Title
Adoption of Resolution Confirming a Ground Lessor’s Consent and Estoppel Certificate and Authorizing the City Manager to Execute Documents Necessary to Implement the Terms of the Ground Lessor’s Consent and Estoppel Certificate with Encinal Marina, Ltd., Doing Business As Grand Marina. (Community Development 219)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Adoption of Resolution Confirming a Ground Lessor’s Consent and Estoppel Certificate and Authorizing the City Manager to Execute Documents Necessary to Implement the Terms of the Ground Lessor’s Consent and Estoppel Certificate with Encinal Marina, Ltd., Doing Business As Grand Marina
BACKGROUND
Encinal Marina, Ltd. dba Grand Marina, located at 2099 Grand Street, Alameda, California is seeking a loan from the Bank of Marin for which it intends to pledge as security its leasehold interests in certain tidelands parcels.
In 1979 Encinal Industries, Inc. now known as Encinal Investments Inc. (“Encinal Industries”), signed a lease with the City for certain tidelands parcels. That lease was superseded by an Amended and Restated Lease dated January 6, 1984 (the “A&R Lease”). A second lease between the City and Encinal Industries was signed in 1983 (the “Tidelands Lease”). Both leases included extension options which have been exercised.
By an Assignment of Leasehold, recorded on 3/14/86, Encinal Industries assigned to Encinal Marina its leasehold interest in 4 of the 11 parcels under the A&R Lease. Then, by a Second Assignment of Leasehold also recorded on 3/14/86, Encinal Industries assigned to Encinal Marina its leasehold interest in 2 additional parcels under the A&R lease. That Assignment of Leasehold also assigned Encinal Industries’ interests under the Tidelands Lease to Encinal Marina.
Rent under both lease is paid annually, with Encinal Marina and Encinal Investments each paying separately for their respective interests under the A&R lease and Tidelands Lease.
Staff has recently come to learn that in 2012 Encinal Marina obtained a loan in the amount of $5,000,000 from Fremont Bank (the “Fremont Loan”). As partial security for the Fremont Loan, Encinal Marina granted Fremont Bank a deed of trust and assignment of rent with respect to its leasehold parcels, together with certain other Tidelands parcels that it owns in fee. It appears that this was done without obtaining City consent.
The Grand Marina was originally designed and built by the tenant in 1986 and substantially completed by 1990. The original cost estimate was $3,500,000, but this figure did not account for addressing the toxic condition of the site. Prior to Grand Marina, different sections of the site had been occupied by a Lumber Treatment Facility (1906-1979), Union Oil (1910-1958), City’s Corporation Yard (1917-1943), Marine Ship Repairs (1948-1951), and Harbor Tug and Barge (1958-1985), each using toxic chemicals for their operations. In order to secure City permits, the site was tested for contaminates because of the history of its occupancy. The site was found to be contaminated resulting in tripling the estimated cost of construction due to the removal of the contaminated material and cleanup of the waterfront.
The existing Fremont loan is a carryover debt from the original development of the Marina. The current Fremont debt is due with-in 12 months and at that time a multi-million dollar balloon payment is required. Bank of Marin has proposed to refinance the Fremont debt, fully amortizing it over the next 11 years (approximately the length of the tide lands lease).
Encinal Marina is now seeking a new loan from Bank of Marin in the amount of $3,600,000 (the “Bank of Marin Loan”). The Bank of Marin Loan will be used to pay off the remaining balance of the Fremont Loan. As a condition for making the loan, Bank of Marin in requiring that Encinal Marina grant it a security interest in its leasehold parcels and has requested that the City execute a Ground Lessor’s Consent, Estoppel, Certificate and Agreement.
DISCUSSION
This Ground Lessor’s Consent, Estoppel, Certificate and Agreement reaffirms the underlying tidelands leases and Encinal Marina’s interests in them. It also includes a consent to the Bank of Marin Loan and the encumbrance of Encinal Marina’s interests in the two leases by the lender.
In view of the somewhat complex nature of the assignment of fractionalized interests in the Tidelands Lease and A&R Lease as security for a loan, outside counsel for both the City and Bank of Marin have made substantial revisions to the Bank’s standard Ground Lessor’s Consent form.
A new Section 3 has been added, specifically addressing the Tideland Restrictions imposed on the use of the tidelands parcels, pursuant to the Naval Air Station Alameda Tidal Settlement and Exchange Agreement dated February 18, 2014. That new section of the Ground Lessor’s Consent assures that in the event of a foreclosure upon Encinal Marina’s leasehold estate, the Bank of Marin, or its successor, acknowledges and is bound by the Tideland Restrictions.
FINANCIAL IMPACT
The recommendations in this report have no financial impact.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action has no effect on the Municipal Code.
ENVIRONMENTAL REVIEW
This action does not require environmental review because it is not a project under California Environmental Quality Act (CEQA) under CEQA Guidelines section 15378 and Public Resources Code section 21080.
RECOMMENDATION
Adopt a Resolution and authorize the City Manager to execute Ground Lessor’s Consent, Estoppel, Certificate and Agreement for a pledge by Encinal Marina, a Ltd., of its leasehold interests as security for a loan from Bank of Marin
Respectfully submitted,
Debbie Potter, Community Development Director
By,
Nanette Mocanu, Assistant Community Development Director
Financial Impact section reviewed,
Edwin Gato, Acting Finance Director
Exhibit:
1. Encinal Industries Tidelands Lease
2 Amended and Restated Lease
3. Ground Lessor’s Consent, Estoppel Certificate and Agreement