LA DOLCE VITA ( LDV ) SETTLEMENT AGREEMENT AND RELEASE & FIRST AMENDMENT TO LEASE AGREEMENT

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1 LA DOLCE VITA ( LDV ) SETTLEMENT AGREEMENT AND RELEASE & FIRST AMENDMENT TO LEASE AGREEMENT Prepared by: Kymberly R. Horner Economic Development Director June 14, 2016

2 DEVELOPMENT OF PROPERTY Redevelopment Project Heritage Square (HS) opened in November of 1991 One city block and is comprised of fourteen structures Twelve 1880 s to the 1920 s. The property is maintained by the Heritage Square Property Owners Association ( HSPOA ) Dissolution of Redevelopment requires the disposition of RDA properties via a Long Range Property Management Plan SA presently Owns 4 Homes at HS McGrath House and the Winery, both properties are subject to the dissolution process. McGrath House has restaurant tenant, La Dolce Vita 2

3 THE SETTING Heritage Square is a Centerpiece of Downtown Revitalization LVD Serves as Restaurant Visitor Attractor & Event Collaborator LA DOLCE VITA LEASE RECONCILIATION 3

4 THE OCCUPANCY SA Owns the McGrath House that LVD Occupies LVD Commenced Occupancy in LA DOLCE VITA LEASE RECONCILIATION 4

5 THE ISSUE LVD Has Fallen Behind in Rent Payments - $112,000 LVD Attributes This to a Variety of Disputed Claims Including: Deficient Exterior Building Maintenance by City/SA Inoperative Elevator for Patron and Delivery Access Limited Assistance from City/SA to Market Event Space LA DOLCE VITA LEASE RECONCILIATION 5

6 THE PROPOSED SOLUTION Enter into a Settlement Agreement and Release between the SA and LDV Approve First Amendment to Lease by and between the SA and LDV Require Unconditional Release of all Current and Future Claims by Tenant 4 LDV exercises Option to Purchase LA DOLCE VITA LEASE RECONCILIATION 6

7 SETTLEMENT AGREEMENT MAJOR DEAL POINTS LDV Shall Pay Successor Agency $83,004 Representing Both Unpaid Rent & Unpaid Catering Event Fees LDV shall provide an explanation to SA Staff concerning the alleged sublease to The Kitchen LDV must demonstrate it s not in violation of section 17.1 of the 2008 Lease Agreement Assignment and Subletting LDV shall exercise its purchase option pursuant to Section 24 Option to Purchase of the 2008 Lease Agreement. Release by LDV from and for any and all claims Release by Successor Agency from and for any and all claims 7

8 1 ST AMENDMENT TO LEASE AGREEMENT DEAL POINTS LDV shall pay SA $56, for past amounts due Base Rent & late fees, payments must be made within 3 days of entry into Agreement If LDV makes all past due payments in 3 business days of parties signing the Agreement, monthly Base Rent is reduced by 50% (to $1,792.67), retroactive to May 16, 2013 LDV shall continue to pay monthly Base Rent If LDV makes all past due payments within 3 business days of the parties entry into the Agreement then LDV may exercise its Option to Purchase, SA and LDV shall make best effort to consummate the sale within 60 days thereafter If LDV fails to make all past due payments within 3 business days of the parties entry into the Agreement, then the Lease shall be terminated without notice 8

9 1 ST AMENDMENT TO LEASE AGREEMENT DEAL POINTS If the parties fail to consummate the sale of the Leased Premises within 120 days after receipt of the MAI appraisal from Successor Agency due to LDV s failure to exercise best efforts to consummate such sale, then the Lease shall be terminated From the date of the Agreement, if any future installment of Base Rent or Catering fees are unpaid as of the 5th day of any month, then the Lease shall terminate without notice For purposes of Section 24 Option to Purchase of the 2008 Lease, LDV shall be deemed to be in default of the Lease unless and until LDV has paid SA, in full, for all amounts then due under the First Amendment to Lease and/or the Lease 9

10 CONDITIONS OF APPROVAL Approval of the Settlement Agreement and Release and the First Amendment to Lease by the Oversight Board; and any one of the following occurs: The California Department of Finance ( DOF ) approves the Settlement Agreement and Release; or The timeframe the DOF may object the approval expires; or The DOF objects to the Oversight Board s approval of the Settlement Agreement and Release and the First Amendment to Lease and either party successfully overturns or reverses the DOF s objection. If Settlement Agreement and Release and the First Amendment to Lease are not entered into within 6 months of the signing by all parties, then the following shall happen: Settlement Agreement and Release and the First Amendment to Lease Subject to rescission on written notice of any party; Settlement Agreement and Release and the First Amendment to Lease shall expire upon written notice Settlement is subject to extension by written agreement of the parties 10

11 RECOMMENDATION That the SA (i) approve a Settlement Agreement and Release by and between the SA and LDV, to settle contemplated and potential litigation, (ii) recommend to its oversight board approval thereof, and (iii) authorize the Chairman (or designee) to execute the document with such non-substantive changes as may be acceptable to SA General Counsel and Special Counsel. That the SA (i) approve a First Amendment to Lease by and between the SA and LDV, (ii) recommend the Oversight Board approval thereof, and (iii) authorize the Chairman (or designee) to execute the document with such non-substantive changes as may be acceptable to the SA General Counsel and SA Special Counsel. Authorize the Executive Director of the SA (or designee) to prepare, revise and execute all associated documents necessary to carry out and implement the Settlement Agreement and Release and the First Amendment to Lease, and to administer the SA s obligations, responsibilities and duties thereunder. 11

12 FINAL STEPS If approved the Settlement Agreement and Release and the 1 st Amendment to the Lease Agreement would require: SA Approval Oversight Board Approval State Department of Finance (DoF) Approval 12

13 THE END Questions and Answers LA DOLCE VITA LEASE RECONCILIATION 13