DATE: November 17, 2015
SUBJECT:
Title
SHELTER ISLAND YACHTWAYS, LTD., LOCATED AT 2330 & 2390 SHELTER ISLAND DRIVE, SAN DIEGO, CA
A) RESOLUTION CONSENTING TO ASSIGNMENT OF OWNERSHIP INTERESTS WITHIN SHELTER ISLAND YACHTWAYS, LTD., D.B.A. SHELTER ISLAND BOATYARD
B) ORDINANCE GRANTING AMENDMENT NO. 1 TO LEASE WITH SHELTER ISLAND YACHTWAYS, LTD., D.B.A. SHELTER ISLAND BOATYARD, UPDATING CERTAIN LEASE PROVISIONS
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EXECUTIVE SUMMARY:
Shelter Island Yachtways, LTD., d.b.a. Shelter Island Boatyard, operates a boatyard at 2330 and 2390 Shelter Island Drive, San Diego (Attachment A-Location Map). Shelter Island Boatyard has a 30-year lease with the District covering its boatyard operations1 which expires in September 2044. Shelter Island Boatyard is currently owned by William Roberts (General Partner) and 42 limited partners (Attachment B-Existing and Proposed Organization Structure). Shelter Island Boatyard has requested District consent to an assignment of ownership interests to add Roy Hobbs (40%), Linda Hobbs (20%), and Wayne Morrison (20%) as limited partners. By adding the aforementioned individuals to the limited partnership, the ownership interests of William Roberts and the remaining 42 partners would be reduced. Consistent with District practice, the District has prepared a lease amendment to update certain lease provisions to bring it to the current standard, including sustainable leasing language (Attachment C-Existing and Proposed Lease Summary). Staff has analyzed the proposed transaction and recommends the Board grant consent and authorize the lease amendment.
RECOMMENDATION:
Recommendation
A) Adopt a resolution consenting to assignment of ownership interests within Shelter Island Yachtways, LTD., d.b.a. Shelter Island Boatyard; and
B) Adopt an ordinance granting Amendment No. 1 to lease with Shelter Island Yachtways, LTD., d.b.a. Shelter Island Boatyard, updating certain lease provisions.
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FISCAL IMPACT:
The proposed Board actions will have no fiscal impact. Shelter Island Boatyard pays the District flat rent of $27,095 per month, which equates to $325,140 annually. Shelter Island Boatyard will continue to pay flat rent in accordance with the lease.
This agenda item is subject to Board of Port Commissioners Policy 106-Cost Recovery User Fee Policy.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal.
Not applicable.
DISCUSSION:
Shelter Island Boatyard has a lease with the District to operate a boatyard at 2330 and 2390 Shelter Island Drive, San Diego. The lease covers approximately 85,740 square feet of land and 124,645 square feet of water, including an existing building and dock system. In October 2014, Shelter Island Boatyard entered into a new 30-year lease with the District through 2044. Per the Lease, Shelter Island Boatyard is required to complete a $3,250,000 redevelopment project by April 1, 2016, which includes construction of two piers, a 150-ton gantry crane, and a 75-ton gantry crane. Construction of the redevelopment project is proceeding as scheduled and will be complete by the end of 2015. Shelter Island Boatyard is now proposing an assignment of ownership interests to add Roy Hobbs, Linda Hobbs, and Wayne Morrison as limited partners. Consistent with District practice, a lease amendment has been prepared to update the lease to current standard District language (Attachment C-Existing and Proposed Lease Summary). As more fully discussed below, staff recommends consenting to the assignment and approving the lease amendment.
Assignment of Ownership Interests
Shelter Island Boatyard is a California limited partnership that is currently owned by general partner William Roberts and 42 limited partners. Shelter Island Boatyard has requested District consent to an assignment of ownership interests to add Roy Hobbs (40%), Linda Hobbs (20%), and Wayne Morrison (20%) as limited partners, thereby reducing the ownership interests of William Roberts and the remaining 42 partners.
The proposed assignment would allow Roy Hobbs, Linda Hobbs, and Wayne Morrison to be added as limited partners of Shelter Island Boatyard, all of whom have extensive experience in the boatyard business and possess the qualifications needed to operate a successful and profitable boatyard facility. Roy Hobbs is an industry Certified Public Accountant and the Chief Executive Officer of Shelter Island Boatyard with over 30 years of business experience in recreational boating. He was a founding director of the San Diego Marine Trade Association where he established the annual “clean up the bay” project called “Operation Clean Sweep,” which is now a well-established event. Mr. Hobbs was a member of the Port’s Real Estate Advisory Committee, a founding director of the San Diego Port Tenants Association (“SDPTA”), and currently sits on SDPTA’s Real Estate and Environmental Committees. Linda Hobbs is the Construction/Project Coordinator for Shelter Island Boatyard responsible for overseeing the redevelopment of the property and acting as primary business liaison with the lender, contractors, vendors, and consultants. Previously, she was a partner in two major law firms in San Diego specializing in Real Estate, Corporate/Commercial Transactions, and International Business Law. Mrs. Hobbs was CEO/President of Telisimo International Corporation, a wireless communications support company in San Diego for 20 years prior to joining Shelter Island Boatyard. Wayne Morrison is the General Manager of Shelter Island Boatyard and has been working in the boating industry for over 40 years. Mr. Morrison was previously head of fiberglass boat building and repair for Driscoll Custom Boats. In 1978, Mr. Morrison formed Yachtways Fiberglass and Repair on Shelter Island, which specialized in yacht fiberglass repair and refurbishment. Mr. Morrison joined Shelter Island Boatyard in 1992 as Manager of Operations. Their extensive experience in the boating industry and proven ability to successfully operate Shelter Island Boatyard demonstrates their qualifications to become new limited partners of Shelter Island Boatyard.
Lease Amendment
Pursuant to Board of Port Commissioner’s Policy No. 355 and the Administrative Practices-Real Estate Leasing, it is the District’s practice to update out-of-date leases to the then current standard upon an assignment of ownership interests. Although the current Shelter Island Boatyard lease was drafted in 2014, the District has since updated the following paragraphs: assignment-sublease, conformance with laws and regulations, hold harmless, insurance, and “as-is” lease and waivers. Shelter Island Boatyard has agreed to a lease amendment which would update the entire lease to our current standard (Attachment D-Lease Amendment No. 1).
Since the District is pursuing, but has not yet adopted, a Sustainable Leasing Policy (SLP), Shelter Island Boatyard has agreed to include language regarding a future SLP. The proposed amendment for Shelter Island Boatyard specifically acknowledges the District’s adoption of the Climate Action Plan (CAP) and our pursuit of the SLP. The amendment also states that if any future amendments to the lease are required, they may include additional operational requirements consistent with the CAP and, following adoption, the SLP will be fully incorporated into terms of any future amendments to the lease.
The lease provides that as a condition of an assignment, rent shall be set at market. Shelter Island Boatyard recently entered into a new lease on October 1, 2014, at which time the rent was updated to market. Shelter Island Boatyard currently pays $27,095 per month in rent which equates to $0.23 per square foot per month. Based on a comparison of nearby boatyards, staff has determined that Shelter Island Boatyard’s rent is in line with the market. Therefore, no change to rent is proposed.
Conclusion
The proposed assignment would allow Roy Hobbs, Linda Hobbs, and Wayne Morrison to be added as limited partners of Shelter Island Boatyard, all of whom have extensive experience in the boatyard business and possess the qualifications needed to operate a successful boatyard facility. Consistent with District practice, the lease has been amended to update it to our current standard. Staff recommends that the Board consent to an assignment of the ownership interests in Shelter Island Boatyard and approve an ordinance granting Lease Amendment No. 1 to the lease with Shelter Island Boatyard to update key lease provisions.
General Counsel’s Comments:
The General Counsel’s Office has reviewed and approved the proposed Amendment No. 1 to the lease as to form and legality.
Environmental Review:
The proposed Board actions do not constitute a “project” under the definition set forth in California Environmental Quality Act (CEQA) Guidelines Section 15378 because the actions will not have a potential to result in a direct or indirect physical change in the environment and are therefore not subject to CEQA. No further action under CEQA is required.
The proposed Boards actions do not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit Regulations. Therefore, issuance of a Coastal Development Permit or exclusion is not required.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
James Hammel
Assistant Asset Manager, Real Estate
Ryan Donald
Senior Asset Manager, Real Estate
Attachments:
Attachment A: Location Map
Attachment B: Existing and Proposed Organizational Structure
Attachment C: Existing and Proposed Lease Summary
Attachment D: Lease Amendment No. 1
1Lease between San Diego Unified Port District and Shelter Island Yachtways, LTD., d.b.a. Shelter Island Boatyard, on file in the Office of the District Clerk as Document No. 62353.