HomeMy WebLinkAbout2022-08-16; City Council; Resolution 2022-203RESOLUTION NO. 2022-203
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA
APPROVING THE FOURTH AMENDMENT TO THE RETAIL LEASE AGREEMENT
WITH HOUSE MARTEL, LLC TO MODIFY BASE RENT AND PERCENTAGE RENT
OBLIGATIONS AND TO CONTINUE TO DEFER PAYMENT OF DEFERRED RENT
UNTIL APRIL 29, 2024, FOR THE CHAPTERS CAFE AT THE CARLSBAD CITY
LIBRARY ON DOVE LANE AND AUTHORIZING THE CITY MANAGER TO EXECUTE
THE 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 Cafe), 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
WHEREAS, on Jan. 29, 2019, the city and Chapters Cafe entered into Amendment No. 1 to the
Lease, extending the required business opening date ninety-days, from 180 days to 270 days from the
Aug. 2, 2018, lease effective date (Resolution No. 2021-039); and
WHEREAS, on Oct. 13, 2020, the city and Chapters Cafe 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
WHEREAS, on Feb. 9, 2021, the city and Chapters Cafe entered into Amendment No. 3 to the
Lease, deferring rental payments for up to an additional six months from Feb. 1, 2021, to Aug. 31,
2021 (Resolution No. 2020-198); and
WHEREAS, Chapter Cafe is now requesting to modify Base Rent from $15,697 per year ($1,308
per month) to $9,000 per year ($750 per month); and
WHEREAS, in addition to Base Rent, Chapters Cafe is now requesting to modify percentage
rent obligations to 12 percent of gross sales above the rent breakpoint of $75,000 in an amount not
to exceed $5,000 per year, which shall be used to offset or pay down deferred rent under the
Agreement; and
WHEREAS, Chapters Cafe is now requesting to continue to extend the rent deferral period
until April 29, 2024, as the impacts associated with the COVID-19 pandemic persist; and
WHEREAS, the City Council concurs that the City Manager's recommendation that the
modification to Base Rent, Percentage Rent, and 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 associated with COVID-19, which
include the initial closure and subsequent and continued reduced patronage levels at the Dove
Library since March 16, 2020; and
WHEREAS, Chapters Cafe has 20 months remaining on its initial lease agreement term and
was timely in its rent payments until the Cafe and the library were closed because of the pandemic in
March of 2020, has made full and partial rent payments of $15,798 to the city over the course of the
initial term, including during its previously approved rent deferral periods, has 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; and
WHEREAS, the Fourth Amendment will provide immediate relief to Chapters Cafe by
modifying Base Rent and Percentage Rent payments, as well as extending the rent deferral period
until April 29, 2024, with the balance of the deferred rent to be paid back to the city at the
termination of the initial five-year term, unless the city approves the five-year lease renewal option,
in which case Chapters Cafe will continue to pay Percentage Rent until the balance of the Deferred
Rent is paid. Once all Deferred Rent has been paid in full, Percentage Rent will continue to be paid to
the city until the termination of the five-year renewal option.
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 Fourth Amendment to the
Retail Lease Agreement with Chapters Cafe, 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.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 16th day of August, 2022, by the following vote to wit:
AYES:
NAYS:
ABSENT:
Hall, Blackburn, Bhat-Patel, Acosta, Norby.
None.
None.
tjfL �FAVIOLA MEDINA, Clerk Services Manager
(SEAL)
AMENDMENT NO. 4 TO RETAIL LEASE AGREEMENT
A This Amendment No. 4 to Retail Lease Agreement ("Amendment") is entered into as of lA�. I e, , 2022, by and between the CITY OF CARLSBAD, a Californiamunicipa orporation ("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 the property located 1775 Dove Lane, Carlsbad, CA 92011, consisting of approximately 750 square feet of commercial building space located within the Carlsbad City Library.
WEREAS, on Jan. 29, 2019, 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, to April 30, 2019; and
WHEREAS, on Oct. 13, 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, on Feb. 9, 2021, the Landlord and Tenant entered into Amendment No. 3 to the Lease, deferring rent payments for up to six additional months, from Feb. 1, 2021, to Aug. 31, 2021; and
WHEREAS, due to the ongoing financial impact that the current Coronavirus (COVID-19) pandemic has had on Tenant, Tenant has requested a decrease in Base Rent and to continue to defer payment of the Deferred Rent (defined below) until a later date; and
WHEREAS, Tenant has applied for Federal, State, and local grants, loans and awards which may be used to offset the financial impacts of the COVID-19 pandemic, and if awarded any funds through these programs, Tenant intends to utilize such funds to fulfill its obligation to pay Landlord in full any amount of Deferred Rent due under this Lease; and
WHEREAS, Landlord has agreed to a modification of the Base Rent and Percentage Rent under the Lease and to continue to allow Tenant to defer payment of the Deferred Rent until April 29, 2024, subject to the specific terms and conditions set forth in this Amendment; and
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. Article 1: Basic Lease Provisions: Subsections 1.3 Term and RentCommencement, 1.4 Base Rent and 1.5 Percentage Rent of the Lease are hereby deleted in their entirety and replaced with the following language:
1.3 Term and Rent Commencement. Approximately five (5) years, commencing upon the date when this Lease has been executed by both parties (the "Term CommencementDate"), and expiring, unless sooner terminated in accordance with this Lease, on April 29, 2024 (the Expiration Date"), subject to the extension options set forth in Section 3.2 below. Tenant shall commence paying rent under this Lease on April 30, 2019 (the "Rent
Commencement Date"); provided, however, that concurrently with the execution of this Lease, Tenant shall pay to Landlord the Base Rent for the first (1st) full month beginning on the Rent Commencement Date. As used in this Lease, "Lease Year" means each twelve (12) month period (or portion thereof) during the Term commencing with the Rent Commencement Date.
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1.4 Base Rent. Beginning on the Effective Date of this Amendment:
Base Rent Per Month $750.00 Annual Base Rent $9,000
1.5 Percentage Rent. Commencing on the Rent Commencement Date and continuing throughout the remainder of the Term, for any Lease Year in which Gross Sales (defined in Article 5 below) exceed the Rent Breakpoint (defined below), in addition to Base Rent, Tenant shall pay percentage rent equal to twelve percent (12%) (the "Percentage") of the amount by which Gross Sales with respect to such Lease Year exceed the Rent Breakpoint with respect to such Lease Year (collectively, "Percentage Rent"), in an amount not to exceed five thousand dollars ($5,000) per Lease Year. As
used herein, "Rent Breakpoint" means the amount calculated by dividing the annual Base Rent for the applicable Lease year by the Percentage (i.e. the •• breakpoint, which is $75,000). Tenant shall pay Percentage Rent on an annual basis on the anniversary of the Lease Year and report Gross Sales on a monthly basis as set forth in Article 5 below. Percentage Rent payments shall be due within thirty (30) days of each Lease Year as described In Section 1.3 above. Further, the Percentage Rent due each Lease Year shall be applied annually toward the outstanding balance at the end of each Lease Year of Deferred Rent described in Section 1.5(b) below to reduce the amount of the Deferred Rent to the extent possible prior to the termination of this Agreement.
1.5 (b) Deferred Rent. Notwithstanding the provisions in Article 1 of the Lease, Tenant may continue to defer payment of past due Base Rent for the period commencing May 1, 2020, and continuing through April 29, 2024, in the aggregate amount of $30,823 ("Deferred Rent"). Tenant shall pay Landlord the Deferred Rent no later than April 29, 2024. 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) Failure to Comply. If Tenant fails to timely comply with Sections 1.4 or 1.5of this Lease, as amended, then (i) any unpaid Deferred Rent will becomeimmediately due and payable and subject to 3% interest compounded monthly; and(ii)Landlord will have the right to pursue any available remedies under the Leaseand/or applicable law.
(2) Tenant Certification. By execution of this Amendment, Tenant certifiesthat Landlord has not defaulted in the performance of its obligations under theLease and Tenant has no claim, defense, excuse or offset with respect to theLease as it relates to COVID-19, or otherwise. Tenant further acknowledges andagrees that prior to executing this Amendment, Tenant has had an opportunity todiscuss this Amendment with its legal counsel, tax professionals and financialadvisors.
(3)Confirmation. Except as modified by this Amendment, all provisions ofthe 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, theterms in this Amendment shall control.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
LAf':IDLORD:
a Califomi
Dated: �b/4?
APPROVED AS TO FORM: Celia A. Brewer City Attorney
TENANT:
HOUSE MARTEL, LLC a California limited liability com
By:
Title:
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