SR-03-27-1984-6LCA: RIM: v
City Council Meeting 3 -27 -84
STAFF REPORT
Santa Monica, California
"AR 2 7 1994
TO: Mayor and City Council
FROM: City Attorney
SUBJECT: Approval of Assignment of Ground Lease for
Pacific Shores Hotel
By Contract Number 1740, the City of Santa Monica
entered into a long -term ground lease for property located at
1819 Ocean Avenue. The property has been improved with
structures currently known as the Pacific Shores Hotel. The
current lessee of the property is Murdock -Santa Monica, a
California Limited Partnership. The City has been requested
to approve an assignment of the lease from Murdock -Santa
Monica to Pacific Shore Associates Limited Partnership, a
California Limited Partnership.
Section 5.15 of the lease, as amended by Addendum 2
dated July 26, 1967, provides:
Notwithstanding any other provision of
agreement,
the
rights and
interests of
developer,
or
its successors
in interest,
under agreement shall be fully and freely
assignable with consent of City; and City
shall give its consent to such assignment
when it believes or reasonably should
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relieve that the proposed assignee will
correctly and properly discharge the
obligation of developer hereunder.
Recent developments in California landlord tenant law
have greatly restricted the ability of a landlord to prohibit
an assignment of a lease. Many of these cases have upheld
claims for damages against landlords who have attempted to
interfere unreasonably with the lessee's rights of assignment.
See Schweiso v. Williams, 150 Cal. App. 3d 883, 198 Cal. Rptr.
238 (1984); Cohen v. Ratinoff, 147 Cal. App. 3d 321, 195 Cal.
Rptr. 84 (1983), Richardson v. La Rancherita La Jolla, Inc.,
98 Cal. App. 3d 73, 159 Cal. Rptr. 285 (1979).
In connection with the request to approve the
assignment, a variety of information has been provided to the
City. The information indicates that the limited partnership
to which the lease will be assigned is managed by general
partners who have significant hotel experience throughout the
United States. The partnership has entered into a management
contract with Tollman - Hundley Hotels to operate the hotel.
The partnership has secured a $9 million loan commitment from
Community Savings and Loan, Inc. to finance acquisition of
the leasehold interest of the current lessee. (A description
of the experience of the general partners and the proposed
hotel manager is contained in Attachment 1 to this Staff
Report.)
Based upon the information provided to the City, there
appears to be no legal basis for the City to decline to
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approve the assignment. However, the City Attorney has
secured the agreement of the parties that the existing lessee,
Murdock -Santa Monica, will not be released from its
obligations under the lease agreement for a period of five
years. The five year period corresponds to the period of a
second deed of trust from Pacific Shores Associates Limited
Partnership to Murdock -Santa Monica. The effect of this
agreement is to minimize any risk to the City in approving the
assignment. (In any event, given the location of the property
and its improvements, the City's rights as landlords place it
in a secured position in the event of a default.)
It should be pointed out that the existing lease
agreement_ provides for rent payments calculated on a
percentage of room rentals (8.5 %), receipts of the cocktail
lounge (5 %), receipts from the restaurant (3 %) and
miscellaneous receipts (3 %). In calendar year 1983, rental
payments to the City from this lease were $230,421.00.
The following documents accompany this Staff_ Report:
1. Attachment 1. A description of the general partners
and proposed hotel manager.
2. Attachment 2. Assignment of Lessee's Interest Under
Lease and of Sublessor's Interest Under Sublease. This is the
document by which the current lessee, Murdock -Santa Monica,
will transfer its interest to Pacific Shore Associates Limited
Partnership.
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3. Attachment 3-- Covenant of Assumption. This is the
document by which Pacific Shore Associates Limited Partnership
will assume all contractual obligations under the lease.
4. Attachment 4 -- Consent to Assignment of Lessee's
Interest Under Lease and of Sublessor's Interest under
Subleases and Release of Assignor. This is the document by
which the City gives its consent to the assignment and
releases Murdock -Santa Monica from future contractual
obligations. Paragraph 2 of this document was modified at the
request of the City Attorney to .provide that Murdock -Santa
Monica would not be released until five years after the
assignment. , ,
5. Attachment 5-- Estoppel Certificate. This document
has been requested by Community Savings and Loan, Inc., and is
designed to apprise the prospective lender of the current
status of the lease. At the request of the City Attorney, the
estoppel certificate has been substantially revised to narrow
its scope.
RECOMMENDATION
It is respectfully recommended that the City Council
adopt the accompanying resolution approving the assignment
from Murdock -Santa Monica to Pacific Shore Associates Limited
Partnership.
PREPARED BY: Robert M. Myers; City Attorney
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