To: MAYOR AND CITY COUNCIL
From: ELIZABETH HAUSE, WATERFRONT AND COMMUNITY SERVICES DIRECTOR
TITLE
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ADOPT BY TITLE ONLY RESOLUTION NO. CC-2611-093, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDONDO BEACH, CALIFORNIA, LEASING CERTAIN PROPERTY TO SUNRISE-HARBOR LTD.
APPROVE THE SECOND AMENDMENT TO THE LEASE WITH SUNRISE-HARBOR LTD. FOR THE REDONDO BEACH HOTEL AT 400 NORTH HARBOR DRIVE TO UPDATE THE REQUIRED HOTEL STANDARD AND MODIFY THE RENOVATION FUND PROVISIONS
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EXECUTIVE SUMMARY
The Redondo Beach Hotel, located at 400 North Harbor Drive, is owned and operated by Sunrise-Harbor Ltd. (Lessee) under a Ground Lease with the City dated December 18, 2013. In 2020, the Lessee entered into a franchise agreement with Hilton Franchise Holding LLC to operate the hotel as part of the Hilton Tapestry Collection, an upper-midscale soft brand. In 2021, the City Council approved a First Amendment to the Lease in response to the Lessee’s request for COVID-19-related financial relief, eliminating the Furniture, Fixtures, and Equipment (FF&E) Fund and releasing the remaining fund balance to the Lessee. To align the existing lease with the requirements of the Hilton franchise, the Lessee has requested a second amendment to the Lease.
The proposed second amendment updates the Required Hotel Standard to reflect current franchise brand standards and modifies the Renovation Fund provisions to allow for ongoing, incremental improvements consistent with the franchise agreement, rather than a single fixed renovation event. The amendment also includes a provision that, should the Hilton franchise agreement terminate or expire, the original single-renovation-event requirement would be reinstated. Adoption of the Resolution is required to implement the proposed second amendment.
BACKGROUND
Sunrise-Harbor Ltd. Is the current Lessee under the Ground Lease with the City of Redondo Beach, dated December 17, 2013, for the premises occupied by the Redondo Beach Hotel at 400 North Harbor Drive. The property sits at the northeast corner of Beryl Street and North Harbor Drive, is bordered by a Salvation Army residence facility to the east, and the AES plant to the north. The Redondo Beach Hotel occupies a 2.32-acre parcel with 112 guest rooms, 2 event spaces, fitness center, pool and spa area, and other amenities typically offered at a boutique hotel. The lease has a 55-year term, commencing December 18, 2013 and expiring December 17, 2068.
In September 2020, the Lessee entered into a franchise agreement with Hilton Franchise Holding LLC, to operate the hotel as a Hilton Tapestry Collection property. The Tapestry Collection is Hilton’s upper-midscale soft brand, which establishes quality and operational standards that the hotel must maintain, including annual quality assurance inspections and periodic property improvement plans (PIPs) that direct required renovations and upgrades.
The Lease was first amended on June 1, 2021, in response to the Lessee’s request for financial relief related to the COVID-19 pandemic. The amendment eliminated the FF&E Fund and released the remaining fund balance to the Lessee.
In May 2025, the City Council approved a Lessor Agreement serving as an estoppel in connection with the Lessee’s refinancing of the hotel’s mortgage. At that time, City staff confirmed that the Lessee was current on all lease obligations, including rent payments and reserve fund requirements.
Following the 2025 refinancing, the Lessee approached the City to request amendments to certain lease provisions that had become inconsistent with the requirements of the Hilton franchise agreement. Specifically, the Lessee identified two provisions requiring updates:
1. The Required Hotel Standard definition, which referenced the Mobil Four Diamond standard no longer applicable to the property’s current brand.
2. The Renovation Fund provisions, which required a single midterm renovation event between 2039 and 2042, in conflict with Hilton’s requirement for ongoing, incremental improvements directed by annual quality assurance reviews and PIPs.
The proposed amendment updates the Required Hotel Standard definition to reflect the Lessee’s current franchise brand and replaces the single fixed renovation requirement with a flexible renovation structure. It also adds a new provision providing that, if the Hilton franchise agreement is terminated or expired, the original single-renovation-event structure would be reinstated.
COORDINATION
The Resolution and lease documents were reviewed and approved as to form by the City Attorney’s Office.
FISCAL IMPACT
Approval of the amendment does not result in any change to the Lessee’s rent obligations or the quarterly deposit requirement for the Renovation Fund. The amendment updates the manner in which Renovation Fund expenditures may be made, which is expected to support the ongoing maintenance and improvement of the hotel property consistent with the City’s interest in maintaining quality waterfront operations.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
• Reso - No. CC-2611-093 Leasing Certain Property to Sunrise-Harbor Ltd.
• Agmt - Proposed Second Amendment to the Lease between the City of Redondo Beach and Sunrise-Harbor Ltd.
• Agmt - First Amendment to the Lease between the City of Redondo Beach and Sunrise-Harbor Ltd, June 1, 2021
• Agmt - Lease between the City of Redondo Beach and Sunrise-Harbor Ltd, December 17, 2013