Bar Harbor Lease Breach

We ARE MdR has discovered that Doug Ring's Marina Two Holdings LLC is in breach of Section 5.5 of its Lease for not commencing construction by a certain date.

After a through read of the Lease Agreement dated December 30, 2003 between Los Angeles County and Marina Two Holdings LLC, We ARE MdR notes the following.

Per Section 5.5.1 "The Lessee shall cause the Substantial Commencement of Construction for the Redevelopment Work (as defined) to have occurred on or before that date (the “Anticipated Commencement Date”) which will reasonably permit Lessee to substantially complete the Redevelopment Work (as defined) by the Outside Completion Date (June 30, 2009 as defined)."

In other words, the Lessee must commence construction on or before a date (the “Anticipated Commencement Date”) that would allow them sufficient time to substantially complete the project by June 30, 2009.

Today is June 29, 2008. The Lessee is required to give six (6) months notice to all Bar Harbor tenants and boat owners per its Conditional Development Permit (CDP). Thus, the earliest the Lessee could commence substantial construction would be December 29, 2008 (a full 5 years after the lease was signed!). That would leave just six (6) months for substantial completion of the project. This is irrefutably insufficient time.

It is clear to We ARE MdR that the Lessee has breached Section 5.5 of the lease, which means, per Section 5.5.4, that this lease shall be amended in accordance with the Reversion Agreement, and the lease term shall revert back to an expiration date of approximately 2021 (versus 39 years later).

Of course this remedy is at the County’s option (and its sole remedy). However, We ARE MdR further offers:

Section 5.5.3: “Lessee expressly acknowledges and agrees that the terms and provisions of this subsection 5.5.3 are an inducement and material consideration for County to enter into this Lease, and that County would not otherwise be willing to enter this Lease.”

Section 5.5.4: “…Therefore, it is understood and agreed that the time periods and requirements for extensions contained in this Section 5.5 and in Section 5.5 of the Parcel 12 Lease shall be strictly enforced and should the lessee…fail to meet the conditions of Substantial Commencement of Construction within the terms of this Section 5.5…then at County’s option, and as its sole remedy, this Lease shall be amended in accordance with the Reversion Amendment.”

We ARE MdR performed a PRA request on this lease agreement (see related articles) and the response indicates that there have been no lease extenions granted or nor do any conditions exist that would entitle the Lesee to any lease extenions.

We ARE MdR has raised this issue with Acting Director Kreimann and County Counsel Faughnan. They claim the Lessee is not yet in breach but soon will be. I asked them in person following a Small Craft Harbor Commission meeting how they are not in breach. If this is true and you show me how, I will drop the issue. All they could say was that it was complicated. Of course it is. What do you do with developer that has breached its lease? Stay stuned to find out what happens next.

David Barish