To: Board of Supervisors
From: Greg Baer, Director of Airports
Report Title: APPROVE and AUTHORIZE the Director of Airports, or designee, to execute a subordination agreement associated with the hotel ground lease at Buchanan Field Airport.
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE and AUTHORIZE the Director of Airports, or designee, to execute a Landlord's Subordination Agreement between Jai Shri Ram Hospitality Group of Concord LLC, Celtic Bank Corporation, and the County to facilitate a leasehold mortgage as allowed under the ground lease for the hotel located at Buchanan Field Airport, Pacheco Area.
FISCAL IMPACT:
There is no fiscal impact to the Airport Enterprise Fund associated with this action.
BACKGROUND:
In May of 2023, the Board approved an assignment of the ground lease for the Concord Plaza Hotel that’s located at Buchanan Field Airport (45 John Glenn Drive), from Dale Village Apartment Company, L.P., to Jai Shri Ram Hospitality Group, LLC (Jai Shri Ram). Since taking over the lease and ownership of the hotel, Jai Shri Ram has endeavored to rebrand the hotel under two Marriott flags, and make significant capital improvements to upgrade the facility to meet the Marriott standards. Jai Shri Ram is seeking to finance the capital improvements through a leasehold mortgage as allowed under the ground lease. While the ground lease allows for leasehold mortgages and can be effectuated without the County’s consent, the potential lenders desire more detail regarding certain collateral securing the loan, and thus are requiring execution of the attached agreement prior to loan funding. Even though the agreement is called a Subordination Agreement, the County is not subordinating any of its rights under the ground lease, and to that end, this agreement does not modify or change any terms within the existing ground lease. This is a standard requirement for lenders that gives them the right to enter the hotel premises to retrieve property that the County has no security interest in, should Jai Shri Ram as the borrower default under the loan.
CONSEQUENCE OF NEGATIVE ACTION:
If the County does not execute the agreement required for bank financing, the much-needed capital improvements to the hotel will most likely not occur.