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HomeMy WebLinkAbout2006-09-26; Housing & Redevelopment Commission; Resolution 4291 2 3 4 ARTS THEATER IN THE VILLAGE REDEVELOPMENT AREA 5 " 6 Building and related property located at 2787 State Street, originally known as the Bauer Lumber 8 7 Building, on November 20, 1997; and, 9 10 , I Street at a future date; and, 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 isbH \ HOUSING AND REDEVELOPMENT COMMISSION RESOLUTION NO. 429 A RESOLUTION OF THE HOUSING AND REDEVELOPMENT COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA AUTHORIZING EXECUTION OF A LEASE AGREEMENT BETWEEN NEW VILLAGE ARTS AND THE CARLSBAD REDEVELOPMENT AGENCY TO LEASE AGENCY-OWNED PROPERTY LOCATED AT 2787 STATE STREET FOR THE PURPOSES OF OPERATING A PERFORMING WHEREAS, the Carlsbad Redevelopment Agency assumed ownership of the State Street WHEREAS, the subject site was acquired by the Redevelopment Agency with the intent of facilitating redevelopment of the site as well as other properties at the corner of Grand Avenue and State WHEREAS, it is anticipated that it will be approximately two to three more years before the Agency will be able to initiate redevelopment activities related to the subject site; and, WHEREAS, there is a need within the community to make continued use of the subject building/property for retail and/or entertainment purposes until such time at which a redevelopment project may occur at the site to eliminate blight and/or blighting influences within the Village Redevelopment . - Area; and WHEREAS, there is a need to test the consumer market for demand and benefit of a performing arts theater in the Village Redevelopment Area, and the subject building has the ability to accommodate a theater; and WHEREAS, the Agency has determined that it is appropriate and necessary to enter into the subject lease and extend use of the subject building for retail and/or entertainment purposes until such time as a redevelopment project may be implemented; and WHEREAS, California Health and Safety Code Section 33400(b) permits the Agency to rent, maintain, manage, operate, repair and clear property purchased for the purposes of redevelopment; and WHEREAS, the Redevelopment Agency has exclusively negotiated with New Village Arts to lease a portion of the subject building and operate a performing arts theater within said building; and 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 23 24 WHEREAS, based on the substantial nature of the tenant improvements required to the building to accommodate a theater venue and the short term lease period for use of the subject property, a determination has been made that the property shall be leased to New Village Arts for one dollar ($1) per year which is consideration that is not less than the fair reuse value with the covenants and conditions authorized by the subject lease; and WHEREAS, New Village Arts shall be responsible for compliance with state prevailing wage requirements for all construction activities related to tenant improvements for said building, and shall be responsible for all costs associated with said improvements; and WHEREAS, the Housing and Redevelopment Commission of the City of Carlsbad, on the date of this resolution, held a duly noticed public hearing to consider the recommendations and heard all persons interested in or opposed to the lease agreement between the Carlsbad Redevelopment Agency and New Village Arts for interim use of the subject building for a performing arts theater; and WHEREAS, the Housing and Redevelopment Commission of the City of Carlsbad, on the date of this resolution, considered the report on the lease as required per Section 33433 of the California Health and Safey Code. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Commission of the City of Carlsbad, California, as follows: 20 n 1. That the above recitations are true and correct. 21 2. The Commission has reviewed the report required by Section 33433 of the California Health 22 and Safety Code and hereby determines that the building located at 2787 State Street, and owned by the Carlsbad Redevelopment Agency, shall continue to benefit the redevelopment area through its continued interim use for retail and/or entertainment purposes through a lease with the New Village Arts for a two year period according to the terms set forth in the attached lease agreement, provided as Exhibit 3, until such time as construction is initiated on a redevelopment project for the site. 25 3. That the subject lease will assist in the elimination of blight within the Village Redevelopment Area by providing occupancy of a vacant/abandoned building and a use that will add desired entertainment to the area, and is consistent with the Village Redevelopment Plan and Five Year Implementation Plan. 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4. That the consideration is not less than the fair reuse value of the building space with the covenants and conditions and tenant improvements costs authorized and/or required by the lease. 5. The Commission hereby approves said lease agreement and authorizes the Chairman of the Housing and Redevelopment Commission to execute the approved lease agreement between the Carlsbad Redevelopment Agency and New Village Arts for lease of the Agency-owned property located at 2787 State Street, in substantially the form presented to the Commission and subject to approval of the City Attorney, who serves as legal Counsel to the Carlsbad Redevelopment Agency. PASSED, APPROVED AND ADOPTED at a Special meeting of the Housing and Redevelopment Commission of the City of Carlsbad, California on the 26th day of September , 2006 by the following vote to wit: AYES: COMMISSIONERS HALL, KULCHIN, PACKARD, SIGAFOOSE NOES: COMMISSIONER LEWIS ABSTAIN: NONE ABSENT: NONE ATTEST: •" 2 •oV'ESTABLISHED'\% RAYMOND R. PATCHETT, Secretary \V- •: • <a ,-^c 5 EXHIBIT 2 SECTION 33433 REDEVELOPMENT REPORT FISCAL AND OTHER IMPACTS OF LEASE SECTION 33433 REDEVELOPMENT REPORT NEW VILLAGE ARTS THEATER SHORT TERM LEASE SEPTEMBER 12,2006 Lease Summary The Redevelopment Agency shall lease property located at 2787 State Street to New Village Arts, a non-profit theatre company, for one dollar ($1) per year for a two (2) year term (with a possible one year extension at the discretion of the Agency) for the purposes of establishing a temporary performing arts theater within the Village Redevelopment Area. A recent retail analysis indicates a need for enhanced entertainment opportunities within the Village Area. This particular location has not proved financially successful for prior tenants, however, allowing the subject property to be used on an interim basis as a theater will allow the Agency and New Village Arts to test the success and benefit of a theater in the Village without a large outlay of capital by either party. A copy of the proposed lease is attached for public review. Fiscal Impacts The cost of the lease agreement to the Agency and the estimated value of the lease are outlined below for information purposes. 1. Cost to the Agency; The original land acquisition cost was $500,000 for the 9,800 square foot building at 2787 State Street. There are two (2) leaseable spaces within the subject building. The rear space is approximately 6,310 square feet in size, and the front space is approximately 3490 square feet in size. Since 1997, the leased areas have generated approximately $391,150 in net revenues for the Agency. The rear space although larger than the front space, has no street frontage, assigned parking, and only minimal improvements making its current primary use a warehouse. As a result, its value at acquisition is estimated at approximately $240,000. The front space is valued higher on a square footage basis due to its street frontage and more extensive improvements, including air conditioning. Its value at acquisition is estimated at approximately $260,000. The rear space is the subject of the proposed lease. The property was purchased with tax exempt bond proceeds with the intent of facilitating redevelopment of the site as well as other properties at the corner of Grand Avenue and State Street at a future date. As of this date, there have been no relocation or demolition costs to the Agency. To date, approximately $25,150 has been expended by the Agency and/or City of Carlsbad to improve the building to allow for its use to benefit the Village Redevelopment Area. Approximately $21,000 of the subject improvement cost was allocated to the front space and $4,150 to the rear space. No further improvements and/or related costs are anticipated at this time by the Agency to allow for interim theater use of the building by New Village Arts. 1 Section 33433 Redevelopment Report - NVA Lease Page 2 2. Estimated Value of the Interest to be Leased at Highest and Best Use: In its current condition and with its existing limitations (no parking, air conditioning primary street frontage and limited lease term), the Agency has determined that the highest and best use for the subject leased space is warehouse. Based on the current warehouse lease market, a fair market lease rate of approximately $.50 per square foot for warehouse purposes would be appropriate for this building based on its age, construction type, amenities and limitations (as noted above). A recently terminated lease with the Children's Museum for this warehouse space was set at $.50 per square foot. The Agency believes that this is an appropriate continuing fair market rent for the subject space. 3. Estimated Value of the Interest with the Conditions of the Lease: The New Village Arts intends to lease the warehouse space and complete tenant improvements for the purposes of using the building space for a temporary theater site. The rent will be set at $1.00 per year which is a rental rate that is below the estimated market value of $37,860 per year. However, the tenant improvements (to be paid entirely by the tenant) are estimated at $100,000 total and can only be amortized over a two year period due to the limited lease term. The cost of the tenant improvements amounts to approximately $50,000 per year over the two year term which exceeds the market rate rent. Therefore, the Redevelopment Agency has determined that the estimated reuse value of the subject property for the lease is $0 due to the significant cost of the tenant improvements and short lease term. New Village Arts has agreed to pay for all of the tenant improvements, pay rent of $ 1 per year, and provide a deposit of $2000, plus provide the appropriate insurance coverage for any damage caused to the building during their use. Impact on Blight Elimination It is the Agency's opinion that the lease of the subject space within the subject property will assist in the elimination of blight within the Village Redevelopment Area by: 1. Eliminating the negative visual and land use impacts of a vacant, abandoned space/building in close proximity to the commuter rail station and in a critical redevelopment focus area by ensuring the continued existence of an appropriate use within the building. 2. Testing the customer market for the most appropriate land use for the property to assist with implementation plans for ultimate redevelopment of the site. 3. Assist with efforts to reduce evening crime in the Village by providing an alternate evening activity that will encourage more positive pedestrian traffic and public interaction in the area. 4. Assist in the effort to revitalize the retail and dining environment by providing an evening entertainment opportunity which currently does not exist within the area. Section 33433 Redevelopment Report - NVA Lease Page 3 Summary The subject lease provides the Redevelopment Agency with the opportunity to determine if there is a market demand for a performing arts theater within the Village Area at a nominal interim cost, and to determine the ultimate operating costs associated with such a theater. This information will assist with efforts to determine the appropriate redevelopment project for the subject site. Ultimate plans for the site will result in demolition and reconstruction of an appropriate redevelopment project to assist in revitalization efforts and elimination of blighting influences within the Village. This project could ultimately include a theater space if this market test is successful. EXHIBITS LEASE AGREEMENT BETWEEN CARLSBAD REDEVELOPMENT AGENCY AND NEW VILLAGE ARTS CARLSBAD REDEVELOPMENT AGENCY LEASE TO NEW VILLAGE ARTS THEATRE OF PROPERTY LOCATED AT 2787 STATE STREET CARLSBAD, CALIFORNIA 92008 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 1 LEASE AGREEMENT THIS LEASE AGREEMENT, made and entered into this c2b*~day of/iy/£*tbe^. 2006, by and between the Carlsbad Redevelopment Agency, hereinafter called "Lessor," and New Village Arts, a California non-profit corporation, hereinafter called "Lessee," without reference to number or gender, for property located at 2787 State Street, Carlsbad, California, 92008. WITNESETH: WHEREAS, the Carlsbad Redevelopment Agency is the owner of the real property improved with an approximately 9400 square foot commercial building located at 2787 State Street, Carlsbad, California, 92008; and WHEREAS, Lessee desires use of a maximum of 6310 square feet of said Lessor premises to operate a business (as defined below); NOW, THEREFORE, it is understood and agreed by and between the parties hereto as follows, to wit: TO HAVE AND TO HOLD a portion of said leased premises for the term of this lease and upon the conditions as follows: 1. TERM: The term of the lease shall be for a period of two (2) years commencing on October 1, 2006, and ending on September 30, 2008. Provided tenant has completed any necessary improvements and obtained approval from the Housing and Redevelopment Director to occupy said premises prior to the commencement date stated herein, Lessee shall be entitled to occupy the premises and conduct business prior to commencement date. At the Lessor's discretion, Lessee may extend the term for one (1) additional one (1) year period, upon the same terms and conditions stated herein. Lessee must request an extension in writing at least 120 days prior to the initial lease term's expiration. 2. RENT: (a) As and for the rent, Lessee agrees to pay to Lessor the sum of one dollar ($1.00) per year for the two year term of the lease. Lease payments for the two year term shall be paid in advance upon commencement of the lease. (b) Rent shall be delivered to the Finance Department of the City of Carlsbad at 1635 Faraday Avenue, Carlsbad, California, 92008. The designated place of payment and filing may be changed at any time by Lessor upon ten (10) days written notice to Lessee. Lessee assumes all risk of loss if payments are made by mail. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 2 Iff- (c) There shall be no increase in the annual lease payment for the two-year lease period. If granted, any extension beyond the third year will be held at the same annual lease rate as the previous term. (d) Lessee agrees to pay a Security Deposit in the amount of two thousand dollars ($2000) to be paid upon execution of the lease agreement. Lessee shall submit the Security Deposit in the form of a cashier's check simultaneously, and/or in conjunction with the signed lease agreement. Lessor shall not cash nor deposit said Security Deposit until this lease agreement is signed by Lessor, resulting in the full execution of this agreement. The Security Deposit shall be held in an interest bearing account (at the same rate the City of Carlsbad earns on its money). Upon expiration of this lease, Lessee shall be entitled to all interest accrued over said lease term. Lessor shall not be required to keep the Security Deposit separate from its general accounts. (e) If Lessee fails to pay Rent, or otherwise defaults under this lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefore, deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. 3. USE: (a) Lessee agrees that the 6,310 square feet of leased premises shall be used only and exclusively for operation of the New Village Arts Theatre and for no other purpose whatsoever without the written consent of Lessor. (b) Lessee shall not and is expressly prohibited from using the premises for any other purpose or use whatsoever, whether it is purported to be in addition to or in lieu of the particular exclusive use. (c) Lessee shall actively and continuously use and operate the premises for the limited particular exclusive use as expressly provided for in Paragraph 3(a) of this lease, except for failure to do so caused by acts of God. 4. EARLY TERMINATION: Lessee or Lessor shall have a right to terminate this lease by first giving one hundred eighty (180) days written notice to the other party. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 3 b 5. IMPROVEMENTS: (a) Lessee shall be responsible for interior improvements to the facility, including dividing walls, HVAC, additional restroom facilities and any appropriate entries/exits to meet applicable building and fire code requirements. The Redevelopment Agency has provided for the separation of the electrical and mechanical equipment to provide service to both the 6310 square feet of leased premises for theatre use and the adjacent retail space, except that air conditioning shall not be provided to the space subject to this lease. (b) Subject to Lessor approval, Lessee may, at its own expense, make additional interior alterations or changes in the 6,310 square feet of leased premises or cause to be built, made or installed thereon any structures, machines, appliances, utilities, signs or other improvements necessary or desirable for the use of said premises and may alter and repair any such structures, machines or other improvements; provided, however, that no alterations and changes shall be made and no structures, machines, appliances, utilities, signs or other improvements shall be made, built or installed, and no major repairs thereto shall be made except upon obtaining all necessary prior approvals from Lessor and proper permits from the City of Carlsbad. (c) Lessee shall be responsible for manufacturing and installation of signage in accordance with the signage regulations set forth within the Carlsbad Village Redevelopment Master Plan and Design Manual and the City of Carlsbad Municipal Code. Lessee further agrees that no banners, pennants, flags, or other advertising devices, nor any temporary signs shall be permitted to be flown, installed, placed, or erected on the premises except in accordance with the City of Carlsbad Village Redevelopment Master Plan and Design Manual and the City of Carlsbad Municipal Code. (d) Lessee is advised that both federal (Davis-Bacon) and State of California Prevailing Wage Rate requirements may apply to improvements to the premises. If applicable, Lessee shall be responsible to determine the appropriate wage rates for any work performed on the premises and to pay wages according to those requirements. 6. OWNERSHIP; REMOVAL; SURRENDER/RESTORATION: (a) Ownership. Lessor shall have the right to require removal or elect ownership of all alterations and utility installations made by Lessee, except for trade fixtures which shall be owned and removed by Lessee. Unless otherwise instructed per Paragraph 6(b) hereof, all Lessee owned alterations and utility 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 4 installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the premises. (b) Removal. By delivery to Lessee of written notice from Lessor not later than sixty (60) days prior to the end of the term of this Lease, Lessor may require that any or all Lessee constructed alterations or utility installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any alterations or utility installations made without the required consent. (c) Surrender/Restoration. Lessee shall surrender the premises by the expiration date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair any damage occasioned by the installation, maintenance or removal of trade fixtures, alterations and/or utility installations, furnishings, and equipment installed by or for Lessee and the removal, replacement, or remediation or any soil, material or groundwater contaminated with hazardous substance (as defined in Paragraph 22) by Lessee. Trade fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the premises pursuant to this Paragraph 6 (c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 30 below. 7. PARKING: Lessee understands there is no private parking available on the subject property. Lessee further understands that execution of this lease agreement in no way constitutes the granting of exclusive use of public parking adjacent to the property. 8. RIGHT TO ENTER PROPERTY: Upon execution of this lease agreement, Lessee shall be granted access to the premises to initiate, construct and complete any desired tenant/building improvements as outlined in Paragraph 5 of this lease. 9. REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS: Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder in connection with this Lease, and that no person, firm, broker or finder is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the Lessee and/or Lessor, including any costs, expenses, or attorney's fees reasonably incurred with respect thereto. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency PageS 10. WAIVER OF RELOCATION BENEFITS: Lessee understands this lease agreement is entered into for a specified period of time in order to provide interim use of the property, until such time as the Lessor chooses to develop the property in accordance with the Carlsbad Village Redevelopment Master Plan. Lessee therefore agrees to waive any and all relocation benefits defined in the California Relocation Assistance Law (Government Code, Section 7260, et, seq.) after having the opportunity to consult with legal counsel about potential entitlements. 11. LIENS: (a) Lessee agrees that it will at all times hold Lessor free and harmless and indemnify it against all claims for labor or materials in connection with improvements, repairs, or alterations on the lease premises, including the costs of defending against such claims, and reasonable attorney's fees incurred therein. (b) In the event that any lien or levy of any nature whatsoever is filed against the lease premises or the leasehold interests of the Lessee, the Lessee shall, upon written request of Lessor, deposit with Lessor a bond conditioned for the payment in full of all claims upon which said lien or levy has been filed. Such bond shall be acknowledged by Lessee as principal and by a corporation, licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company, as surety, and in accordance with the City of Carlsbad's bonding requirements. Lessor shall have the right to declare this lease in default in the event the bond required by this paragraph has not been deposited with the Lessor within ten (10) days after written request has been delivered to Lessee. 12. LEASE ENCUMBRANCE: Lessee understands and agrees that it cannot encumber the lease, leasehold estate and the improvements thereon by a deed of trust, mortgage or other security instrument. If any deed of trust, mortgage or other security instrument that encumbers the lease, leasehold estate and the improvements thereon is entered into by Lessee, Lessor shall have the right to declare this lease in default. 13. ASSIGNMENT-SUBLEASE: Lessee shall not assign or transfer the whole or any part of this lease or any interest therein, by merger, consolidation, dissolution or otherwise, nor sublease the whole or any part of the leased premises, nor contract for the management or operation of the whole or any part of the leased premises, nor permit the occupancy of any part thereof by any other person or business entity, nor permit transfer of the lease by merger, consolidation or dissolution, without the prior written consent of Lessor, in each instance. This lease shall inure to the benefit of and be binding upon the parties hereto and any successors of Lessee as fully and to the same extent as though specifically mentioned in each instance, and all covenants, stipulations and agreements in this lease shall extend to and bind any assigns and sublessee of Lessee. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 6 14. DEFAULT: (a) It is mutually understood and agreed that if any default be made in the payment of rental herein provided or in the performance of the covenants, conditions, or agreements herein (any covenant or agreement shall be construed and considered as a condition), or should Lessee fail to fulfill in any manner the uses and purposes for which said premises are leased as above stated, and such default shall not be cured within thirty (30) days after written notice thereof if default is in the performance of the use obligation provisions pursuant to Paragraph 3 of this lease, or ten (10) days after written notice thereof if default is in the payment of rent, or in the performance of any other covenant, condition and agreements, Lessor shall have the right to immediately terminate this lease; and that in the event of such termination, Lessee shall have no further rights hereunder, the Lessee shall thereupon forthwith remove all personal property from said premises and shall have no further right to claim thereto, and Lessor shall immediately thereupon, without recourse to the courts, have the right to reenter and take possession of the leased premises. Lessor shall further have all other rights and remedies as provided by law, including without limitation the right to recover damages from Lessee in the amount necessary to compensate the Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under the lease or which in the ordinary course of things would be likely to result there from. (b) In the event of the termination of this lease pursuant to the provisions of this paragraph, Lessor shall have any rights to which it would be entitled in the event of the expiration or sooner termination of this lease. 15. BANKRUPTCY: In the event Lessee becomes insolvent, makes an assignment for the benefit of creditors, files a petition in bankruptcy or becomes the subject of a bankruptcy proceeding, reorganization, arrangement, insolvency, receivership, liquidation, or dissolution proceeding, or in the event of any judicial sale of Lessee's interest under this lease, Lessor shall have the right to declare this lease in default. 16. MAINTENANCE AND REPAIR: (a) As part of the consideration for the leasing thereof, Lessee agrees to assume full responsibility for the interior operation, maintenance, including painting, and repair of the premises, throughout the term and without expense to the Lessor. Lessee will perform all interior maintenance, repairs and replacements, including glass, necessary to maintain and preserve the premises in a good, safe, healthy and sanitary condition satisfactory to Lessor and in compliance with all applicable laws. Lessee further agrees to provide 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 7 n approved containers for trash and garbage and to keep premises free and clear of rubbish and litter, or any other fire hazards. Lessor shall be responsible for all exterior maintenance, including roof repairs. (b) For the purpose of keeping the premises in a good, safe, healthy and sanitary condition, Lessor shall have the right but not the duty, to enter, view, inspect, determine the condition of and protect its interests in, the premises. If inspection discloses that the premises are not in the condition described, Lessee must perform the necessary maintenance work within thirty (30) days after written notice from Lessor. Further, if at any time during the term of the lease for the premises Lessor determines that the premises are not in the condition described, Lessor may require Lessee to file and pay for a faithful performance bond, to assure prompt correction without additional notice. The amount of this bond shall be adequate, in Lessor's opinion, to correct the unsatisfactory condition. The rights reserved in this section shall not create any obligations or increase any obligations for Lessor elsewhere in this Lease. 17. TAXES AND UTILITIES: This Lease may result in a taxable possessory interest. Lessee shall be solely responsible for payment of property taxes associated with its occupancy of the leased premises, if any apply. Lessee agrees to and shall pay before delinquency all its pro-rata share of the possessory taxes and assessments of any kind assessed or levied upon Lessee or the leased premises by reason of this lease or of any structures, machines, or other improvements of any nature whatsoever erected, installed or maintained by Lessee, or by reason of the business or other activities of Lessee upon or in connection with the leased premises. Lessee shall also pay any fees imposed by law for licenses or permits for any business or activities of Lessee upon the leased premises or under this lease, and shall pay before delinquency any and all charges for utilities at or on the leased premises. If Lessee fails to pay said possessory taxes, Lessor may declare default in accordance with Paragraph 14. Lessee shall be responsible for payment of all utilities, including but not limited to security alarm, trash, water, gas and electricity. 18. CONFORMANCE WITH RULES AND REGULATIONS: Lessee agrees that in all activities on or in connection with the leased premises and in all uses thereof, including the making of any alterations or changes and the installation of any machines or other improvements, it will abide by and conform to all ordinances, rules and regulations prescribed by the City of Carlsbad, including, but not limited to, sign regulations and requirements for outdoor display set forth within the Carlsbad Village Redevelopment Master Plan and Design Manual and the City of Carlsbad Municipal Code, and any applicable laws, including those of the County Health Department, the State of California and Federal Government, as any of the same now exist or may hereafter be adopted or amended. 19. NON-DISCRIMINATION: Lessee agrees not to discriminate against any person or class of persons by reason of sex, color, race, religion, or national origin. If the use 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency PageS provided for in this lease allows the Lessee to offer accommodations or services to the public, such accommodations or services shall be offered by the Lessee to the public on fair and reasonable terms. 20. PARTIAL INVALIDITY: If any term, covenant, condition, or provision of this lease is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired, or invalidated thereby. 21. HOLD HARMLESS: Lessee shall defend, indemnify, and hold harmless Lessor, its officers and employees from liability, damage, and expense of any kind, including reasonable attorney's fees, arising from all claims or causes of action of any kind including but not limited to injury to or death of any person or persons, including Lessee, its employees, and invitees resulting directly or indirectly from granting and performance of this lease or arising from the use and operation of the leased premises or any defect in any part thereof. 22. HAZARDOUS SUBSTANCES: The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the premises, (ii) regulated or monitored by any government authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statue or common law theory. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the premises or neighboring properties, that was caused or contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the premises during the term of this Lease, by or for Lessee, or any third party. 23. EASEMENTS: (a) This lease and all rights given hereunder shall be subject to all easements and rights-of-way now existing or heretofore granted or reserved by Lessor in, to or over the leased premises for any purpose whatsoever, and shall be subject to such rights-of-way for reasonable access, sewers, pipelines, conduits and such telephone, cable television, telegraph, light, heat or power lines as may from time to time be determined by Lessor to be necessary. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 9 (b) Lessor agrees that such easements and rights-of-way shall be so located and installed as to produce a minimum amount of interference to the business of Lessee. 24. INSURANCE: Lessee shall obtain and maintain for the duration of this lease agreement and any and all amendments, insurance against claims for injuries to persons or damage to property which may arise out of or in connection with use of the subject building and provision of services by Lessee. The insurance will be obtained from an insurance carrier admitted and authorized to do business in the State of California. The insurance carrier is required to have a current Best's Key Rating of not less than "A-V". The policies for said insurance shall, as a minimum, provide the following forms of coverage: (a) Comprehensive General Liability - (covering premises and operations in the amount of not less than One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, personal injury and property damage. If the submitted policies contain aggregate limits, general aggregate limits will apply separately under this lease or the general aggregate will be twice the required per occurrence limits. (b) Property Insurance - Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, trade fixtures, alterations and utility installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000.00 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property and trade fixtures as well as alterations and utility installations. Lessor will be responsible for providing coverage for the structure itself, exclusive of the items required to be covered by Lessee's insurance policy. (c) Evidence of Insurance - Certificates and endorsements in a form acceptable to Lessor evidencing the existence of the necessary insurance policies shall be kept on file with Lessor during the entire term of this lease. All insurance policies shall be primary coverage, and will name Lessor as an additional insured, protect Lessor against any legal costs in defending claims and will not terminate without thirty (30) days written notice to Lessor. (d) Lessor shall retain the right at any time to review the coverage, form, and amount of the insurance required hereby. If, in the opinion of the Lessor, the insurance provisions in this lease do not provide adequate protection for Lessor and/or for members of the public using the leased premises, Lessor may require Lessee to obtain an insurance sufficient in coverage, form and amount to provide adequate protection. Lessor's requirements shall be reasonable but shall be designed to assure protection from and against the kind and extent of risk, which exist at the time a change in insurance is required. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 10 (e) Lessor shall notify Lessee in writing of changes in the insurance requirements and, if Lessee does not deposit certificates/endorsements evidencing acceptable insurance policies with Lessor incorporating such changes within thirty (30) days of receipt of such notice, this lease shall be in default without further notice to Lessee, and Lessor shall be entitled to all legal remedies. (f) The procuring of such required policies of insurance shall not be construed to limit Lessee's liability hereunder, nor to fulfill the indemnification provisions and requirements of this lease. Notwithstanding said policies of insurance, Lessee shall be obligated for the full and total amount of any damage, injury, or loss caused by negligence or neglect connected with this lease or with the use or occupancy of the leased premises. (g) Lessee agrees not to use the premises in any manner, even if use is for purposes stated herein, that will result in the cancellation of any insurance Lessor may have on the premises, or on adjacent premises, or that will cause cancellation of any other insurance coverage for the premises, or adjoining premises. Lessee further agrees not to keep on the premises or permit to be kept, used, or sold thereon, anything prohibited by any fire or other insurance policy covering the premises. Lessee shall, at its sole cost and expense, comply with any and all requirements, in regard to premises, of any insurance organization necessary for maintaining fire and other insurance coverage at reasonable cost. 25. WARRANTIES-GUARANTEES-COVENANTS: Lessor makes no warranty, guarantee, covenant, including but not limited to covenants of title and quiet enjoyment, or declaration of any nature whatsoever, concerning the condition of the leased premises, including the physical condition thereof, or any condition which may affect the leased premises, and it is agreed that Lessor will not be responsible for any loss, damage or costs which may be incurred by Lessee by reason of any such condition or conditions. 26. DAMAGE TO OR DESTRUCTION OF PREMISES: In the event of damage to or destruction by fire, the elements, acts of God, or any other cause, of twenty five percent (25%) or less of the improvements located within the premises Lessee shall, within ninety (90) days, commence and diligently pursue to completion the repair, replacement, or reconstruction of improvements necessary to permit full use and occupancy of the demised premises for the purposes required by this lease. Repair, replacement or reconstruction of improvements within the demised premises shall be accomplished in a manner and according to plans approved by Lessor; provided, however, Lessee shall not be obligated to repair, reconstruct or replace the improvements following their destruction in whole or substantial part (more than 25% of improvements) except to the extent the loss is covered by insurance required to be carried by Lessee pursuant to Paragraph 24 of this Lease (or would be covered whether or not such required insurance 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 11 is actually in effect). If Lessee elects not to restore, repair or reconstruct as herein provided, then the Lease shall terminate. Rent shall not be abated during the repair period, except to the extent that Lessor is compensated by Lessee's insurance for rental loss. Lessor shall be entitled to any insurance proceeds and other compensation for the loss. 27. QUITCLAIM OF LESSEE'S INTEREST UPON TERMINATION: Upon termination of this lease for any reason, including but not limited to termination because of default by Lessee, Lessee shall execute, acknowledge and deliver to Lessor within thirty (30) days after receipt of written demand thereof a good and sufficient deed whereby all right, title and interest of Lessee in the demised premises is quitclaimed to Lessor. Should Lessee fail or refuse to deliver the required deed to Lessor, Lessor may prepare and record a notice reciting the failure of Lessee to execute, acknowledge and deliver such deed and said notice shall be conclusive evidence of the termination of this lease and of all right of Lessee or those claiming under Lessee in and to the demised premises. 28. PEACEABLE SURRENDER: Upon the expiration of this lease or sooner termination or cancellation thereof, as herein provided, Lessee will peaceably surrender said premises to Lessor in as good condition as said premises were at the date of this lease, ordinary wear and tear excepted. If the Lessee fails to surrender the premises at the expiration of this lease or the earlier termination or cancellation thereof, Lessee shall defend and indemnify Lessor from all liability and expense resulting from the delay or failure to surrender, including, without limitation, any succeeding Lessee's claims based on Lessee's failure to surrender. 29. WAIVER: Any waiver by Lessor of any breach by Lessee of any one or more of the covenants, conditions, or agreements of this lease shall not be, nor be construed to be, a waiver of any subsequent or other breach of the same or any other covenant, condition or agreement of this lease, nor shall any failure on the part of Lessor to require or exact full and complete compliance by Lessee with any of the covenants, conditions, or agreements of this lease be construed as in any manner changing the terms hereof or to prevent Lessor from enforcing the full provisions hereof. The subsequent acceptance of rent hereunder by Lessor shall not be deemed to be waiver of any preceding breach by Lessee of any term, covenant, or condition of this lease, other than the failure of Lessee to pay the particular rental so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent. 30. NO RIGHT TO HOLD OVER: Lessee has no right to retain possession of the premises or any part thereof beyond the expiration or termination of this lease. In the event that Lessee holds over, then the Base Rent shall be increased to Six Thousand Three Hundred and Ten Dollars ($6310.00) per month applicable during the month immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 12 31. ACCEPTANCE OF PREMISES: (a) Prior to execution of this lease, Lessee shall be entitled to have independent tests performed to satisfy Lessee that the premises are in condition for occupancy. (b) By signing this Lease, Lessee represents and warrants that it has independently inspected the premises and made all tests, investigations and observations necessary to satisfy itself of the condition of the premises. Lessee further acknowledges that premises are in an acceptable condition, and that Lessee does not hold Lessor responsible for any defects in premises. 32. QUIET POSSESSION: Lessee will at all times during the terms of this Lease occupy the premises quietly and not commit any act, waste or nuisance which disturbs the quiet enjoyment of the property for the Lessor, public, any neighbor or other tenant of Lessor. 33. SUCCESSORS IN INTEREST: Unless otherwise provided in this lease, the terms, covenants and conditions herein shall apply to and bind the heirs, successors, executors, administrators, and assigns of all the parties hereto, all of whom shall be jointly and severally liable hereunder. 34. ENTIRE UNDERSTANDING: This lease contains the entire and only understanding and agreement of the parties, and Lessee, by accepting the same, acknowledges that there is no other written or oral understanding or agreement between the parties with respect to the demised premises and that this lease supersedes all prior negotiations, discussions, obligations and rights of the parties hereto. No waiver, modification, amendment or alteration of this lease shall be valid unless it is expressly in writing and signed by authorized persons of the parties hereto. Each of the parties to this lease acknowledges that no other party, nor any agent or attorney of any other party, has made any promise, representations, waiver or warranty whatsoever, express or implied, which is not expressly contained in writing in this lease, and each party further acknowledges that it has not executed this lease in reliance upon any collateral promise, representation, waiver or warranty, or in reliance upon any belief as to any fact not expressly recited in this lease. 35. TIME IS OF THE ESSENCE: Time is of the essence of each and all of the terms and provisions of this lease. 36. NOTICES: Notices given or to be given by Lessor or Lessee to the other may be personally serviced upon Lessor or Lessee or any person hereafter authorized by either in writing to receive such notice or may be served by certified letter addressed to the appropriate address hereinafter set forth or to such other address as Lessor and Lessee may hereafter designate by written notice. If served by certified mail, forty-eight (48) 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 13 hours after deposit in the U.S. Mail, service will be considered completed and binding on the party served. LESSEE: TO LESSEE President or Managing Director New Village Arts Theatre P.O Box 2565 Carlsbad, California 92008 BY: PAT HURLEY PRESIDENT NEW VILLAGE ARTS THEATRE TO LESSOR Housing & Redevelopment Director Carlsbad Redevelopment Agency 2965 Roosevelt Street, Suite B Carlsbad, California 92008 IANOF CARLSBAD REDEVELOPMENT AGENCY DATE:DATE: Note: Signature of Lessee must be Notarized. FORM AND LEGALITY: [ALD R. BALL CITY ATTORNEY DATE: 2787 State Street Lease Agreement Final Revisions: 8/29/2006 New Village Arts Theatre Carlsbad Redevelopment Agency Page 14 State of California County of J^n £)/<£4fc)<£5?}ss.CALIFORNIA ALL-PURPOSE CERTIFICATE OF ACKNOWLEDGMENT On / Date personally appeared , before me, P/if Printed Name of Notary Public personally known to me - or - [I] proved to me on the basis of satisfactory evidence: D form(s) of identification D credible witness(es) 7 Printed Name(s) of Signer(s) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary Public OPTIONAL INFORMATION Although the information in this section is not required by law, it could prevent fraudulent removal and reattachmentof this acknowledgment to an unauthorized document and may prove useful to persons relying on the attached document. Description of Attached Document The preceding Certificate of Acknowledgment is attached to a document titled/for the purpose of Additional Information containing ) ^+- pages, and dated 0 JI ~~ The signer(s) capacity or authority is/are as: O Individual(s) d Attorney-in-Fact CD Corporate Officer(s) Title(s) I I Guardian/Conservator I I Partner-Limited/General n Trustee(s) D Other: representing: Narne(s) of Person(s) or Entity(ies) Signer is Representing [ | Additional Signer(s) | | Signer(s}Thumbprint(s) Other © Copyright 2004 Notary Rotary, Inc. 925 29th St, Des Moines, IA 50312-3612 Form ACK02. 02/04. To re-order, call toll-free 1-877-349-6588 orvisitusonthe Internet at http://www.thenotaryshop.com