Westminster City Council
SUBJECT
Title
Addendum No. 2 to the Commercial - Industrial Lease - Triple Net Agreement at 15550 Beach Boulevard.
End
From: Christine Cordon, City Manager
Requested by: Administration
Prepared by: Ryan Salz, Senior Management Analyst
____________________________________________________________
RECOMMENDED ACTION
Recommendation
Approve Addendum No. 2 to the Commercial - Industrial Lease - Triple Net Agreement with The Dennis and Grace Lin Family Trust UTD June 14, 2001 and Tzu Chien Lin (also known as Dennis Lin), Yu-In Lin (also known as Grace Lin) as individuals for City Owned property located at 15550 Beach Boulevard.
end
BACKGROUND
The City purchased the site located at 15550 Beach Boulevard in February 2011. Since the Assignment of Lease shortly thereafter, Dennis Lin became a Lessee to the City and developed the prominent automotive dealership, Orange Coast Infiniti.
On December 9, 2024, the Mayor and City Council approved a Draft Addendum No. 2 to the Commercial - Industrial Lease - Triple Net Agreement (“Lease Agreement”) for City Owned property located at 15550 Beach Boulevard (Attachment 1). The 2024 agenda report and attachments provide a comprehensive background of the Lease Agreement and pertinent information related to the Draft Addendum No. 2. The intent of the Addendum is to update the Lease Agreement to encompass the value of the rear portion of the property, extend the lease term for an additional ten years, and enable the development of another vehicle dealership on the property. The introduction of the second dealership will require a substantial, additional investment by the lessee to improve and retrofit the property, specifically the existing showroom building.
In the same month as the City Council approval, Nissan and Honda announced plans for a major potential merger aiming to create the world’s fourth largest automaker by vehicle sales. This immediately became relevant to the City because Nissan is the parent company of Infiniti, and Orange Coast Infiniti is the active tenant at 15550 Beach Boulevard. Due to the significant news and surrounding geopolitical uncertainty at the time of the City Council approval, the lessee and owner of Orange Coast Infiniti, Dennis Lin, was no longer in a position to execute the approved version of Addendum No. 2.
Considering the evolving circumstances, City staff continued to engage in productive discussions with the Lessee to seek a feasible version of Addendum No. 2. Following deliberation and consistent observation of the dynamic environment affecting the firms involved in the transaction, Mr. Lin has agreed to a modified version of the Draft Addendum No. 2 (Attachment 2). The modified Draft Addendum No. 2 is largely the same as the original version, except for an increase in the number of months allowed for rent abatement on the Rear Portion of the property. In addition, the Rent value was increased to reflect the most recent inflationary adjustment imposed on March 1, 2025, as set forth in the Lease Agreement. The remaining language is identical to the version approved by the Mayor and City Council on December 9, 2024.
FISCAL IMPACT
The Lessee, Dennis Lin, currently pays $66,679 per month to the City under the active Lease Agreement for the front portion of the property. With the inclusion of the rear portion, the total payment would increase to $102,706 per month. This would result in a $36,027 monthly increase in revenue to the City. Each of these Rent figures will be adjusted annually in accordance with Section 53 of the Lease Agreement. In addition, the introduction of a new vehicle dealership would generate a substantial annual increase in sales tax revenue.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
Execution of Addendum No. 2 to the Lease Agreement would facilitate a substantial annual increase in General Fund revenue by means of increased Rent and the introduction of a secondary dealership on the site. If Addendum No. 2 to the Agreement is executed tonight, it will become effective on October 1, 2025.
ATTACHMENTS
1. December 9, 2024 Staff Report
2. Draft Addendum No. 2 to the Lease Agreement
REVIEWED BY
Erin Backs, Finance Director
City Attorney’s Office
Christine Cordon, City Manager