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Some Facts on Marina Back Rent

August 28, 1994

Your Aug. 23 editorial regarding the 35-year-lease extension to Goldrich & Kest (G&K) in the Sunset Marina Park in Huntington Harbor (the "marina") and your previous newspaper articles display an appalling lack of knowledge, starting with your constant statement that G&K owed $200,000 in back rent. The facts are as follows:

In the lease among Jona Goldrich, Sol Kest and Mel Grau and the Orange County Harbor District dated Sept. 15, 1969, Section 9 contains a formula for revision of percentage rentals. Basically it states that commencing in 1979 and every five years thereafter any of the percentage rents shall be subject to revision. It also states that such adjustments shall be made by negotiation, but if the parties cannot agree, there is a procedure by which each party shall select a qualified real estate appraiser and the two chosen shall select a third qualified real estate appraiser.

The county in 1989, with no agreement from the tenant, G&K, arbitrarily increased its percentage rental from 20% to 25% effective Jan. 1, 1989. G&K was not in agreement with this increase, but because of the fact that they were in negotiations with the county for a lease extension, it was agreed that this increase be set aside to a later date. After the initial negotiations broke down on May 7, 1992, in a letter from John R. Kraemer, Esq., to Mr. John Sibley, chief deputy director, G&K signified its willingness to increase its percentage rentals to 25% effective Jan. 1, 1992.

Subsequent to this increase by the tenant, the county approached G&K to reopen negotiations regarding the lease extension. The county approached G&K for the following reasons.

1. County staff had approved a development plan to expand the facilities at the Marina and wished to implement this expansion plan.

2. The county had available to it a loan from the state of California in the amount of $4.4 million at a favorable rate of interest and it would lose such loan if the development plan for the marina was not implemented in an expeditious manner.

3. The county's lease for the marina expires Sept. 15, 1999, and the county wished to implement and conclude the development plan for the marina prior to the expiration. The agreement as it stands today, subject to the necessary governmental approvals, dictates that the development plan would be concluded prior to the 35-year extension.

4. It would be difficult for the county to find a tenant that would invest $5.5 million of its own monies into the expansion and redevelopment of the marina. G&K has promised to do this.

Also, one thing the paper neglected to point out is that even if the county had advertised for bidders to redevelop the marina, G&K had a right of first refusal to release the marina upon the terms and conditions as accepted by any successful bidder.

The reason why the county and G&K originally agreed to waive the $196,621 (the correct amount allegedly owed to the county) was that G&K had a legal claim against the county because of the county's unwillingness or inability to allow G&K to develop the whole marina parcel. It was because G&K agreed to forgo its claim for lost profits due to the county's breach of its obligations that the county's claim for the $200,000 in back rent was also waived.

All newspapers have an obligation to secure all the necessary facts before making judgments and printing these judgments and opinions for public consumption.


Partner, Goldrich & Kest

Culver City

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