Speaker 1: A report from Economic and Property Development Recommendation to execute an amended and restated lease and Operations Agreement and concurrent assign assignment to Urban Commons District two.
Speaker 0: Thank you. I'm going to turn this over. I know we have a pretty large presentation or in-depth presentation. I know the council obviously had some closed session conversations on this. And so now we're having an open, open session discussion. So. Mr. West.
Speaker 10: Yes, Mr. Mayor. Council members, as we all know, the Garrison Group inherited this project from Save the Queen. The Garrison Group isn't a land developer. So what we're doing tonight will facilitate urban commons to take over the lease. They will be a land developer for those 45 acres, as well as managing the queen. And Mike Conway is going to give us the details of this restated lease and presentation.
Speaker 0: Thank you, Mr. West. Mayor Garcia, members of the City Council. This item involves the Queen Mary leasehold and staff's recommendation to enter restated lease with the proposed successor, lessee. Give us an investment group. Our current lessee seeks to assign its interest in the Queen Mary leasehold to urban commons, the proposed successor lessee and for the city and urban commons to enter a restated lease that will continue first class operations of the ship. Secure ongoing funding for historic restoration and preservation. And stimulate shoreside development. And increase the stature of this important city asset. From a visual perspective, the Queen Mary leasehold includes the ship and surrounding and rackmount 43 acres of adjoining land and 11.5 acres of adjoining water area. The leasehold includes the ship, the Spruce Goose Dome, access to the Carnival Cruise Lines dock, a joint parking garage, surface parking a sublease to a Catalina Express and a separate lease that allows limited use of the events park. Further from a visual perspective, access to the leasehold is restricted by the southerly terminus of the 710 Freeway, which is severely impacted by Port Trucking uses. And its access is primarily from the Magnolia Avenue Bridge. And as background, in 1995, the city entered a 66 year lease with Queen Queens Seaport Development Inc, controlled by Joseph Predator, who in 2005 declared bankruptcy due to nonpayment of percentage rent. In 2007, Save the Queen LLC purchased the leasehold interest out of bankruptcy. In 2009, Save the Queen defaulted on its loan from Garrison Development Group, who subsequently took over day to day management of the Queen Mary. Under terms of the bankruptcy agreement, Garrison completed over $5.3 million in capital improvements on the ship. In 2011, Garrison completed an historic inventory report, which identified over 4700 historically significant items on the ship, and they also hired Evolution Hospitality to operate the ship. Evolution has brought such signature events as chill and distinctive exhibits such as Princess Diana, which have served to increase attendance and hotel occupancy and improve the public recognition and reputation of the Queen Mary. Additionally, Garrison continued his financial investment into the leasehold by completing over $8 million in additional upgrades to restaurants, retail stores, hotel amenities, historic restoration and new exhibits. More recently, in cooperation with city staff, Garrison developed a conservation management plan and is in the process to complete a Historic Structures Report and Marine survey and another noteworthy success with the completion of the fire alarm upgrade and certification. This slide provides a partial list of the upgrades and renovations that Garrison has funded and implemented with Evolution, Hospitality and the historic resource advisor, John Thomas. And resulting from these significant capital investments. Updated, upgraded. Guestrooms and restaurants. Unique and attractive. Attractive exhibits and widely popular special events. The Queen Mary has received many awards and accolades since Garrison and Evolution have managed the Queen Mary. Additionally, Garrison has delivered on the requirements established through the Bankruptcy Court, as demonstrated in reports prepared by the city auditor. Now. I'll go through a few before and after pictures. This is the first one of the signature smoked smokestacks of the Queen Mary, which are freshly painted. State room upgrades which have improved the guest experience. Renovation of the Promenade Café, which has improved the look and feel of this eating venue. Similarly, Sir Winston's, the Queen Mary's sophisticated eating establishment has been superbly renovated, receiving enthusiastically positive reviews. Chelsea Chowder House now has a more intimate and classical dining atmosphere. The Queen's Salon has been transformed into a first class venue, and the main entrance has been spruced up a little bit and added some modernization. And one of the more overwhelming tasks is maintaining the teak deck, which is an ongoing event. But when completed, the difference is truly astounding. So Garrison's successes. So since 2009, the status of the Queen Mary can only be described as a success. Garrison has invested over $13 million in capital improvements, upgrades and restoration. Garrison An evolution has brought us Churchill, the Princess Diana exhibit and many historic restorations to original character and quality. City staff believe that Garrison has an extraordinary job of maintaining and improving this unique and world renowned icon, and with evolution as their operator, have significantly enhanced the reputation of the Queen Mary and consequently of the city of Long Beach. As staff, I would like to thank Long Win and Chuck Pomeranz from Garrison, John Jenkins and Shaun Monarch Maddock on Evolution, and John Thomas, their historic resource advisor. They have not only been great partners, but extraordinary servants, stewards of this international icon who are in the audience with us this evening. And now, as City Council considers the future of the Queen Mary, it's important to recall that there are unique challenges to both hotel operations and landside development. These challenges affect land use density, market limitations, access and congestion, all of which serves to increase the risk associated with maintaining and growing hotel revenue and successful land development. These higher risks serve to require an increased level of equity and higher cost of debt than more traditional developments. And for a bit more detail, there is essentially a single point of access to the Queen Mary, which is shared by the port and its related truckers. The Queen Mary is surrounded by water and the port of Long Beach, severely limiting the market from which to draw visitors. Any development will need to draw up from up to a 60 minute driving time in order to remain successful. Also, tidelands land use restrictions is the limiting factor which serves to further increase risk and limit development. To help gauge development alternatives. Three Demand analyzes have recently been completed and the results identified three primary uses for the land. The first being a boutique hotel to supplement the Queen Mary and support Carnival Cruises. The second is an entertainment complex for special and ongoing events with support of food and beverage venues. And the third is a Mega-Yacht marina to accommodate larger personal watercraft that have limited berthing opportunities. These analysis suggested a number of entertainment uses to be considered, which include live music themed restaurants, open air markets, waterfront activities, children's entertainment and possibly college classrooms. So today, the Queen Mary is faced with a few issues. The existing lease is overly cumbersome. Percentage rent is unreliable. Carnival Cruise Line seeks to expand its presence in Long Beach and needs additional space in the Dome. Development opportunities are limited, and certain incentives are necessary in order to compel land development. And so to address these issues, four goals were identified. Number one, ensure the continued first class operation of the ship. Number two, ensure secure ongoing funding for historic restoration and preservation. Three, Ensure a well-capitalized, market driven, high quality, entertainment oriented development. And number four, ensure the availability of the dome for expanded cruise operations that increase the passenger count and enhance the guest experience. So for goal number one, staff proposes that a restated lease require the following establish a hotel operations, maintenance and furniture, fixtures and equipment fund starting at 1% of gross revenues and increasing to 3% by year five. To fund ongoing maintenance and replacements, establish a new base maintenance plan. Establish a nonprofit foundation to assist in fundraising for historic restoration. Complete and implement the Historic Preservation and Capital Investment Plan, Conservation Management Plan, Marine Survey and Historic Structures Report and prepare and implement a transition plan. Four goal two staff recommends that the restated lease require that an amount equal to current passenger fees up to $2.15 per passenger be paid to the city to be used for capital investment and historic restoration and preservation. For the first five years, this amount passed through to the city will be fixed at $2.15 million to compensate urban commons for this lost revenue. Staff recommends a preferred annual Non-Cumulative priority return of 9% on both the initial investment and eligible capital improvements. Revised percentage rent to be 10% of operating revenue above the base rent and after priority return has been paid. Base rent will continue at $300,000 per year, increasing every ten years by CPI and capped at 40%. This reflects a 3.4% annual rate and the city shall participate in net profits of any sale or refinance of the leasehold interest to a level of 25% of net proceeds for goal number three. Staff recommends extending the term of the lease to 66 years to provide for recapitalization opportunities, provide for financeable subleases for land development, require city consent for any assignments or encumbrances. Establish a land value by appraisal and require a return on land value when the land generates revenue starting at 3% and increasing to 7% over five years. Adjust the land value every ten years by CPI capped at 40%. This also reflects a 3.4% annual rate. Require implementation of financial reporting practices as recommended by the city or author auditor and require participation, support and cooperation of the Queen Mary Task Force in Development, Design, Outreach and Entitlement. And the First Queen Mary Task Force meeting has been scheduled for January 6th of 2016. So design, outreach and entitlement will finally begin. For goal number four as a result of Carnival's interest in increasing the size of its ships, servicing Long Beach and as an incentive for the successor lessee to quickly pursue development to allocate the entire Spruce Deuce Goose Dome to carnival for its passenger embarkation and disembarkation needs. And to enhance the guest experience, Garrison conducted an exhaustive search for a highly qualified and well-capitalized successor, lessee. Garrison identified urban commons as their preferred successor. Lessee and city staff has spent the last year working with urban commons to ensure that their team are sufficiently experienced, motivated and capitalized to maintain first class operations of the hotel, continue significant capital investment and historic restoration and preservation, and immediately pursue land development. Staff is pleased to join Garrison in recommending urban commons as the successor lessee. Urban Commons has assembled an impressive team to work with the Queen Mary Task Force to begin development, design and public outreach for landside development with First Harrigan, Gensler, Architects, Burnham and Associates, John Thomas and Global Hospitality Group. The Urban Commons team is ready to meet with the Queen Mary Task Force and begin its outreach efforts. As a little bit of context, this slide shows the hotels owned and or operated by Urban Commons just in California with a preponderance in Southern California. And this slide shows urban commons development projects, which are entirely in Southern California. This is the Urban Commons team headed by Howard Wu and Taylor Woods, who assembled a formidable and local team. Urban Commons will retain evolution hospitality to ensure a seamless transition, and John Thomas will continue as its historic resource officer. As development opportunities are refined through the outreach and engagement process, additional specialized team members will be added to augment expertize in market segments identified during the engagement process. So with that, staff recommends that City Council authorize the city manager to execute a restated lease and concurrent assignment to Urban Commons LLC as successor lessee to Garrison Investment Group . And this concludes my presentation. I'm available to answer questions. Thank you. Before I turn this over to Vice Mayor Lowenthal, who will lead the conversation in a being second district and being the creameries in the second District, I want to start off doing public comment first. And so if there's any members of the public that want to comment on this issue, now would be the time.
Speaker 8: It looks.
Speaker 7: Like this. I think. Smarty pants.
Speaker 8: Jim McCabe. Many of you are familiar with me. I'm a retired deputy city attorney. Just as a starter, this agenda item is pretty glaringly in violation of the Brown Act. The the agenda item doesn't even mention the Queen Mary. If you're familiar with operations agreement 22697. That's fine. But the general public is not familiar with that. This is a clear violation of the public. Oh, excuse me. That the Brown Act and I think it should be of concern to all of you, because if it's found to be null, to not be.
Speaker 2: Sufficient, what you do tonight will.
Speaker 8: Be null and void. I am informed that the city gets rent now. That was true of the lease that I wrote and I think it is principally still in effect. Please be sure that the. City. The Tidelands Beaches Recreation will receive nothing from this lease. There is $300,000 in purported rent that goes right back into the ship that we we're giving away for 66 years. A new 66 year period. We'll never get the 10% of gross revenue rent because obviously this is a net profit situation in which you'll never get any rent until. Urban gets a whopping 9% of its return on its return every year for the next 66 years. We've been told by the city manager that this is an urban development property, but nothing in the council letter mandates that any development be done. And on the land parcel and not. There is no downside for the proposed lessee if it doesn't. This is a very sweet deal for Urban entered into with almost no public notice. I appreciate your attention. I obviously answer any questions if you want to add some.
Speaker 0: Thank you. Next speaker, please.
Speaker 6: Good evening, council and mayor and control. And I agree with the previous speaker that there was no public notice given for this item. I read through. The agenda for this week. And I didn't see anything about the Queen Mary. So I am unprepared to address anything having to do with this lease. Just reading the agenda item does not give you any clue that this is about the Queen Mary. I also have a question about the developer, the land that is going to be developed along with the ship. I heard a brief mention of the events park. And I'm wondering, is this what is often what the name of this park, as I understand it, is the Harry Bridges Events Park that is near the Queen Mary. And I would like to know if that is being included in what can be developed. As I understand it, this is part of the city's parks and recreation. Parks and I question whether this can be developed. Thank you for answering any questions.
Speaker 0: Thank you. Another one, please come down, Larry. Any other public speakers besides Mr. Goodhue? Any other ones? Nope. Okay. Mr.. Good to be the final speaker.
Speaker 2: Very good. CLERK As they address the olfactory senses, they're triggered immediately when you see a 9% return. Which is a healthy or very healthy return. In today's economy. I'd like to see what you have refused and are scared to get from the city auditor relative to having her do an audit on the city hall project or didn't even get one for the port of for the courthouse. Certainly you should get one here. And I don't know, I'm not I've I'm not a financial wizard, but I know if somebody is getting 9%. Somebody else has taken it out the rear. So that boils down to and that may be the city of Long Beach. So I would suggest a thorough audit by somebody other than willy nilly and Madoff. Madoff to. And whatever the lease has. The one thing I want to make sure that is not in there is that we don't have a flea market, a farmer's market , or an arts and crafts show. And the lease should specifically prohibit those. If you're going to spend the type of dollars that you're going to use, we don't the people that are going to spend the type of dollars sufficient to get a return for that investor, aren't interested in a flea market, an arts and crafts show or anything approaching it. So make sure that lease echoes that sentiment. Thank you.
Speaker 0: Thank you. I'm gonna turn this over to the vice mayor before I do so. Just to clarify. And I was brought up. I know, Mr. City Attorney. Now, as I read the counsel item, I know that the Queen married in the first sentence of the discussion, and it opens with that. But just to confirm with you. This item clearly meets all the posting requirements and the standard legal test.
Speaker 9: That is correct.
Speaker 10: I would disagree with the speakers of under government code section 54 nine 54.2. Agenda must contain a general brief description of each item of business to be transaction transacted or discussed in here. Clearly, the.
Speaker 9: Item being discussed is the amended and restated lease.
Speaker 0: And it provides the exact least number. Thank you. With that, I'll turn this over now to Vice Mayor Lowenthal.
Speaker 5: Thank you, Mr. Mayor. And thank you, Mr. City attorney. Also want to thank the speakers for sharing their thoughts about this. I know certainly some of you have been involved with the Queen Mary, at least been interested with the Queen Mary for a very long time. And that's something that we share in common. We on the council, as well as those in the community, I have been working with the Queen Mary the entire time I've been elected to office. And so that's nearly ten years have seen. Somewhat of its entire lifecycle pretty much in the last ten years, the bankruptcy, the assumption of the lease by garrison and some steps before that. But this is a big deal for us and I know it. Mr. Conway doesn't make presentations with as much fanfare as certainly I know is involved with the moment that we are embarking upon. But it is a big deal. This is the best thing that I have seen for the Queen Mary in the entire time that we have discussed this for a decade to bring her back to her glory. She is nearly back and I have to thank Garrison for that. They've done a good job of stepping into the management role of Queen Mary and surrounding properties, even though it was not their original role or their original mission. And I think garrison for that, for stepping up and doing that. So they have brought.
Speaker 6: Back.
Speaker 5: The various parts of the ship that they have been working on and really kind of short her up. And so I'm thankful for that. They've lived up to the conditions of their lease and brought on the necessary partners to manage the hotel and restore the Queen Mary according to the Conservation Management Plan. And that's important to us. So I do think them for that. However, the Queen Mary and her surrounding property have the potential to be so much more. And given what we have done in the downtown proper to restore life and energy and vitality as well as improve the area economically, I think it's time that this type of attention is paid to the Queen Mary as well. And that's why I'm very optimistic with this new lease urban commons, we will take the next step with you and a step toward development of the acreage around the ship in a manner that enhances our downtown and our shoreline. And I think the timing couldn't be better. I'm also confident that will include our Queen Mary Land Development Task Force in the most effective manner possible. I know they had their first meeting recently, and I know they're very excited to be a part of this process. So, Mr. Mayor, I'm very supportive of this recommendation. I look forward to working with Urban Commons to deliver on the terms of their lease and the potential of this site. I also want to share that I am personally committed to the improvement of this ship. It's something that I think each of us feels to some degree, but we all have an affinity for the Queen Mary here in Long Beach, and I am very happy to see this through. Ten years in the making, from where it was ten years ago to today and where it can be. I thank you for that. And thank you, Mr. Conway.
Speaker 0: Thank you, Councilwoman Gonzales.
Speaker 4: I just want to thank Mike for this great presentation. I know as Vice Mayor Lowenthal mentioned, the upgrades and renovations are just astounding to see where we were at and then just the stacks alone. I mean, an incredible improvement to our beautiful landmark here. And I thank you for your work in this. I think we certainly had a long way to go. And this is timely as we are changing the downtown, as things are getting a little bit better. And yes, the surrounding does need to certainly change and we need to look beyond what we currently have. And so I want to thank you for that, for bringing that to light. Mike, I just had a question as far as additional outreach. I mean, is there going to be like a new marketing plan of some sort or how would that be?
Speaker 6: Um.
Speaker 0: Councilmember Gonzales, I think we'll start with the Queen Mary Task Force to get an idea of how we can or how urban commons can coordinate with them and the outreach efforts. So I think we'll take some guidance from the from the task force.
Speaker 4: Great. Thank you.
Speaker 0: Thank you. Councilman Richardson.
Speaker 3: I want to just take a moment to again and this is my second or third time tonight just congratulating folks on a legacy project. This is the second or third thing I've seen tonight at the council that really is fantastic work that represents, you know, not only the leadership in and our vice mayor's district, but also the great work staff has done. So I'm really excited about what's to come with Queen Mary. When I you know, I'm not from California, but when I before I lived in California, there were three things I knew about Long Beach. It was Snoop Doggy Dogg. It was the Port of Long Beach and the Queen Mary. So this is in the you know, this is this is big, right? This is this is really big. And so I want to congratulate our vice mayor in her her her hard work, the entire city council, the mayor, the task force staff . I'm really excited about what's to come. And this is going to be big for tourism in our city. Thanks.
Speaker 0: Thank you, Councilwoman Pryce.
Speaker 4: Thank you. I have a few questions.
Speaker 12: In regards to.
Speaker 4: The I know we have the task force in place, but what can you tell us in terms of development plans, development, desire? Given your your knowledge of the project and the partners that we're going to be working with?
Speaker 0: Councilmember Price There has been some considerable discussion as to potential uses on the site, and as the demand analyzes indicated there, it will likely be entertainment oriented. Hurst Harrigan is on the Urban Commons team. They are a preeminent consultant relative to entertainment development in the South Land and we think that's the likely direction that development will take for the land side. But we want to make sure that we don't prejudge what will come out of the task force and what will be communicated through outreach in the downtown to the Greater Long Beach area. But we expect that given the constraints of the site and the Tidelands restrictions that entertainment uses are likely going to be predominant on that land. But the actual elements we would like to get more feedback from the community and the task force on that.
Speaker 4: But you see development at that site as a. Foregone conclusion.
Speaker 0: The If I understand your question correctly, Urban Commons has been patiently waiting to start the outreach and development process. They're anxious to get started. Okay.
Speaker 4: And then I know we talked about the Dome and Carnival's use of the dome. I happened to be at a conference at the Queen Mary every day last week. So I got to spend a lot of time on the ship, as well as a lot of time talking to people whose first time it was in Long Beach , who were in the conference with me and who were on the ship for the first time. So I made a lot of kind of user observations. And what, if any, requirements do we have for the maintenance or the updating of that dome? It really does not look like it's in good shape at all. I don't think it's been cleaned in a while.
Speaker 0: The dome is under the Garrison's lease currently and there has been a request by Carnival to have the dome cleaned. Evolution Hospitality responded to that request, indicating that as soon as the event that is occurring in the dome is completed, that they would move forward and clean the dome.
Speaker 4: And are there any sort of maintenance requirements moving forward? Because, you know, it does reflect on on the city to a large extent. And to nicely.
Speaker 0: Garrison is required. Currently, Garrison through evolution is required to maintain the dome. In informal discussions with Carnival. There is an expectation that significant investment will occur in the Dome once they take it over. We can't get into detail. The city doesn't have a direct relationship with Carnival, but we expect an investment to occur shortly.
Speaker 4: All right. Well, thank you for your report. And thanks to the vice mayor for the information she's provided and the work that you've all done to educate us all tonight. Thank you.
Speaker 0: Thank you. And just to bring a little more clarity from what I understand, that as soon as chill is over, they're going to clean the dome from when, say, the the emptied out and the clean the both the outside and the inside. Vice Mayor Lowenthal.
Speaker 5: Thank you again, Mr. Mayor. I was eager to have the task force start and misspoke, actually. I only imagine that they've met. They have not met yet. They plan to meet in January, but I know they're looking forward to it.
Speaker 0: Thank you, Councilman Andrews.
Speaker 2: Yes. First of all, I'd like to thank Mr. Conway for the fine job. He's, you know, taken on with this new a vice mayor in your district. But I can see nothing but a win win for this situation. And knowing the job that you guys are going to, you know, take it from looking at the pictures that you put up here. It shows me that I can go back to the Queen Mary and get away from those ghost stories I used to hear about. So you guys keep up the good work and kudos because I will be going back with my family again. Thank you.
Speaker 0: Thank you. We're going to before we go to the vote, I'm going to make a couple a couple closing comments. There's no question that the Queen Mary is an icon of the city of Long Beach. When people think of Long Beach, they think of the Queen Mary. There's incredible history. There's incredible military history tied to that ship. There's history in the way Long Beach was developed and certainly as the way our country was developed here and in California. So when you think about the the value that that ship has, it's really you can't really put a price on the cultural icon that it really is. And so to be able to finally get to a point where we're going to look at the land surrounding the ship and develop it in a way that's appropriate, that's community oriented, that maximizes the space, but also brings more people and draws more people to the ship while reinvesting back into the ship and into and into the dome, I think is is critical. I think it's we shouldn't vote without also thinking officially a garrison. You know, Garrison came in at a very difficult time in the Queen Mary's history. The Queen Mary has had a a rough history in the last ten, 15 years. And so the fact that Garrison stepped in when they did, made the investments that they could, reinvested it back into upgrades on the ship. Now, the ship is not in perfect shape. There is a lot of investment that still needs to happen. But you can't argue that the ship today is in much better, but in a much better position and improved from a historical landmark perspective than it was before Garrison came on board. And so thank you to Garrison for those investments. And we know that now, as this transitions over to urban commons, which I've had obviously a chance to know, the vice mayor has had a chance to to meet with them. We're bringing in a group that has experience with development, and Garrison never intended to be the master developer on the site. And what we really have an opportunity now to do is to build out a part of downtown Long Beach that has been dormant, in many cases empty and with and has not met its potential. So this is an opportunity to build something spectacular adjacent to the Queen Mary. It's a chance to build something that respects the fact that the Queen Mary is the centerpiece and will be the centerpiece of this development. And we look forward to in in the coming months when the community process kicks off in January with the first meeting of the task force. We're going to engage in a very, I think, a very open and transparent process where the community can come in and be able to comment on on on the plans that Garrison and the task force are going to develop in the in the coming months. And so we we're excited to, in the future, break ground on that project and build something the whole community can be proud of. And that, of course, respects the great beauty of the ship. And so thank you, Garrison. And. And if all goes well here. Hello. Urban comments. And we'll begin that relationship. And with that. Members, please cast your votes.
Speaker 1: Motion carries.
Speaker 0: Thank you and thanks again for for that next item, please.
Speaker 1: Report from Economic and Property Development recommendation to accept funds totaling 3.9 million funded by the Community Economic Adjustment assistance for reductions in defense industry employment and execute a contract with blue drop performance learning in the amount of 2.5 million to develop web based platform materials citywide.
Recommendation to authorize City Manager, or designee, to execute any and all documents necessary for an Amended and Restated Lease and Operations Agreement No. 22697 and concurrent assignment to Urban Commons, LLC, as Successor Lessee to Garrison Investment Group, LLC.  (District 2)