DATE: April 11, 2023
SUBJECT:
Title
RESOLUTION FINDING THE BOARD ACTION EXEMPT UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA), INCLUDING, BUT NOT LIMITED TO, CEQA GUIDELINES SECTIONS 15301 AND 15304 AND CONSENTING TO A SECOND AMENDMENT TO RESTAURANT LEASE BETWEEN PACIFIC GATEWAY, LTD DBA SAN DIEGO MARRIOTT MARQUIS AND MARINA AND OS PACIFIC, LLC DBA ROY'S RESTAURANT, LOCATED AT 333 WEST HARBOR DRIVE, TO EXTEND THE RESTAURANT LEASE TERM BY 10 YEARS WITH TWO 5-YEAR OPTIONS TO EXTEND
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EXECUTIVE SUMMARY:
Host Hotels & Resorts LP owns Pacific Gateway Ltd. dba San Diego Marriott Marquis and Marina (“Pacific Gateway”), which operates a hotel and marina located at 333 West Harbor Drive in San Diego (the “Premises”) (see, Attachment A - Location Map). Pacific Gateway and the San Diego Unified Port District (“District”) are parties to that certain Amended, Restated, and Combined Lease, as amended, dated December 5, 1995 and recorded in the Office of the District Clerk as Document No. 33656 (the “Lease”) for the operation of Pacific Gateway’s hotel and marina operations, which, should the applicable extension options be validly exercised, expires in 2083 (the “Master Lease”).
Pacific Gateway and OS Pacific LLC dba Roy’s Restaurant (“Roy’s Restaurant”) are parties to that certain Restaurant Lease dated as of August 21, 2006 (as amended by that certain First Amendment to Restaurant Lease dated June 20, 2007, the “Sublease”), pursuant to which Roy’s Restaurant operates an upscale Pacific Rim style restaurant and cocktail lounge on a portion of the Premises. Pacific Gateway has requested District consent to a Second Amendment to Restaurant Lease (the “Second Amendment”) (see Attachment B - Second Amendment to Restaurant Lease) between Pacific Gateway and Roy’s Restaurant in order to extend the Sublease term by ten (10) years plus two additional five (5) year extension options and to add additional terms, including an obligation that Roy’s Restaurant invest approximately $1,000,000 into upgrading the restaurant’s interior.
Given Roy’s Restaurant’s popularity and long-term track record of success, staff recommends that the Board approve the proposed Second Amendment.
RECOMMENDATION:
Recommendation
Adopt a Resolution consenting to a Second Amendment to Restaurant Lease between Pacific Gateway, Ltd dba San Diego Marriott Marquis and Marina to OS Pacific, LLC dba Roy’s Restaurant, located at 333 West Harbor Drive, to extend the Sublease term by ten (10) years plus two additional five (5) year extension options.
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FISCAL IMPACT:
The proposed Board action would not result in any direct fiscal impact to the District.
This agenda item is subject to Board of Port Commissioners Policy No. 106 - Cost Recovery User Fee Policy.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A vibrant waterfront destination where residents and visitors converge.
• A Port that is a safe place to visit, work and play.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
Pacific Gateway’s Master Lease with the District includes 17.9 acres of land and 19.0 acres of water on which Pacific Gateway currently operates two 25-story hotel towers with 1,362 guest rooms, meeting space, restaurants, retail shops, other ancillary hotel uses as well as a 446-slip marina.
Roy’s Restaurant was founded in 1988 by Roy Yamaguchi, a James Beard award-winning chef. Currently 22 Roy’s Restaurants operate within the United States and feature “Pioneered Pacific Rim cuisine.” Roy’s Restaurant subleases approximately 7,500 square feet of restaurant space from Pacific Gateway in a two-story venue at the Premises, which includes both indoor and outdoor seating options as well as table and bar seating. The overall seating capacity is approximately 250 in addition to a private dining area that can hold approximately 100 patrons. Roy’s Restaurant has been a successful operator at Pacific Gateway since 2008, providing upscale service and food which has contributed to its success throughout the years.
Pacific Gateway is requesting Board consent to the proposed Second Amendment to Restaurant Lease (see Attachment B) to extend the Sublease term by ten (10) years plus two additional five (5) year extension options, among other terms. In addition, the Second Amendment requires Roy’s Restaurant to invest approximately $1,000,000 in refurbishing the interior of the restaurant premises and also includes District related terms clarifying that the Master Lease controls with respect to the various parties’ rights and obligations.
Given Roy’s Restaurant’s history of success on District tidelands and the Second Amendment requiring upgrades to the restaurant premises, containing District friendly terms and conditions, and being consistent with the Master Lease and BPC Policy No. 355, staff recommends that the Board approve of the proposed Second Amendment to Restaurant Lease.
General Counsel’s Comments:
The Office of the General Counsel has reviewed this agenda sheet and the attachments as presented to it and approves the same as to form and legality.
Environmental Review:
The proposed Board action, including without limitation, consenting to an amendment to a sublease between Pacific Gateway, LTD dba San Diego Marriott Marquis and Marina and OS Pacific, LLC dba Roy’s Restaurant, located at 333 West Harbor Drive, to extend the term by 10 years with two 5-year options to extend, is Categorically Exempt pursuant to California Environmental Quality Act (CEQA) Guidelines Sections 15301 (Existing Facilities) and 15304 (Minor Alterations to Land) and Sections 3.a.(3)(12) and 3.d.(5) of the District’s Guidelines for Compliance with CEQA because the project would consist of improvements to an existing restaurant that would involve no expansion of use beyond that previously existing and would not involve the removal of mature, scenic trees. The District has determined none of the six exceptions to the use of a categorical exemption apply to this project (CEQA Guidelines Section 15300.2).
The proposed Board action complies with Section 87, which allows for the establishment, improvement, and conduct of small boat harbors, marinas, aquatic playgrounds, and similar recreational facilities, and for the construction, reconstruction, repair, maintenance, and operation of all works, buildings, facilities, utilities, structures, and appliances incidental, necessary, or convenient for the promotion and accommodation of any of those uses, including, but not limited to, snack bars, cafes, restaurants, motels, launching ramps, and hoists, storage sheds, boat repair facilities with cranes and marine ways, administration buildings, public restrooms, bait and tackle shops, chandleries, boat sales establishments, service stations and fuel docks, yacht club buildings, parking areas, roadways, pedestrian ways, and landscaped areas. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board action is consistent with the Public Trust Doctrine.
The proposed Board action is considered excluded development pursuant to Sections 8.a.(8)(12) (Existing Facilities) and 8.d.(2) (Minor Alterations to Land) of the District’s Coastal Development Permit Regulations because the project would consist of improvements to an existing restaurant that would involve a negligible expansion of use beyond that previously existing and would not involve the removal of mature, scenic tress. If the Board approves this action, District staff would notify California Coastal Commission (CCC) staff in accordance with Coastal Act Section 30717. The approval would become effective after the 10th working day after notification to CCC staff, unless an appeal is filed with the CCC within that time frame.
Diversity, Equity, and Inclusion Program:
This agenda sheet has no direct DEI impact on District workforce or contract reporting at this time.
PREPARED BY:
Andrea Ormerod
Program Manager, Real Estate
Attachment(s):
Attachment A: Location Map
Attachment B: Sublease Amendment No. 2