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Date: June 3, 2025
To: Honorable Mayor and Members of the City Council
From: Aram Chaparyan, City Manager
By: Carlos Huizar, Management Associate | [email protected] Subject: City Manager - Approve Third Amendment to Amended and Restated Lease with DCH California Investments, LLC for City-Owned Property Located at 2909 and 2955 Pacific Coast Highway. Expenditure: None.
RECOMMENDATION
Recommendation of the City Manager that City Council approve a Third Amendment to the Amended and Restated Lease with DCH California Investments, Inc. (C2009-247) for City-owned property located at 2909 and 2955 Pacific Coast Highway.
FUNDING
None required.
DISCUSSION
The City of Torrance entered into an Amended and Restated Lease with DCH California Investments LLC (C2009-247) on July 19, 2009, for the operation of automobile dealership facilities (DCH Toyota) on City-owned parcels located at 2909 and 2955 Pacific Coast Highway (the “Leased Premises”). The lease has been amended twice to address operational and financial provisions.
The First Amendment, executed on July 14, 2015, eliminated the scheduled Fair Market Rent Adjustment for January 1, 2015, and changed the payment schedule for percentage rent from annual to semi-annual. The Second Amendment, executed on December 19, 2017, provided clarifications related to gross profit calculations and audit procedures to improve accountability and administrative efficiency.
The proposed Third Amendment incorporates two key updates:
1. Term Extension:
The Lessee has exercised the first of two 10-year extension options. As a result, the lease term will be extended through December 31, 2034 .
2. Fair Market Rent Adjustment:
Effective January 1, 2025 , the Minimum Base Rent (MBR) will be adjusted to reflect the mutually agreed-upon fair market value of the Leased Premises. The new MBR will be 1 City Council
June 3, 2025
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2 $144,933.33 per month , or $1,739,199.96 annually , for calendar year 2025. Provisions for percentage rent (1% of gross sales) and annual rent adjustments will remain as currently specified in the Lease.
For comparison, for calendar year 2024, the City received $1,295,880 in MBR and $98,398 in Percentage Rent. The updated MBR represents an annual increase of $433,319.96 in guaranteed lease revenue for this calendar year. This Fair Market Adjustment ensures the City continues to receive a fair market return on this high-value commercial property while preserving revenue from gross sales performance.
ATTACHMENTS
1. Third Amendment to Amended and Restated Lease (C2009-247)
2. Original Amended and Restated Lease and Prior Amendments 2 -1-
THIRD AMENDMENT TO AMENDED AND RESTATED LEASE
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LEASE (“Third Amendment”), is made and entered into as of June 3, 2025 (“Effective Date”), by and between the CITY OF TORRANCE, a municipal corporation, as Lessor, hereinafter referred to as the “City”, and DCH California Investments LLC, a California limited liability company, as Lessee (hereinafter referred to as “Lessee”).
R E C I T A L S
A. City and Lessee entered into that certain Amended and Restated Lease dated July 19, 2009 (hereinafter referred to as “Lease”) with respect to certain real property described in the Lease at Paragraph 1 and its Exhibits “A-1” and “A-2”, and hereinafter referred to as the “Leased Premises”, which includes the 2909 PCH Premises, the 2955 Premises, the 2909 PCH Improvements, and the 2955 PCH Improvements.
B. City and Lessee amended the Restated Lease by a First Amendment dated July 14, 2015 in order to, among other matters, eliminate the Fair Market Adjustment for January 1, 2015, to provide for payments of Percentage Rent for Lease Years to be made semi-annually, rather than annually.
C. City and Lessee amended the Restated Lease by a Second Amendment dated December 19, 2017 in order to, among other matters, to clarify the terms of the lease relating to gross profit and audit.
D. City and Lessee desire, among other things, to amend the Restated Lease to reflect the mutually agreed Fair Market Adjustment as of January 1, 2025 and to exercise the first option period to extend term to December 31, 2034.
THEREFORE, City and Lessee agree as follows:
1. Paragraph 2A entitled “Term” is amended to read in its entirety as follows:
A. Term
The term of this lease shall commence on the Closing of the Argonaut Agreement (“Commencement Date”), and the Commencement Date and the effectiveness of this Lease shall be expressly conditioned upon the Closing of the Argonaut Agreement and the concurrent termination of the Torrance Toyota Lease pursuant to the Termination Agreement. The extended term of this Lease utilizing the first option period shall expire at Midnight, December 31, 2034.
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2. Paragraph 4A entitled “Amount” is amended to read in its entirety as follows:
A. Amount
Commencing on January 1, 2025, and continuing through December 31, 2025, Lessee shall pay to the City a Minimum Basic Rent, based on the mutually agreed-upon Fair Market Valuation of the Lease Premises, in the amount of One Hundred Forty-Four Thousand Nine Hundred Thirty-Three Dollars and Thirty-Three Cents ($144,933.33) per month (the “2025 Fair Market Adjustment”). Thereafter, the Minimum Basic Rent shall be subject to annual adjustment in accordance with Subsection B of this Paragraph 4.
3. CITY REPRESENTATIONS. City represents and warrants that there is no deed of trust or mortgage against, or that effects, the Leased Premises, and City agrees that in the event any such deed of trust or mortgage is created, a non-disturbance agreement reasonably satisfactory to Lessee shall be provided to Lessee.
4. COUNTERPARTS. This Third Amendment may be executed in one or more identical counterparts, and as so executed by all parties hereto shall constitute a single instrument. To facilitate execution of this Third Amendment, the parties may execute and exchange by facsimile, email or other digital transmission counterparts of this Third Amendment or the signature pages hereto.
5. ENTIRE AGREEMENT. This Third Amendment embodies the entire agreement and understanding between the parties, and supersedes all such prior agreements and understandings, relating to the matters addressed in this Third Amendment and all prior or contemporaneous written or oral discussions, understandings and agreements relating to the matters addressed in this Third Amendment are merged herein and shall be of no further force or effect.
CITY: LESSEE:
CITY OF TORRANCE, DCH CALIFORNIA INVESTMENTS LLC,
a municipal corporation, a California Limited Liability Company By: __ By: __________________________
George K. Chen, Mayor
Name: Edward Impert
Its: Assistant Secretary
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ATTEST:
__
Rebecca Poirier, MMC
City Clerk
APPROVED AS TO FORM:
Patrick Q. Sullivan, City Attorney
by __________________________________
Tatia Y. Strader, Assistant City Attorney
5 DCH Toyota Lease
(Ground Lease)
6 ATTACHMENT 2
Table of Contents
1. C2009-247 DCH California Investments LLC
Amendment #2 (12-19-2017)……………………….3
2. C2009-247 DCH California Investments LLC
Memorandum of Lease (2015)………………….....10
3. C2009-247 DCH California Investments LLC
Amendment #1 (07-14-2015)……..…………….....17
4. C2009-247 DCH California Investments LLC
Memorandum of Lease (2009)………………..…...21
5. C2009-247 DCH California Investments LLC (07-
14-2009)……………………………………..…….30
PAGE 2
7 1. C2009-247 DCH California
Investments LLC Amendment #2
(12-19-2017)
PAGE 3
8 9
10 11
12 13
2. C2009-247 DCH California
Investments LLC Memorandum of
Lease (2015)
PAGE 10
14 15
16 17
18 19
20 3. C2009-247 DCH California
Investments LLC Amendment #1
(07-14-2015)
PAGE 17
21 22
23 24
4. C2009-247 DCH California
Investments LLC Memorandum of
Lease (2009)
PAGE 21
25 26
27 28
29 30
31 32
33 5. C2009-247 DCH California
Investments LLC (07-14-2009)
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