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Agenda Item
ASR
Control 21-000465 |
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MEETING DATE: |
06/22/21 |
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legal entity taking action: |
Board of Supervisors and Orange County Flood Control
District |
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board of supervisors
district(s): |
All Districts |
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SUBMITTING
Agency/Department: |
County Executive Office (Approved) |
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Department contact
person(s): |
Thomas Miller (714) 834-6019 |
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James Treadaway (714) 647-3948 |
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Subject: Adopt Resolution and Approve
Ground Lease with Orange County Golf, LLC
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ceo CONCUR |
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Clerk of the Board |
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Concur |
Approved Agreement(s) and Resolution(s) |
Discussion |
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3 Votes Board Majority |
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Budgeted: N/A |
Current Year Cost:
N/A |
Annual Cost:
N/A |
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Staffing Impact: |
No |
# of Positions:
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Sole Source:
N/A |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 8/14/2018
#6, 8/22/2006 #50 |
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RECOMMENDED ACTION(S):
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1. |
Find that the project is Categorically Exempt from the CEQA, Class 1 (Existing Facilities) pursuant to CEQA Guidelines, Section 15301. |
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2. |
Adopt a Resolution making certain findings as required pursuant to the Orange County Flood Control Act related to approval of the proposed Ground Lease between the Orange County Flood Control District and Orange County Golf, LLC. |
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3. |
Approve and authorize the Chief Real Estate Officer or designee to execute the proposed Ground Lease between the Orange County Flood Control District and Orange County Golf, LLC for a 19-year-term with options to renew for two 10-year-terms for a total-term up to 39-years with minor modifications that do not alter the liability or obligations of the Orange County Flood Control District. |
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4. |
Authorize the Chief Real Estate Officer or designee, on behalf of the Orange County Flood Control District, and to perform all activities specified to be performed by the Chief Real Estate Officer or Orange County Flood Control District within the terms of the proposed Ground Lease and to execute any documents necessary for implementation of the Ground Lease and to execute any amendments that make non-monetary and/or monetary changes that do not increase Orange County Flood Control District costs by more than $50,000 per fiscal year, as approved by County Counsel. |
SUMMARY:
Approval of the proposed Ground Lease between the Orange County Flood Control District and Orange County Golf, LLC for a 19-year-term with options to renew for two ten-year-terms will allow for Orange County Golf, LLC to develop, entitle, fund, operate and maintain a golf course, and related facilities, on Orange County Flood Control District-owned property, to provide a high quality, sustainable and market-driven golf course and event center for the long-term use and enjoyment by the public.
BACKGROUND INFORMATION:
On December 10, 2002, the Orange County Flood Control District (District) entered into a Cost-Share Agreement (Agreement) with the Riverside County Flood Control and Water Conservation District and the San Bernardino County Flood Control District (collectively referred to as the Sponsors) for the purchase of approximately 486 acres (Property), located near the 91 Freeway (where the County of San Bernardino, the County of Riverside and the County of Orange intersect) that were required for the Santa Ana River Mainstem, Prado Dam Project (Project). The Property contained an existing golf course operation. The Agreement provided for flood protection and water conservation, involving negligible or no expansion of existing or former use of said Property as compatible with the Project (District-Use) with the District to receive any revenue form the Property as just compensation for District-Use, provided the District would be responsible for all associated District-Use costs.
On August 22, 2006, the District entered into Property Management Agreement D06-055 (PMA) with a predecessor entity of Orange County Golf, LLC (Lessee) for said predecessor to provide public golf operations and management for an approximate 412 acres of the Property commonly known as Green River Golf Club (GRGC). The PMA further authorized the Director of OC Public Works to execute the Concession Agreement D06-056 with GRGC Food & Beverage Operators to provide GRGC with onsite food and beverage services (Concession Agreement). The PMA and Concession Agreement continued to be in effect until they were replaced by a five-year interim lease between Lessee and District approved by the Board of Supervisors (Board) on August 14, 2018. This interim lease is presently in effect until 2025, and includes terms that allow for its early termination for it was contemplated that County Executive Office (CEO) Real Estate would initiate the Request for Proposal (RFP) process to review market proposals submitted to use the Property and would enter into a long-term lease to implement the chosen proposal.
The RFP process, which was initiated in 2018 concluded with the selection of Lessee, for a Ground Lease agreement (Lease) to use the GRGC portion of the Property as submitted here for Board approval. The proposed Lease has a 19-year term with options to renew for two 10-year-terms. Negotiations took longer than expected due to uncertainty presented by the 2020 Coronavirus Pandemic. The proposed Lease provides that the Lessee will pay District the greater of percentage rent or base rent in any given year. Base rent will be set at $60,000 each year or $5,000 each month for the first five years of the initial 19-year Lease term, at which time Ground Rent shall increase every five years by an amount equal to the prior year’s base rent and the greater of the increase in the Consumer Price Index every five years to follow, or 10 percent. Percentage Rent shall be set at 1.5 percent of gross receipts for the first five years of the Lease and two percent thereafter. In the event Lessee’s Annual Revenue exceeds $10 million in a given year, percentage rent is to be set at three percent of Lessee’s gross receipts within that applicable year. A percentage rent must be renegotiated for subsequent years.
Upon commencement of the proposed Lease, Lessee is to maintain a Capital Improvement Fund consisting of two percent of Lessee’s Annual Revenue from GRGC operations for the remaining duration of the initial 19-year term of the Lease and to invest an additional $1.5 million in property improvements to GRGC.
District’s Net Benefit Revenue for the proposed Lease, over the course of its initial 19-year-term, is estimated to be $4,433,619 as follows:
District’s Net Benefit Revenue Item Amount
Ground Rent (Years 1-19) $2,057,099
Capital Improvement Fund (Years 1-19) $876,520
Property Improvements Investment $1,500,000
District’s Total Net Benefit Revenue $4,433,619
The proposed Lease limits Lessee’s use of GRGC to the continued operation of the existing golf course facility and event center operations, as compatible with District-Use. The additional District-owned, 74-acre portion of the Property is located northeast of GRGC’s premises and is excluded from this Lease. Any subleases on said portion of the Property must be separately negotiated with the District, including any percentage rent received from those subleases.
CEO Real Estate, in conjunction with the approval of the Lease, also requests the adoption of the attached Resolution making required finding under the Orange County Flood Control Act, which are required for the approval of the Lease.
Compliance with CEQA: The proposed action is Categorically Exempt (Class 1) from the provisions of CEQA, pursuant to CEQA Guidelines, Section 15301, because it involves a lease of an existing public facility, for the continued operation of the existing golf course facility and event center operations, that is compatible with District-Use.
General Plan Conformity: The proposed action is consistent with the respective General Plan of the City of Corona and the City of Chino Hills.
Orange County Flood Control Act: The Orange County Flood Control Act Chapter 36, Section 2 (b)(12) requires the Board make certain findings prior to entering into the proposed Lease. The evidence relied upon to make these findings is recited within the proposed Resolution attached.
FINANCIAL IMPACT:
Revenue for the proposed Lease has not been included in the FY 2021-22 Budget but will be included in the budgeting process for future years. Revenue from this Lease is anticipated to be $60,000 each year for the first five years and adjusted thereafter as set forth in the Lease. District’s Total Net Benefit Revenue for the initial 19-year-term of the Lease is anticipated to be $2,057,099. Upon approval and execution of the proposed Lease, the rent and any other payments will be credited to OC Flood Fund 400 and Real Estate Development Fund 135 in accordance with the terms set forth in the Lease. Ground Rent revenue will be split between Flood Control District and the County, with 35 percent going to Flood Control District Fund 400 and 65 percent to County Fund 135. There are no costs related to the proposed Recommended Action. All improvements to GRGC are to be constructed, operated and maintained by Lessee at the Lessee’s sole cost and expense.
STAFFING IMPACT:
N/A
REVIEWING AGENCIES:
OC Public Works
ATTACHMENT(S):
Attachment A – Location Map
Attachment B – Resolution
Attachment C – Lease
Attachment D – Orange County Flood Control Act Chapter 36, Section 2 (b)(12)