HomeMy WebLinkAbout2021-02-09; City Council; ; Third Amendment to the Retail Lease Agreement with House Martel, LLC to Defer Rent for Up to Six Additional Months for the Chapters Café at the Carlsbad City Library BecaMeeting Date:
To:
From:
Staff Contact:
Subject:
District:
Feb. 9, 2021
Mayor and City Council
Scott Chadwick, City Manager
Curtis M. Jackson, Real Estate Manager
curtis.jackson@carlsbadca.gov, 760-434-2836
Third Amendment to the Retail Lease Agreement with House Martel, LLC
to Defer Rent for Up to Six Additional Months for the Chapters Café at the
Carlsbad City Library Because of the COVID-19 Pandemic
3
Recommended Action
Adopt a resolution approving the third amendment to the retail lease agreement with House
Martel, LLC to defer rent for up to six additional months for the Chapters Café at the Carlsbad
City Library on Dove Lane because of the COVID-19 pandemic and authorizing the city manager
to execute the amendment.
Executive Summary
On May 12, 2020, the Carlsbad City Council approved guidelines for considering city lease
deferral requests filed because of the COVID-19 pandemic and approved a request from
Chapters Café to defer rent owed on its lease with the city for up to six months. On Oct. 6,
2020, the City Council approved Amendment No. 2 to the lease agreement with Chapters Café,
which allowed rent deferral for up to nine months – from May 1, 2020, to Jan. 31, 2021. Since
that date, the impact from COVID-19 on the City Library and Chapters Café has persisted.
This third amendment with Chapters Café would allow rent deferral for up to six additional
months, from Feb. 1, 2021, to Aug. 31, 2021. The approved guidelines for considering city lease
deferral requests require the City Council’s review and approval of rent deferrals that cover
periods longer than six months.
Discussion
Chapters Café requested temporary forgiveness of rent payments on March 19, 2020, citing
financial hardship due to the COVID-19 pandemic and its related public health restrictions,
which resulted in the closure of the City Library and the café. Subsequently, on April 21, 2020,
at the recommendation of the City Council’s Ad Hoc City Council Economic Revitalization
Subcommittee, the City Council approved Resolution No. 2020-068 – the Economic Recovery
and Revitalization Initiative, which included several measures to support pandemic-related
economic response, recovery and revitalization, including city lessee rent relief.
Feb. 9, 2021 Item #2 Page 1 of 21
The guidelines approved on May 12 (Exhibit 3) require the city manager to analyze tenants
independently and balance a list of enumerated factors, including the tenant’s maintenance of
the leasehold in good condition, payment history, compliance with lease terms, long-term
viability, the remaining term of the lease and evidence showing that the tenant’s need for a
deferral was caused by the COVID-19 pandemic state of emergency. Rent deferral requests
beyond six months are evaluated under the same guidelines. The City Council also authorized
the city manager to negotiate and return to the City Council with a lease amendment for
Chapters Café deferring its rent payments for up to six months.
On , the City Council’s Oct. 6, 2020 approval of a second amendment to the lease agreement
deferred Chapters Café’s rent from May 1, 2020 to Jan. 31, 2021. Staff is now recommending
that the City Council approve deferring rent for up to six additional months, from Feb. 1, 2021,
to Aug. 31, 2021, as the impacts from the COVID-19 pandemic continue.
The City Library is now only partially open. The café is limited under the health orders to
outdoor dining and take-out service only and relies upon library patrons for its source of
income. This request is consistent with the City Council adopted guidelines and is based on the
ongoing impacts of COVID-19, which include the initial closure, the subsequent health orders
and reduced patronage at the library since March 2020.
Chapters Café has approximately 30 months remaining on its lease agreement and was timely
in its rent payments until it and the library were closed because of the pandemic in March
2020. Chapters Café has made partial rent payments to the city during its previously approved
rent deferral period. Chapters Café has also continued to maintain its leasehold in good
condition, continued to comply with all other terms of its lease, and has complied with all
relevant aspects of the state and county health orders.
Beginning the week of September 21, 2020, Chapters Café’s operators began a soft-opening,
making its services available to city staff working at the library and library patrons using the
limited services currently offered at the library. They also started the process of creating an
online-ordering option. Currently they are open only for outdoor dining and take-out service.
Chapters Café anticipates fully opening to the public when the state and county health orders
allow and when the foot traffic at the City Library can support a full re-opening.
Staff is recommending that the City Council give authority to the city manager to execute this
third amendment to the retail lease agreement with Chapters Café to defer rent for up to six
additional months, from Feb. 1, 2021, to Aug. 31, 2021.
Fiscal Analysis
Chapters Café is obligated to pay $1,230.75 per month under its lease. The cost of deferring its
rent payments for up to six additional months would total $7,384.50, in addition to the
$11,076.75 from the first and second nine-month deferral period, for a revised total of
$18,461.25. However, Chapters Café has made partial rent payments totaling $1,000 total since
March of 2020, which reduces the deferred rent total to $1,000. If the full amount of deferred
rent is not repaid by the end of the initial lease term, a 3% compounding interest charge will be
applied to the balance of the amount due.
Feb. 9, 2021 Item #2 Page 2 of 21
No additional appropriations are required because the City Council authorized the deputy city
manager, administrative services to appropriate $50,000 for city lessee relief (City Council
Resolution 2020-079) and funds are still available.
Next Steps
Chapters Café and city staff will implement the terms of the amended agreement.
Environmental Evaluation (CEQA)
The proposed action is exempt from the California Environmental Quality Act under guidelines
15301 - Existing Facilities, which exempts the leasing of property involving negligible or no
expansion of use beyond that existing at the time of the agency’s determination.
Public Notification
Public notice of this item was posted in keeping with the Ralph M. Brown Act and it was
available for public viewing and review at least 72 hours before the scheduled meeting date.
Exhibits
1.City Council Resolution
2.House Martel, LLC third deferral extension request letter
3. Resolution No. 2020-198
4. Resolution No. 2020-083
Feb. 9, 2021 Item #2 Page 3 of 21
RESOLUTION NO. 2021-039
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING A THIRD AMENDMENT TO THE RETAIL
LEASE AGREEMENT WITH HOUSE MARTEL, LLC TO DEFER RENT FOR
UP TO SIX ADDITIONAL MONTHS DUE TO THE COVID-19 PANDEMIC
AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE THIRD
AMENDMENT FOR THE CHAPTERS CAFE LOCATED AT THE CARLSBAD
CITY LIBRARY AT 1775 DOVE LANE
WHEREAS, on Aug. 2, 2018, the city and House Martel, LLC (Chapters Café), entered into
that certain Lease Agreement (Agreement) for the property located at 1775 Dove Lane, Carlsbad,
California (Premises) consisting of approximately 750 square feet of commercial building space
located within the Carlsbad City Library (Resolution No. 2018-136); and
WEREAS, on Jan. 29, 2019, the city and Chapters Café entered into Amendment No. 1 to
the Lease, extending the required business opening date ninety-days, from 180 days to 270 days
from the August 2, 2018 (Resolution No. 2019-010); and
WHEREAS, as a result of the COVID-19 pandemic, many city lease tenants are
experiencing a decline in their businesses or have been required to temporarily close their
businesses, in whole or in part, to comply with (a) executive orders, including California Executive
Order N-33-20, (b) public health orders from the County of San Diego Public Health Officer, and
(c) all other applicable orders and directives associated with COVID-19 (Safety Declarations); and
WHEREAS, On March 19, 2020, Chapters Café requested temporary forgiveness of rent
payments due to financial hardships as a result of COVID-19 Safety Declarations, including the full
closure of the Dove Library and the associated café; and
WHEREAS, as a result of the COVID-19 pandemic, on April 7, 2020, the City Council
created the Ad Hoc City Council Economic Revitalization Subcommittee (Subcommittee) with the
goal of identifying options for economic revitalization due to the COVID-19 emergency for
consideration by the full City Council; and Feb. 9, 2021 Item #2 Page 4 of 21
WHEREAS, based on recommendations from the Subcommittee, on April 21, 2020, the
City Council approved the Economic Recovery and Revitalization Initiative (ERRI). The ERRI
included several measures to support COVID-19 economic response, recovery and revitalization,
one of which includes city lessee relief (Resolution No. 2020-068); and
WHEREAS, on May 12, 2020, the City Council approved the guidelines for considering city
lease rent deferral requests, and approved a city lease rent deferral request for Chapters Café to
defer rent for up to six months (Resolution No. 2020-083); and
WHEREAS, the City Council adopted guidelines provided guidance on rent deferral
requests beyond six-months, with such requests to be evaluated by the city manager for
recommendation and presentation to the City Council for its review and consideration; and
WHEREAS, on Oct. 6, 2020, the city and Chapters Café entered into Amendment No. 2 to
the Lease, deferring rental payments for up to nine-months from May 1, 2020 to Jan. 31, 2021
(Resolution No. 2020-198); and
WHERAS, Chapter Café is now requesting to extend the rent deferral period up to six
additional months (Feb. 1, 2021 to Aug. 31, 2021), as the impacts from the COVID-19 pandemic
persist; and
WHEREAS, the City Council accepts and adopts the City Manager's recommendation that
the rent deferral relief requested is consistent with the guidelines adopted pursuant to
Resolution No. 2020-083; and
WHERAS, this request is based on the ongoing impacts of COVID-19, which include the
initial closure and subsequent reduced patronage of the Dove Library since March 16, 2020; and
Feb. 9, 2021 Item #2 Page 5 of 21
WHEREAS, Chapters Café has 30 months remaining on their lease agreement and was
timely in their rent payments until the Cafe and the library were closed because of the pandemic
in March of 2020, has made partial rent payments to the city during their previously approved
rent deferral period, has continued to maintain their leasehold in good condition, continued to
comply with all other terms of their lease, and has complied with all relevant aspects of the State
and County health orders; and
WHEREAS, the Third Amendment will provide immediate relief to Chapters Café by
deferring rent payments for up to six additional months (Feb. 1, 2020 to Aug. 31, 2021), with the
balance of the deferred rent to be paid back over the balance of the remaining term of the lease
agreement.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California,
as follows:
1.The above recitations are true and correct.
2.That the City Manager is hereby authorized to execute this Third Amendment to the
Retail Lease Agreement with Chapters Café, attached hereto as Attachment A, and to do so in
full compliance with the terms and conditions expressed in the Agreement and to the
satisfaction of the City Attorney.
Feb. 9, 2021 Item #2 Page 6 of 21
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 9th day of February, 2021, by the following vote to wit:
AYES: Hall, Blackburn, Acosta, Bhat-Patel, Schumacher.
NAYS: None.
ABSENT: None.
MATT HALL, Mayor
ATTEST:
BARBARA ENGLESON, City C'Ti-k
Feb. 9, 2021 Item #2 Page 7 of 21
AMENDMENT NO. 3 TO RETAIL LEASE AGREEMENT
, This AmendDent No. 3 to Retail Lease Agreement ("Amendment") is entered into as of r -earbiery eTiAr.- 2021, by and between the CITY OF CARLSBAD, a California
municipal corpdration ("Landlord") and House Martel, LLC, a California limited liability company
("Tenant") and shall be effective and binding upon the parties as of the date of its execution by
both parties.
RECITALS
WHEREAS, Landlord and Tenant are parties to a Retail Lease Agreement entered into as
of August 2, 2018 ("Lease") for Premises located at the Carlsbad City Library at 1775 Dove Lane,
California, CA 92011.
WEREAS, on Jan. 29, 20190, the Landlord and Tenant entered into Amendment No. 1 to
the Lease, extending the business opening date ninety-days, from 180 days to 270 days from
August 2, 2018; and
WHEREAS, on Oct. 6, 2020, the Landlord and Tenant entered into Amendment No. 2 to
the Lease, deferring rent payments for up to nine-months, from May 1, 2020 to Jan. 31, 2021;
and
WHEREAS, due to the financial impact that the current Coronavirus (COVID-19)
pandemic has had on Tenant, Tenant has requested that its obligation under the Article 1 of the
Lease to pay Base Rent be deferred, and Landlord has agreed to allow such deferral, subject to
the specific terms and conditions set forth in this Amendment.
WHEREAS, all capitalized terms used in this Amendment, unless otherwise specified,
shall have the same meaning as the capitalized terms used in the Lease.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are
expressly acknowledged, Landlord and Tenant agree as follows:
AGREEMENT
1.Deferred Rent. Notwithstanding the provisions in Article 1 of the Lease, Tenant
may defer payment of Base Rent for the period commencing May 1, 2020 and continuing through
August 31,2021 (fifteen months), in the aggregate amount of $18,461.25 ("Deferred Rent"). The
Deferred Rent will not be subject to interest or late charges or cause an event of default under
Article 17 of the Lease, provided:
1.1. Commencing September 1, 2021, Tenant resumes paying Base Rent; and
1.2. Commencing September 1, 2021, Tenant repays the Deferred Rent in 23
consecutive monthly installments of no less than $738.45 over the balance of the remaining initial
Lease Term, which expires on July 31, 2023, or until the deferred rent is paid in full.
2.Failure to Comulx. If Tenant fails to timely comply with Paragraph 1 of this
Amendment, then (i) any unpaid Deferred Rent will become immediately due and payable and
subject to 3% interest compounded monthly; and (ii) Landlord will have the right to pursue any
available remedies under the Lease and/or applicable law.
3.Tenant Certification. By execution of this Amendment, Tenant certifies that
Landlord has not defaulted in the performance of its obligations under the Lease and Tenant has
no claim, defense, excuse or offset with respect to the Lease as it relates to COVID-19, or
otherwise. Tenant further acknowledges and agrees that prior to executing this Amendment,
Tenant has had an opportunity to discuss this Amendment with its legal counsel, tax professionals
and financial advisors.
4.Confirmation. Except as modified by this Amendment, all provisions of the Lease
shall remain in full force and effect. In the event of an irreconcilable conflict between the terms of
the Lease and the terms of this Amendment, the terms in this Amendment shall control.
Page 1 of 2
Feb. 9, 2021 Item #2 Page 8 of 21
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first
written above.
LANDLORD:
CITY OF C LSIAD
a California nuniciial corporation
By:
Dated:
TENANT:
HOUSE MARTEL, LLC
a California limited liability company
By: .
Name: I t41,2
Title:
Dated: •
APPROVED AS TO FORM:
Celia A. Brewer
City Attorney
Assist:int City Attorney
Page 2 of 2
Feb. 9, 2021 Item #2 Page 9 of 21
Thank you,
Lisa Mattel
1/15/21
Curtis Jackson
Office of the City Manager
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Curtis,
Sales continue to be a challenge during the pandemic shutdown therefore, I'm requesting a 6
month deferral of my rent for Chapters Cafe. Sales volume for the last three months has been
$3000 a month on average which is about 1/4 of what the normal volume is. I have laid off my
staff and am currently working solo. I have paid $1000.00 in rent since the quarantine began. I
have applied for rental assistance grants but they are still pending.Please let me know if
anything can be arranged.
Chapters Cafe
1775 Dove Lane #146
Carlsbad, CA 92011
Feb. 9, 2021 Item #2 Page 10 of 21
Exhibit 3
Feb. 9, 2021 Item #2 Page 11 of 21
Feb. 9, 2021 Item #2 Page 12 of 21
Feb. 9, 2021 Item #2 Page 13 of 21
Feb. 9, 2021 Item #2 Page 14 of 21
Attachment A
Feb. 9, 2021 Item #2 Page 15 of 21
Feb. 9, 2021 Item #2 Page 16 of 21
RESOLUTION NO. 2020-083
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING GUIDELINES FOR CONSIDERING CITY
LEASE RENT DEFERRAL REQUESTS AND APPROVING A CITY LEASE
RENT DEFERRAL REQUEST FOR CHAPTERS CAFE
WHEREAS, as a result of the COVID-19 pandemic, many city lease tenants are
Exhibit 4
experiencing a decline in their businesses or have been required to temporarily close their
businesses, in whole or in part, to comply with (a) executive orders, including California Executive
Order N-33-20, (b) public health orders from the County of San Diego Public Health Officer,
including prohibiting gatherings of 10 or more people and strongly discouraging non-essential
gatherings of any size, and (c) all other applicable orders and directives associated with COVID-
19;and
WHEREAS, as a result of the COVID-19 pandemic, on April 7, 2020, the City Council
created the Ad Hoc City Council Economic Revitalization Subcommittee with the goal of
identifying options for economic revitalization due to the COVID-19 emergency for consideration
by the full City Council; and
WHEREAS, based on recommendations from the Subcommittee, on April 21, 2020, the
City Council approved the Economic Recovery and Revitalization Initiative, or ERRI. The ERRI
included several measures to support COVID-19 economic response, recovery and revitalization,
one of which includes city lessee relief (Resolution No. 2020-068); and
WHEREAS, pursuant to the ERRI, staff is recommending that the City Council consider
and approve a set of guidelines for considering all city lease rent deferral requests; and
WHEREAS, the proposed guidelines in Attachment A are to be utilized by the city
manager in considering and making recommendations to the City Council on all city lease rent
deferral requests; and
May 12, 2020 Item #4 Page 4 of 10Feb. 9, 2021 Item #2 Page 17 of 21
Feb. 9, 2021 Item #2 Page 18 of 21
Feb. 9, 2021 Item #2 Page 19 of 21
Feb. 9, 2021 Item #2 Page 20 of 21
Feb. 9, 2021 Item #2 Page 21 of 21
Tammy Cloud-McMinn
From:
Sent:
To:
Sub)ect:
Dear Carlsbad City Council,
Joan Scheppke <joanscheppke@gmail.com>
Tuesday, February 9, 2021 12:26 PM
City Clerk
All Receive -Af!epda Item# ¢:,
For the Information of the:
CITY COUNCIL
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Support Extending Rent Deferral for the Chapters Cafe in Dove Library
I am writing to record my support of this item on today's council meeting agenda:
AMENDMENT NO. 3 TO THE RETAIL LEASE AGREEMENT WITH HOUSE MARTEL, LLC FOR RENT DEFERRAL FOR THE
CHAPTERS CAFE
They have created an impressively safe and welcoming space for the community to get out and
enjoy their menu. They are serving a need during the pandemic and will continue to enhance the
library experience as they did before the pandemic for years to come. I support everything that
can be done to keep this business viable.
Thank you,
Joan Scheppke
Carlsbad
Joan
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