DATE: July 17, 2018
SUBJECT:
Title
RESOLUTION CONSENTING TO AMENDMENT NO. 3 TO SUBLEASE BETWEEN PORT CORONADO ASSOCIATES, LLC DBA CORONADO FERRY LANDING MARKETPLACE AND CHEESE WINE DESSERTS, LLC DBA CANDELAS ON THE BAY LOCATED AT 1201 FIRST STREET, IN THE CITY OF CORONADO (RESTAURANT) FOR A ONE-YEAR MANAGEMENT AGREEMENT WITH BLUE BRIDGE HOSPITALITY MANAGEMENT, LLC TO OPERATE THE RESTAURANT WITH AN OPTION TO PURCHASE THE REMAINING TERM OF THE SUBLEASE
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EXECUTIVE SUMMARY:
The District entered into a forty (40)-year lease1 (Lease) with Port Coronado Associates, LLC dba Coronado Ferry Landing Marketplace (Ferry Landing) on July 1, 1986 to develop and operate restaurants, cocktail lounges, shopping facilities, offices for marine-related purposes, and marina slips for pleasure boat berthing; located at 1201 First Street, in the City of Coronado. Ferry Landing received District approval to enter into a 15-year Sublease (Sublease) with Cheese Wine Desserts, LLC dba Candelas on the Bay (Candelas) to operate a restaurant (Restaurant) in Ferry Landing on January 9, 2007. Ferry Landing is requesting Board consent for Amendment No. 3 (Amendment) to the Sublease with Candelas. The Amendment acknowledges that Candelas entered into a one-year management agreement with Blue Bridge Hospitality Management, LLC (BBH). The Amendment also includes a purchase option (Purchase Option) that permits BBH, or an entity formed by BBH, to purchase Candela’s business, which may be exercised at the end of the management agreement. The Amendment is consistent with the terms of the Lease and Board of Port Commissioners Policy No. 355 (BPC 355).
RECOMMENDATION:
Recommendation
Adopt a Resolution consenting to Amendment No. 3 to Sublease between Port Coronado Associates, LLC dba Coronado Ferry Landing Marketplace and Cheese Wine Desserts, LLC dba Candelas on the Bay located at 1201 First Street, in the City Of Coronado (Restaurant) for a one-year Management Agreement with Blue Bridge Hospitality Management, LLC to operate the Restaurant with an option to purchase the remaining term of the sublease
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FISCAL IMPACT:
Staff estimates that this Amendment No. 3 to the sublease could potentially generate an annual rent increase to the District up to $10,500.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A vibrant waterfront destination where residents and visitors converge.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
Ferry Landing’s Lease with the District includes approximately 199,646 square feet of land area and 386,945 square feet of water area and is located at 1201 First Street in the City of Coronado (Attachment A - Location Map). The Lease commenced July 1, 1986 for a term of 40 years, which expires on June 30, 2026. Ferry Landing’s leasehold is comprised of restaurants, cocktail lounges, shopping facilities, offices for marine-related purposes, and marina slips for pleasure boat berthing. The terms of Ferry Landing’s Lease are summarized on the attached Lease Information Summary (Attachment B - Lease Information Summary).
Ferry Landing received District approval to enter into a 15-year Sublease with Candelas to operate the Restaurant on January 9, 2007. The Sublease has approximately 4.5 years remaining. Candelas entered into a one-year management agreement with BBH on April 25, 2018. Ferry Landing’s proposed Amendment No. 3 to the sublease acknowledges this management agreement which contains a Purchase Option that permits BBH, or an entity formed by BBH, to purchase Candela’s business at the end of the one-year term (Attachment C - Existing and Proposed Sublease Information Summary). The Restaurant’s theme and menu items will remain “Mexico City” style cuisine.
BBH's food service and restaurant management experience began in 1998 and has grown to include 14 successful concepts in San Diego and Coronado including: Liberty Public Market, Leroy's Kitchen + Lounge, Stake Chophouse & Bar, Village Pizzeria, Village Pizzeria Bayside, Lil' Piggy's Bar-B-Q, Mess Hall, Scooped by MooTime, MooTime Creamery, Crafted Baked Goods, Bottlecraft LPM, Coronado Coffee Company, Maretalia Ristorante, and West Pac Noodle Bar. BBH currently operates 3 food service/restaurant businesses on Ferry Landing’s leasehold: Village Pizzeria Bayside, Lil Piggy's Bar-B-Q, and Coronado Coffee Company.
BBH projects annual revenue of $2 million for the remainder of 2018 and an annual growth of 4-5%, if BBH exercises their Purchase Option.
For long-term subleases (more than five years), BPC 355 states they must meet the following conditions as a requirement of consent to the sublease:
• Sublease must meet current District lease requirements;
• Provide that the subtenant shall be obligated to pay any master lease rent increases that are applicable to the subleased premises; and
• Provide that in the event of a conflict between the master lease and the sublease, the master lease shall prevail.
The above conditions are confirmed to have been met. Since the Amendment is consistent with BPC 355, staff recommends that the Board adopt a Resolution consenting to the Amendment between Ferry Landing and Candelas.
General Counsel’s Comments:
The Office of the General Counsel has reviewed the terms and conditions of Amendment No. 3 to the Ferry Landing Sublease with Candelas and approves it as to form and legality.
Environmental Review:
The proposed Board action, including without limitation, a resolution consenting to an amendment to an existing sublease for a management agreement to continue operations of an existing restaurant facility, does not constitute an “approval” or a “project” under the definitions set forth in California Environmental Quality Act (CEQA) Guidelines Sections 15352 and 15378 because no direct or indirect changes to the physical environment would occur. CEQA requires that the District adequately assess the environmental impacts of projects and reasonably foreseeable activities that may result from projects prior to the approval of the same. Any project developed as a result of Board’s action or direction that requires the District or the Board’s discretionary approval resulting in a physical change to the environment will be analyzed in accordance with CEQA prior to such approval. CEQA review may result in the District, in its sole and absolute discretion, requiring implementation of mitigation measures, adopting an alternative, including without limitation, a “no project alternative” or adopting a Statement of Overriding Consideration, if required. The current Board direction in no way limits the exercise of this discretion. Therefore, no further CEQA review is required.
In addition, the proposed Board action complies with Section 87 of the Port Act which allows for all visitor-serving commercial and industrial uses and purposes, and the construction, reconstruction, repair, and maintenance of commercial and industrial buildings, plants, and facilities. 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 does 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 (CDP) Regulations because they will not result in, without limitation, a physical change, change in use or increase the intensity of uses. Therefore, issuance of a Coastal Development Permit or exclusion is not required. However, development within the District requires processing under the District’s CDP Regulations. Future development, as defined in Section 30106 of the Coastal Act, will remain subject to its own independent review pursuant to the District’s certified CDP Regulations, PMP, and Chapters 3 and 8 of the Coastal Act. The Board’s direction or action in no way limits the exercise of the District’s discretion under the District’s CDP Regulations. Therefore, issuance of a CDP or exclusion is not required at this time.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Taylor Stack
Asset Manager, Real Estate
Attachments:
Attachment A: Location Map
Attachment B: Lease Information Summary
Attachment C: Existing and Proposed Sublease Information Summary
Attachment D: Sublease
Attachment E: Amendment No. 3
1San Diego Unified Port District Lease to Port Coronado Associates, LLC., on file in the Office of the District Clerk bearing Document No. 19668, dated June 30, 1986