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LBREPORT.com Learns That On Oct 1, City Mgm't Agreed As Queen Mary Landlord/Lessor To "Major Change" In City's Lease With Urban Commons Acknowledging Lessee Doesn't Intend To Finalize Entitlements For Its "Queen Mary Island" Project Within Next 24 Months

Urban Commons sought the lease change on Sept. 10


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(Oct. 9, 2019, 6:50 p.m.) -- LBREPORT.com has learned that on Sept. 10, Queen Mary Mary ship/adjoining development property lessee Urban Commons requested, and on Oct. 1 LB city management agreed (per Economic Development Dir. John Keisler) on behalf of the City as the QM landlord/lessor (not in a regulatory approval capacity) to a "major change" in the City's lease sought by Urban Commons. The major lease change described in the city's letter agreeing to the major lease change references demolishing the existing "Village and Marketplace" in the QM parking lot and constructing additional parking areas...and requires Urban Commons to submit in writing that the building demolition/parking lot construction are required "because it [Urban Commons] does not intend to finalize the entitlements for the Queen Mary Island project within the next 24 months..."

The letter also notes that the City "retains full discretion to impose mitigation measures, make modifications and/or disapprove of the Major Change as a regulatory authority."

In the Oct. 1 "major change" approval letter addressed to Taylor Woods in Urban Commons' L.A. office, Mr. Keisler wrote:

The purpose of this letter is to provide approval of the Major Change requested on September 10, 2019, pursuant to Article 6.7 of Agreement No. 34432: Amended and Restated Lease and Operations Agreement of Queen Mary, Adjacent Lands and Improvements, Dome and Queen's Marketplace (Lease No. 22697) ("Lease"). The Major Change, requested by Adam Grandorff, vice president of construction for Urban Commons, LLC, includes the demolition of the existing Village and Marketplace within the Queen Mary parking lot, and the construction of additional parking areas.

This letter also serves to clarify the obligations of Urban Commons related to such Major Change, as specified in Article 6.7 of the Lease. You are hereby notified to furnish the City with:

  • A true copy of the contract with the general contractor performing the Village and Marketplace abatement and demolition, and a true copy of the contract with the general contractor performing the construction of the parking area. The contract provided should meet the requirements specified in Article 6.7. Approval or disapproval of the general contractor will be provided within ten (10) business days following receipt.

  • Evidence of the availability of funds necessary to complete the Major Change, or evidence of the financing of construction costs, as appropriate.

  • A performance bond in an amount of not less than 100 percent of the anticipated cost of the construction work, as the work will exceed the adjusted cost threshold of $531,105, and a payment bond guaranteeing the completion of the improvements free from liens.

Further, in consultation with the Cityís Development Services Departmentís Planning Bureau, you are hereby notified of the following requirements related to completion of this project:

  • Urban Commons shall obtain a Harbor Development Permit for the proposed project.

  • Urban Commons shall submit in writing that because it does not intend to finalize the entitlements for the Queen Mary Island project within the next 24 months, the demolition of the Village and Marketplace buildings and the construction of the parking lot is required.

  • Urban Commons shall submit documentation indicating that the Village and Marketplace buildings were not deemed significant historic resources.

It is important to note that this letter, and the Cityís approval of the requested Major Change, is delivered by the City in its proprietary capacity as property owner and landlord under the Lease only, and not in City's capacity as regulatory agency. This letter does not constitute a review or approval by City of a development plan, environmental review, an entitlements application, or any other regulatory requirement applicable to the Major Change, and City retains full discretion to impose mitigation measures, make modifications and/or disapprove of the Major Change as a regulatory authority. Urban Commons shall ensure that the proposed Major Change complies in all respects with the requirements of the California Environmental Quality Act.

Thank you for your cooperation in this matter. Please do not hesitate to call me if you have any questions or need additional information or clarification...

[Scroll down for further.]






City management's letter agreeing to Urban Commons' request for the "major change" in the lease is dated the same day -- Oct 1 -- as city management's "fix it-detault-cure" letter (also per Mr. Keisler) asking Urban Commons to present a plan by the end of October to address a number of repair items (two of which are estimated to cost at least $7 million) among repairs that the public was told would be covered by a City-funded "Historic Preservation Capital Improvement Plan" (HPCIP) that included a $17 million City-floated debt bond plus $5 million taken from reserve funds. The HPCIP's funds were depleted before completion of all planned repairs when fire-safety (priority) items consumed roughly $5 million more than initially anticipated. The City also sought two financial documents from Urban Commons by the end of October.

The two letters occur in the context of a Sept. 23, 2019 city management memo (previously reported by LBREPORT.com) that informed the Mayor/Council that although "critical ship repairs" are the responsibility of the lessee Urban Commons, city "staff is working with the Lessee to improve operational income and to develop new revenue streams associated with the Queen Mary and surrounding activities and city staff "hope to receive from Urban Commons an update on this plan "by the end of the year." This implicitly raises the possibility that at some point city management might seek Council approval to seek City Council approval to have the City (in ways that might potentially expose LB taxpayers) pay for the uncompleted QM repairs.

One day later on Sept. 24, 2019, Mayor Robert Garcia stated in conspicuously brief terms during a staged event titled "Building A Better Long Beach" that he wasn't pleased that plans for developing "Queen Mary Island" (the land surrounding the Queen Mary) hadn't progressed as quickly as he'd hoped. He made no mention of the Sept. 23 city management memo (on which he was an indicated recipient) or the two year delay requested Sept. 10 from city management by lessee Urban Commons.

In November 2016, the City Council on a 6-1 vote (Price dissenting), agreed to enter into a 66 year lease with Urban Commons to operate the ship and (more importantly) granted Urban Commons development rights to the ship's adjoining land.

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The City's fix-it/default/cure Oct. 1 letter to Urban Commons cited five remaining repair items it said should be "immediately addressed to be considered in compliance with the Lease" plus two financial documents it said "are currently outstanding under the lease. " The Oct. 1 letter said if Urban Commons failed "to respond" within 30 days, the City could find the firm "in default" under a portion of the lease "with a right to cure" pursuant to another portion of the lease.

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  • [Cited in Oct. 1, 2019 letter] Exterior Paint on the Hull, Funnels, and Top of House Areas ("areas of the exterior hull port and starboard, the aft funnel, and top of house, including vents and sc uppers require painting")
  • Expansion joints ("at least one of the expansion joints requires plate installation, fasteners, water testing, and repair of caulking")
  • Bilge Repair and Rust Remediation ("standing water and intrusion of rust, despite the application of a rust remediator")
  • Side shell and Lifeboats ("identified by the City's Landlord Representative as the most critical priority for the long-term viability of the ship, removal of deteriorating lifeboats and repair of the ship side shell must be prioritized...the continued corrosion represents a serious threat to the ship's structural integrity and the safety of guests and employees.")
  • General Maintenance ("insufficient resources being dedicated to ongoing upkeep of the ship, including maintenance of improvements completed or partially funded through the HPCIP Fund [Historic Preservation Capital Improvement Plan.") ..[T]he number of staff hours dedicated to the Base Maintenance Plan appear to be insufficient to maintain the Premises in first class condition and repair. Please provide a current Base Maintenance Plan as a reference for staffing requirements."

The Oct. 1 letter also listed two financial items "currently outstanding" under the lease:

  • Annual Audited Financials for 2018 -- Section 4.3, Schedule 1
  • Evidence of Base Maintenance and Replacement Plan (BMRP) Fund account deposits and balance -- Section 7.3.1

The Oct. 1 letter stated that Urban Commons staff had been responsive in taking steps to obtain the financials, but indicated the two items "are due no later than October 30, 2019." It concluded: "Please respond to this letter within 30 days and provide a plan to address the deficiencies described above. If you fail to respond within 30 days, Urban Commons may be found in default per Section 14.1.b of the Lease, with the right to cure pursuant to Section 14.2."

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