HomeMy WebLinkAbout2021-03-16; Public Financing Authority; Resolution 83RESOLUTION NO. 83
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD PUBLIC
FINANCING AUTHORITY OF THE CITY OF CARLSBAD, CALIFORNIA,
APPROVING THE FIRST AMENDMENT TO THE GROUND LEASE
AGREEMENT WITH GRAND PACIFIC CARLSBAD HOTEL, L.P. TO: 1) REDUCE
THE NUMBER OF SHERATON HOTEL ROOMS IN PHASE 2 FROM 31
ROOMS TO 25 JUNIOR SUITES; 2) EXTEND THE ADDITIONAL SHERATON
BUILDING OUTSIDE COMPLETION DATE FROM AUG. 31, 2022 TO DEC. 31,
2026; AND, 3) ADD A PROVISION FOR EARLY CONSTRUCTION OF PHASE 2
IF CERTAIN METRICS ARE MET, FOR THE PROPERTY KNOWN AS THE
CROSSINGS AT CARLSBAD WEST VIEW LOT 9, AND AUTHORIZE THE
EXECUTIVE DIRECTOR TO EXECUTE THE FIRST AMENDMENT TO THE
AGREEMENT AND ANY RELATED FUTURE ACTIONS
WHEREAS, the Public Financing Authority of the City of Carlsbad, California has determined that
on Dec. 15, 2016, the city entered into a 55-year Ground Lease Agreement (Agreement) with Grand
Pacific Carlsbad Hotel, L.P. (Grand Pacific), to construct and operate a Hotel at the property known as
The Crossings at Carlsbad West View Lot 9 (Lot 9) by Resolution No. 2016-228; and
WHEREAS, as part of Phase 1, Grand Pacific was required to convert at least 129 existing
Sheraton hotel rooms on Grand Pacific's property to Westin hotel rooms and construct at least 71 new
Westin hotel rooms on Lot 9, for a total of 200 Westin rooms, by Feb. 28, 2021.
WHEREAS, Grand Pacific met this requirement by converting 130 existing Sheraton rooms to
Westin rooms and constructing 78 new Westin rooms on Lot 9, for a total of 208 Westin branded
rooms, or eight more Westin rooms than required under the Agreement; and
WHEREAS, as part of Phase 1, Grand Pacific was required to maintain 121 existing Sheraton
hotel rooms on property owned by Grand Pacific and to construct 48 new Phase 1 Sheraton hotel rooms
to be completed and open for business to the public on or before Feb. 28, 2021; and
March 16, 2021 Item #2 Page 8 of 25
WHEREAS, in addition, in Phase 1 Grand Pacific was also required to commence construction of
at least 32 new timeshare units on Lot 9 by Dec. 15, 2018, with construction to be completed within
18-months of commencement, or by June 15, 2020; and
WHEREAS, Grand Pacific met this requirement by constructing 36 new timeshare units (four
more than required) on Lot 9 that were completed on June 28, 2019, approximately one year earlier
than required; and
WHEREAS, by June 1, 2018, all Phase 1 requirements were met by Grand Pacific; and
WHEREAS, as part of Phase 2, Grand Pacific was required to develop 31 new Sheraton Hotel
Rooms to be completed and open for business to the public on or before Aug. 31, 2022; and
WHEREAS, Grand Pacific anticipates that COVID-19 will impact the tourism industry so adversely
as to make it economically unfeasible to develop the 31 new rooms required in Phase 2 by Aug. 31,
2022, and anticipates room occupancy to not rebound for at least four years; and
WHEREAS, Jan. 25, 2021, Grand Pacific requested that the Agreement be amended as follows:
1) reduce the number of hotel rooms required in Phase 2 —Sheraton from 31 non-specified room types
to 25 junior suite rooms that will be of approximately 370 to 420 square feet per room; 2) extend the
Outside Completion Date for the Phase 2 — Sheraton rooms from Aug. 31, 2022 to Dec. 31, 2026; and
3) add a provision that if the hotel market conditions improve before July 1, 2024, such that the
combined New Sheraton Resort and Westin Hotel obtain an average daily rate (ADR) of $230 per night,
as adjusted by an index, and achieve average occupancy rates of a minimum of eighty percent (80%)
on a trailing 12-month basis, then Grand Pacific shall complete construction of the Phase 2 — Sheraton
rooms within twenty-four (24) months; and
WHEREAS, staff recommends that the Public Financing Authority support all three provisions of
Grand Pacific's lease amendment request and adopt a resolution approving the First Amendment to
March 16, 2021 Item #2 Page 9 of 25
the Ground Lease Agreement with Grand Pacific Carlsbad Hotel, L.P for the property known as The
Crossings at Carlsbad West View Lot 9, and authorize the executive director to execute the First
Amendment to the Ground Lease Agreement and any related future actions; and
WHEREAS, reducing the number of Sheraton Hotel Rooms in Phase 2 from 31 rooms to 25 junior
suites; 2) extending the Additional Sheraton Building Outside Completion Date from Aug. 31, 2022 to
Dec. 31, 2026; and, 3) adding a provision for early construction of Phase 2 if certain metrics are met,
will neither reduce the term of the entire Agreement nor the ground lease payments to be received
under the Agreement.
NOW, THEREFORE, BE IT RESOLVED by the Public Financing Authority Board of the City of
Carlsbad, California, as follows that:
1.The above recitations are true and correct.
2.That the First Amendment to the Ground Lease Agreement, attached hereto as Attachment
A, is hereby approved.
3.That the executive director, or his designee, is hereby authorized to execute the First
Amendment to the Ground Lease Agreement, attached hereto as Attachment A, and to act
on behalf of the Public Financing Authority in all future decisions and actions necessary to
implement the First Amendment to the Ground Lease Agreement, and to do so in full
compliance with the terms and conditions expressed in the aforementioned Agreement and
to the satisfaction of the General Counsel.
March 16, 2021 Item #2 Page 10 of 25
PASSED, APPROVED AND ADOPTED at a Special Meeting of the Public Financing Authority of
the City of Carlsbad on the 16th day of March, 2021, by the following vote, to wit:
AYES: Hall, Blackburn, Acosta, Bhat-Patel, Schumacher.
NAYS: None.
ABSENT: None.
MATT HALL, CHAIRMAN OF THE BOARD
ATTEST:
BARBARA ENGLESON, SECRETARY
(SEAL)
March 16, 2021 Item #2 Page 11 of 25
FIRST AMENDMENT TO GROUND LEASE
THIS FIRST AMENDMENT TO GROUND LEASE ("Amendment") is executed as
of ntqAtt 1.0 , 2021 ("Effective Date") by and between THE CARLSBAD PUBLIC
FINANCING AUTHORITY, a joint powers authority formed by the City of Carlsbad and the
Carlsbad Municipal Water District ("Landlord") and GRAM) PACIFIC CARLSBAD HOTEL,
L.P., a Delaware limited partnership ("Tenant").
RECITALS
WHEREAS, Landlord and Tenant entered into that certain Ground Lease dated
December 15, 2016 ("Ground Lease"), as evidenced by that certain Memorandum of Lease dated
December 15, 2016 and recorded as Document No. 2016-0689339 in the Official Records of San
Diego County. All capitalized terms used in this Amendment and not otherwise defined shall have
the meanings assigned to them in the Ground Lease.
WHEREAS, GRAND PACIFIC CARLSBAD, L.P., a California limited partnership
("Guarantor"), has entered into that certain Guaranty of Completion and Limited Payment
Obligations wherein, Guarantor has guaranteed, among other things, the completion of the
Additional Sheraton Building ("Guaranty").
WHEREAS, Phase 1 of the Additional Sheraton Building consisting of 48 rooms has been
completed.
WHEREAS, in accordance with that certain Memorandum from Landlord to Tenant dated
May 2, 2019, the Additional Sheraton Building Outside Completion date is currently August 31,
2022.
WHEREAS, due to the global pandemic caused by the 2019 Novel Coronavirus Disease
("COVID-19"), Tenant has requested an extension of the Additional Sheraton Building Outside
Completion Date to December 31, 2026 and to modify the Phase 2 hotel room requirements of
the Additional Sheraton Building, and Landlord has agreed to grant such an extension and
modification, all on the terms and conditions set forth in this Amendment.
NOW, THEREFORE, for and in consideration of the mutual agreements hereinafter
contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby mutually acknowledged, Landlord and Tenant agree as follows:
AGREEMENT
1. Modification of Rooms in Phase 2 of Additional Sheraton Building.
Notwithstanding anything to the contrary set forth in the Ground Lease, including Section 1.2,
Phase 2 of the Additional Sheraton Building is reduced from consisting of at least 31 hotel rooms
to at least 25 hotel rooms, all of which shall be junior suites of approximately 370 to 420 square
feet per room.
March 16, 2021 Item #2 Page 12 of 25
2. Additional Sheraton Building Outside Completion Date. Notwithstanding anything to the contrary set forth in the Ground Lease, the Additional Sheraton Building Outside
Completion Date shall be December 31, 2026.
3. Commencement of Construction of Additional Sheraton Building. Notwithstanding the Additional Sheraton Building Outside Completion Date defined in Section 2 of this Amendment, if the market conditions improve before July 1, 2024, such that the combined
New Sheraton Resort and Westin Hotel obtain an average daily rate (ADR) of $230 per night, as
adjusted by the Index (defined below), and achieve average occupancy rates of a minimum of eighty percent (80%) on a trailing 12-month basis (“Measurement Month”), then Tenant shall complete construction of Phase 2 of the Additional Sheraton Building within twenty-four (24) months. If requested by the Tenant in writing at least thirty (30) days prior to the end of the twenty-
four (24) month period, the City Manager of the City of Carlsbad may grant one (1), three (3)
month extension to the twenty-four (24) month time period. (a) Commencing with the quarter ending March 31, 2021 and continuing until the quarter ending June 30, 2024, Tenant will provide to Landlord on a
quarterly basis a report for each of the preceding three (3) months in the
form of Exhibit 1, attached and incorporated herein, within thirty (30) days after the end of each calendar quarter. By way of example, the first report is due April 30, 2021 for the months of January, February and March.
(b) As referenced herein, “Index” means the Consumer Price Index for All Urban Consumers for San Diego-Carlsbad, California, All Items (Base Period 1982-84=100) published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is changed so the base year differs
from that in effect for purposes of measuring market conditions the Index
will be converted in accordance with the conversion factor published by the U.S. Department of Labor, Bureau of Statistics.
(c) For purposes of measuring an adjustment of the ADR, ADR will be
adjusted to an amount equal to the product obtained by multiplying the
ADR by a fraction, the numerator of which is the Index published nearest but prior to the Measurement Month and the denominator of which is the average Index rate published for 2020 (CPI-Urban for San Diego-Carlsbad average for 2020 = 305.126).
4. No Relief for Payment of Annual Rent. Tenant shall at no time request rent relief
or deferral from Landlord for Rent previously paid or owed to Landlord or for Rent which will
become due within nine (9) months from the Effective Date of this Amendment. 5. Confirmation. Tenant represents and warrants to Landlord that: (i) Tenant is not in default of performing any of its obligations under the Ground Lease nor do there exist any events
which, given the passage of time or notice or both, would give rise to a default on the part of
Tenant in performing any of its obligations under the Ground Lease, (ii) to Tenant’s actual
March 16, 2021 Item #2 Page 13 of 25
knowledge as of the Effective Date there are no defaults existing on the part of Landlord in performing any of its obligations under the Ground Lease, nor any events which, given the passage
of time or notice or both, would give rise to a default on the part of Landlord in performing any of
its obligations under the Ground Lease, (iii) Tenant has no claim, defense or offset with respect to the Ground Lease or the payment of rent thereunder, and (iv) Tenant will continue to maintain payment of rent without rent relief as referenced in Section 4 above.
6. Ratification. Except as expressly amended hereby, all terms and conditions of the
Ground Lease are and shall continue to be in full force and effect and binding on the parties hereto, and the Ground Lease is hereby ratified and affirmed. All references to the Ground Lease shall mean the Ground Lease as amended hereby.
7. Miscellaneous. Whenever the term “include”, “including”, or “included” is used in
this Amendment, it shall mean “including without limiting the generality of the foregoing”. The headings of paragraphs and sub-paragraphs contained in this Amendment are merely for convenience of reference and shall not affect the interpretation of any of the provisions of this Amendment. The recitals to this Amendment are, and shall be construed to be, an integral part of
this Amendment. This Amendment is deemed to have been drafted jointly by the parties to this
Amendment, and any uncertainty or ambiguity shall not be construed for or against any party as an attribution of drafting to any party. If any provision of this Amendment is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Amendment shall nonetheless remain in full force and effect. This Amendment may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall constitute one and
the same instrument. Signatures transmitted by facsimile or as emailed PDF copies shall be binding as originals, and each party hereby waives any defenses to the enforcement of the terms of this Amendment sent by facsimile or emailed PDF based upon the manner of transmission or form of signature (electronic, facsimile or “ink original”). Landlord and Tenant hereby represent that each
party has the full power and authority to execute this Amendment and be bound by the terms hereof
without consent from any entity or person. [SIGNATURE PAGE FOLLOWS]
March 16, 2021 Item #2 Page 14 of 25
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
first written above.
LANDLORD: THE CARLSBAD PUBLIC FINANCING
AUTHOR! , a oint powers authority formed by the
City of C lsbad d the Carlsbad Municipal Water
District
By:
Scott "dwick, City Manager
Attest:
Wvlitv
Barbara Engelson, City Clerk
(Seal)
Approved as to form and legality:
,
Celia Brewer, City Attorney 0.A...n • ..... IF &RN-0
TENANT: GRAND PACIFIC CARLSBAD HOTEL, L.P.,
a Delaware limited partnership
By: Grand Pacific Carlsbad Hotel, Inc.,
a Delaware corporation, its General Partner
imothy J. S pc, Ca-President
David S. Brown, Co-President
By:
By:
March 16, 2021 Item #2 Page 15 of 25
By:
Timothy J. Stri Co- resident
By:
David S. Brown, Co-President
ACKNOWLEDGMENT OF GUARANTOR
The undersigned hereby acknowledges the foregoing Amendment and agrees that the Guaranty
continues in full force and applies to the Ground Lease as amended hereby.
GUARANTOR:
GRAND PACIFIC CARLSBAD, L.P.,
a California limited partnership
By: Grand Pacific Development, Inc.,
a California corporation, its general partner
5
March 16, 2021 Item #2 Page 16 of 25
EXHIBIT 1 QUARTERLY REPORT
TRAILING 12 MONTH OCCUPANCY AND RATE CALCULATION
March 16, 2021 Item #2 Page 17 of 25
TRAILING 12 MONTH OCCUPANCY & RATE CALCULATIONWESTIN / SHERATON HOTELMonth / Year __________________Month Month Month Month Month Month Month Month Month Month Month Month12 Month123456789101112TotalProject Rooms377 377 377 377 377 377 377 377 377 377 377 377377Days in the MonthAvailable RoomsRooms OccupiedOccupancy %Total Room RevenueAverage Daily RateMarch 16, 2021Item #2 Page 18 of 25