento CJDR, LLC.
Policy Considerations: The proposed assignment is consistent with the City’s goal of expanding economic development and generating sales tax revenue.
Economic Impacts: Consent to the assignment will allow the new owner of the dealership, Sacramento CJDR, LLC, to continue to generate sales, provide service delivery, and generate additional sales tax revenue for the City.
Environmental Considerations:
California Environmental Quality Act (CEQA): Approval of the assignment is not a “project” subject to the California Environmental Quality Act (CEQA) because it (a) has no potential to cause a significant effect on the environment and (b) pertains to continuing administrative activities that are exempt from review. (14 Cal. Code Regs. §§ 15061(b)(3) and 15378(b)(2).)
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: Section 12(a) of City Agreement No. 2014-0091 allows the lessee, YPD Sacramento CJDR, to assign the lease with the City’s written consent.
Consenting to the assignment will allow Sacramento CJDR, LLC, to conduct business related to the operation of its automobile dealership, as well as related ancillary uses such as repairing, storing and maintaining automobiles. Additionally, the ability to increase inventory by using the city-owned site will support efforts to increase sales volume and service delivery.
Sacramento CJDR, LLC, is an entity recently formed for the sole purpose of purchasing and operating the current tenant's Chrysler Dodge Jeep RAM dealership. Sacramento CJDR, LLC, met the requirements to be awarded a franchise agreement by Stellantis N.V. to operate the Chrysler Dodge Jeep RAM dealership at the property, including Stellantis's capitalization requirements.
The principals behind Sacramento CJDR, LLC, Mehraban Khajehnouri and Peter Schaeffer, have over 30 years of experience in managing and owning car dealerships. Currently they are managers or part owners of nine automotive dealerships across California.
The city-owned site will continue to be used as a parking area supporting inventory for the dealership. There is no proposed change to the lease structure.
Financial Considerations: The lease generates revenue of $7,300 per month for the City, and the rental rate is periodically adjusted using the Consumer Price Index during the lease’s 25-year initial term and its two 10-year extension options. The assignment will have no impact on the lease payments.
The lease payments are applied toward the repayment of the 2006 Series B Capital Improvement Revenue Bond, reducing the General Fund debt-service requirement by $87,600 annually.
Local Business Enterprise (LBE): Not applicable.