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AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT (this "Lease") is made and entered into as of the October 15, 2010, by and between CHATSWORTH ROYALE, a California limited partnership ("Landlord"), and SUMMERVILLE AT COBBCO, INC., a California corporation ("Tenant"), with reference to the following facts and circumstances:
A. WHEREAS, Landlord owns the "Premises" hereinafter described.
B. WHEREAS, Tenant is experienced in the management and operation of residential care facilities for the elderly, as defined in California Health & Safety Code, Division 2, Chapter 23.2, Section 1569.2, and related California statutes and regulations.
C. WHEREAS, Tenant desires to lease the Premises from Landlord and Landlord desires to lease the Premises to Tenant pursuant to the provisions of this Lease, for the purpose of Tenant = s operation of a duly licensed residential care facility for the elderly (an A RCFE @ ).
D. WHEREAS, Landlord is entering into this Lease in reliance upon the particular skills, knowledge and experience of Tenant in the operation of an RCFE.
E. WHEREAS, Tenant currently leases the Premises pursuant to the Amended and Restated Lease Agreement dated as of November 1, 1994, between Landlord and Jerry Agam, an individual, and Pacific Manor, Inc., a California corporation, collectively as tenant, as amended by that certain Amendment to Lease Agreement and Consent Agreement dated August 28, 1998, by and among Landlord, Pacifica Manor, Inc., a California corporation, and Jerry Agam, collectively as Original Tenant, and Cobbco Inc. predecessor to Summerville at Cobbco, Inc., as New Tenant (collectively, the “Prior Lease”), which Prior Lease has a term ending September 30, 2014.
F. WHEREAS Tenant is willing to terminate the Prior Lease and enter into this Lease on the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing recitals and the terms, covenants and conditions of this Lease, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. LEASE OF PREMISES . Subject to the terms and conditions of this Lease, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, for the Term (as defined below) that certain real property described in Exhibit "A" attached hereto, which has been improved with an approximately one hundred seventy-six (176) unit RCFE, and related personal property (as described in Paragraph 11 below) (collectively, the "Premises"). The Premises are located at 20801 Devonshire Street, Chatsworth, California 91311 and are commonly known as A Emeritus at Chatsworth”. Upon full execution of this Lease, the Prior Lease is terminated as of the Commencement Date (as defined in Section 2.1 below).
2. TERM .
2.1 Term . The term of this Lease (the "Term") shall commence on November 1, 2010 (“Commencement Date”) and expire on September 30, 2024.
2.2 Option to Extend . Provided that Tenant is not then in Default (as defined in Section 18 below) hereunder, Landlord hereby grants to Tenant an option (the A Option @ ) to extend the Term of this Lease for one (1) additional five (5) year period (the "Option Period"), commencing upon the expiration of the Term of this Lease, and provided that Tenant complies with all of the terms and conditions set forth in this paragraph. Tenant shall exercise each Option by delivering to
Landlord, on a date that is prior to the date upon which the Option Period would commence (if such option is exercised) by at least nine (9) but not more than twelve (12) months, a written notice ( A Tenant = s Notice @ ) of the exercise of the Option to extend this Lease for the Option Period, time being of the essence. If Landlord fails to receive Tenant = s Notice within the time period provided, the Option shall automatically expire and be of no further force or effect. All of the terms and conditions of this Lease shall apply during the Option Period, except that the initial Monthly Rent during the Option Period shall be equal to the greater of: (i) the “Prevailing Market Rent” (as defined in Paragraph 4.2 below) for the Premises as of six (6) months prior to the commencement of the Option Period or (ii) the Monthly Rent calculated as provided in Paragraph 4.1(c) below, and shall be adjusted annually thereafter as provided in Paragraph 4.1(c) below. As a further condition to Tenant = s exercise of the Option, any prior tenant that has not been expressly released from liability under this Lease, and any guarantor of Tenant's performance hereunder shall expressly reaffirm in writing the extension of their liability with respect to this Lease for the Option Period.
3. MONTHLY RENT . Tenant shall pay to Landlord rental for the Premises, without deduction, set off, prior notice or demand, as follows:
3.1 Monthly Rent . Subject to adjustment under Paragraph 4 below, Tenant shall pay to Landlord monthly rent (the A Monthly Rent @ ) in the amount of $119,565.86 commencing on the Commencement Date. The Monthly Rent set forth below shall be due and payable in advance on the first day of each monthly period set forth below from and after the Commencement Date. Concurrently with the payment of Monthly Rent, Tenant shall deliver to Landlord rent rolls and occupancy statements for the prior monthly period.
3.2 Rent Payment Address, Late Payment Charge . All Monthly Rent and other charges payable by Tenant to Landlord hereunder (collectively, any A Payment @ ) shall be paid to Landlord at 5150 Overland Avenue, Culver City, California, 90230, or at such other address as may be designated by Landlord from time to time in writing to Tenant. Landlord shall have the right at its election at any time during the Term of this Lease to require any and all Payments to be made by direct payment from Tenant’s bank account, and Tenant shall execute and provide any documentation necessary to authorize such direct payment. Tenant acknowledges that late payment by Tenant to Landlord of any Payment will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance(s) affecting the Premises. Therefore, if any Payment is not received by Landlord within seven (7) calendar days after its due date, Tenant shall pay to Landlord a late charge as additional rent hereunder equal to six percent (6%) of such late Payment. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any late Payment by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant's default with respect to the late Payment, nor prevent Landlord from exercising any of the other rights and remedies available to Landlord hereunder, at law or in equity.
3.3 Monthly Rent “Triple Net” to Landlord . The Monthly Rent provided in this Lease shall be in addition to all other payments to be made by Tenant as provided herein. It is the purpose and intent of Landlord and Tenant that the Monthly Rent provided herein shall be absolutely net to Landlord, so that this Lease shall yield net to Landlord the Monthly Rent specified in this Lease each month during the Term (unless otherwise expressly provided herein). Landlord shall have no obligation or liability to pay any amounts in connection with the ownership, operation and/or management of the Premises, or any part thereof, whether for real or personal property taxes, or insurance premiums of any kind, or maintenance or costs of repair of any kind, including structural or exterior maintenance, or license fees, except to the extent expressly provided herein. Excluding monetary liens recorded against the Premises for which Landlord is liable, if any, all costs and expenses including, without limitation, taxes, assessments, insurance premiums, utilities, maintenance and repair (capital and ordinary), license fees and obligations of every kind and nature whatsoever relating to the use and/or operation of the Premises by Tenant which may accrue or become due during or arise out of the Term shall be paid by Tenant, and Tenant shall indemnify,
defend and hold Landlord harmless from and against any and all loss, damage or liability for the same.
4. MONTHLY RENT ADJUSTMENTS .
4.1 CPI Adjustment .
(a) On October 1, 2011, the Monthly Rent then payable hereunder shall be adjusted, compounded annually, by the increase, if any, in the Consumer Price Index published by the Bureau of Labor Statistics of the United States Department of Labor for All Urban Wage Earners and Clerical Workers, “All Items”, Los Angeles, Long Beach, Anaheim Metropolitan Area, California (the “Initial CPI”), which adjustments shall be subject to the limitations hereinafter set forth. The Initial CPI published as of September 1, 1994 shall be considered the “Base Index”. The Monthly Rent shall be adjusted upward, but not downward, by an amount equal to sixty percent (60%) of the increase, if any, in the Initial CPI as of the last month prior to such adjustment over the Base Index. The sum so calculated shall constitute the adjusted Monthly Rent; provided, however, that the Monthly Rent shall not be decreased as a result of any adjustment, and no adjustment shall cause Monthly Rent in effect prior to the adjustment to increase by less than two and one-half percent (2 ½ %) or more than four percent (4%) per annum.
(b) Commencing October 1, 2014, the Monthly Rent shall be equal to $127,916.67, multiplied by a fraction, the numerator of which shall be the Consumer Price Index published by the Bureau of Labor Statistics of the United States Department of Labor for All Urban Consumers (1982-84=100) “All Items, @ Los Angeles-Anaheim-Riverside, California (“CPI”) for July 2014 and the denominator of which shall be 224.610 (i.e., the CPI for January 2010); provided , however , that the Monthly Rent shall not decrease as a result of such adjustment, and shall not be less than $147,210.69 or more than $161,314.14.
(c) Commencing on October 1, 2015, and annually thereafter throughout the remainder of the Term, the Monthly Rent then payable hereunder shall be adjusted, compounded annually, by the increase, if any, in the CPI, which adjustments shall be subject to the limitations hereinafter set forth. The adjustments to the Monthly Rent provided for herein shall be calculated as follows: for each adjustment, the Monthly Rent payable immediately prior to the adjustment shall be multiplied by a fraction, the numerator of which shall be the CPI for the February prior to the date for which the adjustment is being calculated (in each case the A Comparison Index @ ), and the denominator of which shall be the CPI for: (a) July 1, 2014, in the case of the first year of the first adjustment, or (b) the July prior to the date on which the immediately preceding adjustment was calculated in the case of the subsequent adjustments (in either case, the A Base Index @ ). The sum so calculated shall constitute the adjusted Monthly Rent; provided , however , that the Monthly Rent shall not be decreased as a result of any adjustment, and no annual adjustment shall cause the Monthly Rent in effect prior to the adjustment to increase by less than three percent (3%) or more than five percent (5%) per annum.
(d) Pending receipt of the relevant CPI figures and determination of the actual adjustment, Tenant shall pay to Landlord an estimated adjusted Monthly Rent, as reasonably determined by Landlord by reference to the then available index figures. Any overpayment by Tenant shall be credited against the next installment of Monthly Rent due, and any underpayment shall be due and payable by Tenant within five (5) business days after determination of the adjustment. Landlord’s failure to request payment of an estimated or actual adjustment shall not constitute a waiver of the right to any adjustment provided for in this Lease. In the event that the compilation and/or publication of the CPI shall be transferred to any other governmental department, bureau or agency, or shall be discontinued or materially changed, then the index most nearly the same as the discontinued index, as determined by Landlord in its sole discretion, shall be used to calculate the Monthly Rent adjustments contemplated hereunder.
(a) The term "Prevailing Market Rent" as used herein shall be deemed to mean and refer to the greater of the fair market rental value of: (i) the Premises, or (ii) comparable RCFE properties located in a market area in Los Angeles County comparable to the market area of the Premises assuming that:
(i) The Premises are in good condition and repair.
(ii) The Premises would be leased for the period of the option being exercised by a tenant with the credit standing of Tenant, as the same exists at that time.
(iii) The Premises would be leased on the same terms of this Lease insofar as the obligations for repair, maintenance, insurance and real estate taxes existed as of the expiration of the Original Term.
(iv) No deduction or consideration shall be given to allowances for real estate brokerage commissions.
(v) The Premises will be used for a residential care facility for the elderly taking into account the then constructed improvements.
(b) Based upon the foregoing assumptions, the Prevailing Market Rent shall be determined by Tenant and submitted to Landlord by written notice ("Tenant’s Submission") within the twenty (20) day period following commencement of the last six (6) months of the Original Term of this Lease (or Option Period as applicable). If Landlord disagrees with the Prevailing Market Rent reflected in Tenant’s Submission, Landlord shall, within twenty (20) days after receipt of Tenant’s Submission, submit to Tenant in writing Landlord’s opinion as to the Prevailing Market Rent by written notice ("Landlord's Judgment"). If after consultation together and within ten (10) days following Landlord's submission of Landlord's Judgment to Tenant, Tenant and Landlord cannot agree on the amount of the Prevailing Market Rent, then in that event, Tenant and Landlord shall each, at their respective cost and expense, designate a qualified real estate broker in the area ("Tenant’s Broker" and “Landlord’s Broker”) to determine the Prevailing Market Rent. Tenant’s Broker and Landlord’s Broker shall determine the Prevailing Market Rent and submit same to the other Broker in writing within thirty (30) days after the submission of Landlord's Judgment to Tenant. If the Prevailing Market Rent determined by Tenant’s Broker is the same as or higher than Landlord's Judgment or Landlord’s Broker’s submission, said figure shall be the Prevailing Market Rent.
(c) If the Prevailing Market Rent determined by Tenant’s Broker is less than the Prevailing Market Rent determined by Landlord's Broker and if after consultation together and within ten (10) days following determination by Tenant’s Broker and Landlord’s Broker, Tenant’s Broker and Landlord’s Broker cannot agree upon the amount of the Prevailing Market Rent, then, if Landlord’s Broker’s submission and Tenant’s Broker’s submission are within five percent (5%), the parties agree that the Prevailing Market Rent shall be the average of Landlord’s Broker’s submission and Tenant’s Broker’s submission. Otherwise, Tenant’s Broker and Landlord’s Broker shall jointly agree upon and designate one (1) qualified, impartial real estate broker (the "Chosen Broker"). If Landlord’s Broker and Tenant’s Broker cannot jointly agree upon and designate the Chosen Broker within ten (10) days, then in that event the Chosen Broker shall be designated by the then President of the American Industrial Real Estate Association.
(d) No Chosen Broker shall have a conflict of interest. The Chosen Broker shall review the data submitted by Landlord’s Broker and Tenant’s Broker and determine the Prevailing Market Rent, in accordance with the provisions and assumptions set forth herein, and the decision of the Chosen Broker shall be binding upon Landlord and Tenant; provided, however, that the Prevailing Market Rent shall be no less than the greater of (1) Prevailing Market Rent reflected in Tenant’s Submission or (2) the Monthly Rent increased by the CPI (but in no event less than 3%).
The costs and fees of the Chosen Broker shall be shared equally by Landlord and Tenant, and the determination of the Prevailing Market Rent by the Chosen Broker shall be completed no later than the expiration of the Original Term. If for any reason the Prevailing Market Rent has not been determined by the commencement of the Option Period, Tenant shall pay Monthly Rent increased by the CPI (but in no event less than 3%) as provided in Paragraph 4.1 or as specified in Tenant's Submission, whichever is greater, and make up any deficit therein within three (3) business days after Tenant has been notified of the Prevailing Market Rent.
5. INTENTIONALLY OMITTED .
6. SECURITY DEPOSIT . Landlord currently holds $200,000 as security deposit under the Prior Lease, which shall continue to be held by Landlord pursuant to the terms of this Section 6. Tenant shall concurrently with the execution of this Lease deliver to Landlord the additional sum of $200,000 to be held as additional security deposit for a total deposit of $400,000 (the “Security Deposit) for Tenant’s prompt payment and performance of all of Tenant’s obligations hereunder (and not as prepaid rent). Landlord shall not be required to keep the Security Deposit separate from Landlord's other accounts and no trust relationship shall be created with respect to the Security Deposit. In no event shall the Security Deposit be in lieu of or excuse Tenant from paying any portion of the Monthly Rent or any other Payment due and payable by Tenant hereunder at any time during the Term of this Lease. The taking of the Security Deposit by Landlord shall in no way be a bar or defense to any action in unlawful detainer for the recovery of possession of the Premises or any other right or remedy that Landlord may at any time exercise upon Tenant's Default or breach of this Lease. No interest shall be payable by Landlord on the Security Deposit. Without waiving any of Landlord's rights or remedies hereunder, at law or in equity, Landlord may, at Landlord's option, apply all or any part of the Security Deposit to any unpaid Monthly Rent or other Payment due and payable by Tenant from time to time under this Lease (including but not limited to, late charges), or to cure any other Default or breach of Tenant hereunder (including, but not limited to, the cost of maintenance and repair of the Premises). Upon the expiration of the Term of this Lease and Tenant's prompt surrender of possession of the Premises in accordance with the terms of this Lease, and provided that Tenant is not then in default hereunder (and/or no event has occurred which, with the giving of notice or the passage of time, could give rise to a default hereunder), Landlord shall return any portion of the Security Deposit to Tenant that has not been so applied by Landlord. Should all or any portion of the Security Deposit be so applied by Landlord at any time from time to time during the Term of this Lease, Tenant shall, upon the written request of Landlord promptly remit to Landlord an amount sufficient to restore the Security Deposit to the amount of the Security Deposit immediately prior to such application, and Tenant's failure to do so within five (5) days after receipt of Landlord's written request therefor shall constitute a material default of Tenant under this Lease.
7. REAL ESTATE AND PERSONAL PROPERTY TAXES . In addition to all Payments or other charges payable by Tenant hereunder, Tenant shall promptly pay as additional rent all real estate taxes, levies and assessments imposed, levied upon or assessed against the Premises throughout the Term of this Lease. The term "real estate taxes" as used herein shall be deemed to mean all taxes imposed upon the real property and permanent improvements, and all assessments levied against the Premises (including, without limitation, any increases thereto occasioned by any sale or transfer of ownership thereof), but shall not include personal income taxes, inheritance taxes or franchise taxes levied against the Landlord. In addition, throughout the Term of this Lease, Tenant shall pay, prior to delinquency, all taxes assessed against and levied upon fixtures, furnishings, equipment and all other personal property contained in the Premises. Tenant shall reimburse Landlord for real estate taxes paid directly by Landlord, which reimbursement shall be on or before the later of: (i) ten (10) business days prior to each date a delinquency would be assessed by the taxing authority on such tax, if unpaid; or (ii) five (5) business days after written notice from Landlord to Tenant of the amount of Tenant’s required tax reimbursement.
8. INSURANCE .
8.1 Throughout the entire Term hereof, Tenant shall, at its sole cost and expense, but for the mutual benefit of Landlord and Tenant, maintain general public liability insurance
(including professional liability coverage) against claims for personal injury, death or property damage occurring in, upon or about the Premises and on any sidewalks directly adjacent to the Premises. The limitation of liability of such insurance shall be not less than Two Million Dollars ($2,000,000) in respect to injury or death of one person and to the limit of not less than Three Million Dollars ($3,000,000.00) in respect to any one accident and to the limit of not less than Two Million Dollars ($2,000,000.00) in respect to property damage.
8.2 Throughout the entire Term of this Lease, Tenant shall, at its cost and expense, maintain all risk fire and extended coverage insurance in an amount equal to the full replacement value of the Premises (exclusive of foundation and excavation costs), as such value and/or coverages shall be determined or revised by Landlord and/or Landlord’s lender in their reasonable discretion from time to time. The proceeds of said policy shall be payable to Landlord and Tenant as their respective interests may appear. Tenant agrees that upon Landlord's request, Tenant shall procure a mortgagee's loss payable endorsement to said policy, provided that any policy proceeds paid to such mortgagee shall be available for reconstruction in accordance with the terms of this Lease, as amended or supplemented by any subordination, non-disturbance and attornment agreement executed by and between Tenant and such mortgagee. In addition, Tenant, at its own cost, shall either by separate policy or, at Landlord = s option, by endorsement to a policy already carried, maintain insurance coverage on all Standard Furnishings, as well as any personal property owned by Landlord or Tenant and kept in, on or about the Premises, which insurance shall be full replacement cost coverage with a deductible not to exceed $50,000 per occurrence, and the proceeds of such insurance shall be used by Tenant solely for the replacement of Standard Furnishings and other personal property of Landlord or Tenant kept in, on or about the Premises. It is further understood and agreed that Tenant hereby waives any right of recovery from Landlord, its principals, agents and/or employees for any loss or damage (including consequential loss) resulting from any of the perils that would have been insured against in the insurance policies to be maintained by Tenant hereunder (except if caused by the gross negligence or willful misconduct of Landlord or its agents, employees or contractors), whether or not such coverage is actually in place at the time of such loss.
8.3 Throughout the entire Term of this Lease, Tenant, at its sole cost and expense, shall maintain rental interruption insurance for the benefit of Landlord and business interruption or loss of income insurance on its own behalf for a coverage period of at least twelve (12) months. Landlord shall be named as an additional insured and all proceeds of such policy shall be paid jointly to Landlord and Tenant. Without limitation, such policy shall be maintained at coverage levels sufficient to perform all of the continuing monetary obligations of Tenant under this Lease.
8.4 Throughout the entire Term of this Lease, Tenant, at its sole cost and expens