TITLE
Recommendation to authorize City Manager to execute a lease amendment to Lease No. HD-4436 to extend the term to March 31, 2072; and accept a pre-payment of rent for the entire extended term to facilitate the rehabilitation and continued operation of the Coast Hotel at 600 Queensway Drive. (District 2)
DISCUSSION
In March 1972, the Board of Harbor Commissioners executed Lease HD-4436 (Lease) with the Feinberg Group for the development of a 195-room hotel (Land Parcel) and waterside improvements (Water Parcel), including 10 mooring locations, at 600 Queensway Drive (See Exhibit 1). Over the years, the leasehold interest has been sold and assigned to various entities . On March 8, 2005, City Council authorized the assignment of the Lease to Queensway Hotel, LLC, a Delaware limited liability company (Lessee), which operates the Coast Hotel and subleases the Water Parcel to Harborlight Landing LLC, a California limited liability company. The Lease provides for staggered termination dates as follows: for the Water Parcel, March 31, 2020 and for
the Land Parcel, March 31, 2052. The Lease requires payment of the higher of base rent or percentage rent. This rent structure provides for a below fair market base rent, thereby allowing the City to participate in the success of the project through percentage rent.
Lessee intends an extensive renovation program that includes the main building, guest rooms, banquet area, meeting facilities, and landscaping, at an estimated cost of $12.7 million. To assist in financing this significant capital improvement, and to protect this level of investment, Lessee has requested an extension of the term of the Lease to March 31, 2072. This would result in a 20-year extension for the Land Parcel and a 52-year extension for the Water Parcel . Lessee has also requested a pre-payment of rent through the extended term.
Keyser Marsten Associates (KMA), the City's real estate economics consultant, reviewed past and current operating st...
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