| | | | | | | | Agenda Item - 2.h.
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
| To: | Scott C. Stiles
| From: | Lisa L. Kim
| | Dept.: | City Manager
| Dept.: | Community and Economic Development
| | Subject: | Approval of the Third Amendment of the Lease Agreement with SteelCraft Garden Grove, LP, for property located at 12900 Euclid Street, Garden Grove. (Action Item) | Date: | 5/12/2020 |
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| | | | | | | | OBJECTIVE
For the City Council to approve a third amendment to the SteelCraft Garden Grove, LP, lease (“Third Amendment”) to defer monthly rent for an 18-month period, repayment over a five-year period, and waiver of CPI adjustment during the deferral period. |
| | | | | | | | BACKGROUND
In 2017, the City entered into a ground lease agreement with SteelCraft to lease approximately 1.7-acres of City-owned unimproved real property, identified as APN 090-164-37 (12900 Euclid Street). The agreement provided for an initial 10-year term along with an option to extend up to four 5-year extensions (a total of 20 additional years). The monthly rent paid by StreelCraft for the first three years was set at $8,120 with periodic Consumer Price Index (CPI) adjustment to rent.
In 2018, the City and Steelcraft executed an amendment (“First Amendment”) for assignment of lease, assigned to SteelCraft Garden Grove LP.
In 2019, the City and Steelcraft executed an amendment (“Second Amendment”) to extend the optional extensions of the lease from 30-years to a total of 55-years. |
| | | | | | | | DISCUSSION
Due to the recent COVID-19 pandemic, the City received a request from Steelcraft to defer monthly rent for an 18-month period, beginning April 1, 2020 through September 30, 2021, requesting payment over a five-year period. Beginning October 1, 2021, Steelcraft would resume monthly rent along with the repayment rent of $2,436 per month. The deferred amount would be $146,160. Additionally, waiver of the CPI adjustment during the deferral period is recommended. Except as modified by this Third Amendment, all other terms and conditions remain in full force and effect. The current COVID-19 pandemic has spread across the United States and forced temporary closure of business operations during this public health emergency. In order to best protect the health and safety of the tenants, workers, and clients, Steelcraft has opted to shut down their operations on a temporary basis until the Governor’s stay-at-home order is lifted. |
| | | | | | | | FINANCIAL IMPACT
The rent deferral would pause the collection of rent totaling $146,160 for an 18-month period. The repayment of deferral rent would be repaid over a five-year period. At the end of the five-year repayment period, the City will be made whole. |
| | | | | | | | RECOMMENDATION
It is recommended that the City Council:
- Approve the Third Amendment to the Lease Agreement with SteelCraft Garden Grove LP, to pause the monthly rent for an eighteen-month period at no-interest, from April 1, 2020 through September 30, 2021, to be repaid over a five-year period commencing October 1, 2021;
- Approve to waive the first Consumer Price Index during the deferred period; and
- Authorize the City Manager to execute the Third Amendment and make minor modifications as needed on behalf of the City.
By: Paul Guerrero, Sr. Program Specialist - Real Property
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