Option to Lease

Option to Lease: Summary

The following is a summary of the basic steps of the Option to Lease Agreement.
To read the complete agreement, please click HERE.

Grant of Option Right.  The City of L.A. grants to FOHFS62 a sole and exclusive option to lease the Option Property, subject to the terms and conditions of this Option Agreement.

Potential Lease.  FOHFS 62 shall have the right, but not the obligation, to exercise the Option to lease the Option Property at any time during the Option Term (as defined below) in accordance with the procedure and conditions set forth below.  Within thirty (30) calendar days after FOHFS 62’s timely and validly exercise of the Option in accordance with the terms and conditions herein, the Parties shall execute a lease substantially in the form attached hereto as Exhibit C (“Lease”).

Option Term.  The “Option Term” shall commence upon full execution of this Option Agreement by the Parties and expire at 5:00pm PST on June 27, 2020

Option Pre-Conditions.  As conditions precedent to FOHFS62’s right to exercise the Option, Prospective Tenant shall have demonstrated, with written documentation, and to the reasonable satisfaction of Owner, all of the following (collectively, the “Option Pre-Conditions”):

1. By the date of the Exercise Notice, FOHFS62 shall have raised readily-available funds of approximately $1,600,000.00, or if at the time of the Exercise, these funds are not sufficient to complete the project, then in an amount sufficient to cover all soft and hard costs necessary to complete the Renovation Project at the California Prevailing Wage rates, with a 20% contingency (in either case, the “Budget Amount”).
2. FOHFS62, shall have provided the City of L.A. a detailed description of the community center-related services that will be required of FOHFS62, and demonstrate that the value of these services is equal to or exceeds the market value of the leasehold in the Option Property for the term of the Lease;
3. FOHFS62 shall have provided evidence showing that Prospective Tenant has continuously maintained its non-profit status; and
4. FOHFS62 shall have shown that, as of the date of the Exercise Notice, Tenant has not defaulted under any contract with the City of Los Angeles and is able to satisfy all of the contracting requirements set forth in the Lease.

Once the Option To Lease is exercised, the Lease will then be activated.  The following is a partial basic summary of the Lease:

PREMISES:  3631-3635 South Centinela Avenue, Los Angeles, California  (Fire Station 62 in Mar Vista)

LANDLORD: City of Los Angeles

TENANT:       Friends of Historic Fire Station 62

USE:               Community center that provides community services open to the public, such as: Community Emergency Response and Training; art, culture, and other educational classes; and other community meetings and events

TERM:            Initial construction period of up to three years, followed by a 20-year option term, followed by two (2) option terms of five years each

RENT:             $0 (but Tenant is obligated to continuously provide services at certain levels

throughout the term of the lease, as specified in Exhibit B to the lease)

UTILITIES:    All utilities shall be solely paid by Tenant

TENANT IMPROVEMENTS:          Any tenant improvement (including the pre-occupancy renovation project) shall be subject to City’s written approval and shall be solely constructed and paid for by Tenant

CUSTODIAL SERVICES:     Tenant shall provide and pay for its own custodial services

MAINTENANCE:     Tenant, at its sole cost and expense, shall maintain and operate the Premises in accordance with requirements set forth in the lease

Option to Lease: Complete Agreement

OPTION TO LEASE

This Option to Lease (this “Option Agreement”) is dated, for identification purposes only, as of this ______ day of ______________, 20___, and entered into by and between Friends of Historic Fire Station 62, a California non-profit corporation (“Prospective Tenant”), and the City of Los Angeles, a California municipal corporation, acting by and through its Department of General Services (“Owner”).  Prospective Tenant and Owner shall each be referred to herein as a “Party” and collectively be referred to herein as the “Parties”.

RECITALS

1. Owner is the fee simple owner of certain land, and all improvements thereon, located at 3631-3635 South Centinela Avenue, Los Angeles, California, which is the site of an old fire station commonly known as Fire Station 62 in the Mar Vista neighborhood of the City of Los Angeles (collectively, the “Option Property”). The Option Property is more accurately identified on the map attached hereto as Exhibit A and the legal description attached hereto as Exhibit B.
2. Prospective Tenant is a non-profit corporation whose mission is to rehabilitate Fire Station 62 and operate it as a community center open to the public.
3. The Parties desire to execute this Option Agreement, thereby granting Prospective Tenant a sole and exclusive option to lease the Option Property, pursuant to the terms set forth below.

AGREEMENT

NOW, THEREFORE, for just and proper consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties do hereby agree to the following:

1. Grant of Option Right. Owner hereby grants to Prospective Tenant a sole and exclusive option to lease the Option Property, subject to the terms and conditions of this Option Agreement.  Such option to lease the Option Property shall hereinafter be referred to as the “Option”.
2. Potential Lease. Prospective Tenant shall have the right, but not the obligation, to exercise the Option to lease the Option Property at any time during the Option Term (as defined below) in accordance with the procedure and conditions set forth below.  Within thirty (30) calendar days after Prospective Tenant’s timely and validly exercise of the Option in accordance with the terms and conditions herein, the Parties shall execute a lease substantially in the form attached hereto as Exhibit C (“Lease”).
3. Option Term. The “Option Term” shall commence upon full execution of this Option Agreement by the Parties and expire at 5:00pm PST on June 27, 2020, subject to earlier termination pursuant to the terms and conditions of this Option Agreement.  The Option shall automatically terminate and be deemed void in the event Prospective Tenant fails to timely and validly exercise the Option within the Option Term.
4. Exercise of Option. To timely and validly exercise the Option, Prospective Tenant must complete all of the following prior to the expiration or earlier termination of the Option Term: (i) satisfy all of the Option Pre-Conditions (as defined below); and (ii) deliver a written notice (“Exercise Notice”) to Owner, indicating Prospective Tenant’s intent to exercise the Option, after all of the Option Pre-Conditions have been satisfied.
5. Option Pre-Conditions. As conditions precedent to Prospective Tenant’s right to exercise the Option, Prospective Tenant shall have demonstrated, with written documentation, and to the reasonable satisfaction of Owner, all of the following (collectively, the “Option Pre-Conditions”):
   1. As of the date of the Exercise Notice, Prospective Tenant shall have raised readily-available funds either: (i) in an amount no less than $1,561,640.63 (i.e., $1,301,367.19 plus 20% contingency), or (ii) if $1,561,640.63 is insufficient to cover all soft and hard costs necessary to complete the Renovation Project (as defined in the Lease) at the California Prevailing Wage rates, with a 20% contingency, as determined as of the date of the Exercise Notice, then in an amount sufficient to cover all soft and hard costs necessary to complete the Renovation Project at the California Prevailing Wage rates, with a 20% contingency (in either case, the “Budget Amount”). No portion of the Budget Amount shall be funded by the Owner.  In addition, no portion of the Budget Amount shall be funded by any type of financing with any security interest in any portion of the Option Property;
   2. Prospective Tenant shall have provided to Owner: (i) a detailed written description of the types/categories, nature, level/quantity, and frequency of community center-related services that will be required of Prospective Tenant under the Lease, for the term of the Lease, and such specified types/categories, nature, level/quantity, and frequency of services shall have been mutually-agreed upon by and between Prospective Tenant and Owner; and (ii) evidence demonstrating that the value (determined as of the date of the Exercise Notice) of such services required of Prospective Tenant under the Lease, for the term of the Lease, is equal to or exceeds the market value (determined as of the date of the Exercise Notice) of the leasehold in the Option Property for the term of the Lease;
   3. Prospective Tenant shall have provided evidence showing that Prospective Tenant has continuously maintained its non-profit status; and
   4. Prospective Tenant shall have shown that, as of the date of the Exercise Notice, Tenant has not defaulted under any contract with the City of Los Angeles and is able to satisfy all of the contracting requirements set forth in the Lease.

Upon Prospective Tenant’s timely submittal of written documentation in an effort to evidence satisfaction of the Option Pre-Conditions, Owner, acting reasonably and in good faith, shall either approve or reject Prospective Tenant’s submittal within 15 calendar days after such submittal.  In the event that Owner rejects such submittal, Owner shall specify the reason(s) of its rejection, and Prospective Tenant shall be given an opportunity to resubmit written documentation evidencing satisfaction of the Option Pre-Conditions, which resubmittal shall be made within 10 calendar days after Owner’s rejection of the original submittal.  Owner, acting reasonably and in good faith, shall either approve or reject Prospective Tenant’s resubmittal within 15 calendar days after such resubmittal.

6. Limitation on Transfer. During the Option Term, Owner shall not (i) encumber the Option Property or any part thereof, or (ii) sell or otherwise transfer title to the Option Property or any part thereof to any third party without Prospective Tenant’s consent.
7. Possession and Access. This Option Agreement shall not grant to Prospective Tenant any right to access, possess, and/or occupy any portion of the Option Property.  If and when the Lease becomes fully-executed, Prospective Tenant, who would be the tenant under such Lease, would have access and possession to the extent provided in the Lease.
8. Notices. All notices and demands which may or are to be required or permitted to be given by either Party to the other hereunder shall be in writing.  All notices and demands shall be personally delivered (including by means of professional messenger service), sent by United States mail, postage prepaid, return receipt requested, or transmitted by telecopier (e.g., Fax) or electronic mail (upon mutual agreement of participating parties), in which case the receiving Party shall immediately confirm receipt of such telecopied or e-mailed notice.  All notices are effective upon receipt.  For the purposes of such notices, the addresses for the Parties are set forth below.  Either Party may from time to time designate another person or place in a notice.

All notices given under this Option Agreement which are mailed or telecopied shall be addressed to the respective Parties as follows:

9. Assignment and Transfer. Prospective Tenant shall not assign or otherwise transfer any or all of its rights arising from this Option Agreement.  Any attempt by Prospective Tenant to assign or otherwise transfer any of its interests in or rights to this Option Agreement shall be invalid, have no effect, and cause this Option Agreement to automatically and immediately terminate.
10. Waiver. No waiver of any condition (including without limitation any of the Option Pre-Conditions) or legal right or remedy shall be implied by the failure of Owner to declare a forfeiture, or for any other reason, and no waiver of any condition or covenant shall be valid unless it be in writing signed by Owner granting or consenting to such waiver.
11. Early Termination. Prospective Tenant may, at any time, terminate this Option Agreement by notifying Owner in writing.  Owner shall have the right to terminate this Option Agreement immediately upon the occurrence of any of the following: (i) Prospective Tenant does not maintain its non-profit corporation status; (ii) Prospective Tenant defaults, beyond any applicable notice and cure period, under any contract between Prospective Tenant (or any affiliate of Prospective Tenant controlled and/or wholly-owned by Prospective Tenant) and the City of Los Angeles; (iii) the Option Property is destroyed or damaged, wholly or partially, and Prospective Tenant is not willing to restore the Option Property at the sole cost and expense of Prospective Tenant (which cost and expense could be added to the Budget Amount); and/or (iv) the Option Property, or any portion thereof, is subject to any condemnation action or threat of condemnation by any public entity other than the City of Los Angeles.
12. Entire Agreement/Amendment. This Option Agreement and the exhibits attached hereto set forth all the covenants, promises, agreements, conditions and understandings between the Parties concerning the Option Property, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between the Parties other than are herein set forth.  Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Option Agreement shall be binding upon the Parties unless reduced to writing and signed by the Parties.
13. Severability. In the event that any provision or section of this Option Agreement is rendered invalid by the decision of any court or by the enactment of any law, ordinance or regulation, such provision shall be deemed to have never been included therein and the balance shall continue in effect in accordance with its terms.
14. Jurisdiction. This Option Agreement and the rights and obligations of the Parties arising hereunder shall be construed in accordance with the laws of the state in which the Option Property is located.

IN WITNESS HEREOF, Owner and Prospective Tenant have executed this Option Agreement as of the date first written above.

EXHIBIT “A”

Option Property Map

EXHIBIT “B”

Option Property Legal Description

EXHIBIT “C”

Form of Lease