June 24, 2015

MEMORANDUM TO: MAYOR AND CITY COUNCIL FROM: INTREPID THEATRE COMPANY PROPOSAL SUBCOMMITTEE MAYOR GASPAR DEPUTY MAYOR BLAKESPEAR RE: CONSIDERATION AND POSSIBLE ACTION REGARDING NEGOTIATING A POTENTIAL LEASE AGREEMENT WITH INTREPID THEATRE COMPANY (INTREPID) TO BUILD A PERFORMING ARTS THEATRE ON LOT 16 AT THE ENCINITAS RANCH TOWN CENTER (PERFORMING ARTS THEATRE), INCLUDING THE POSSIBILITY OF EXECUTING AN EXCLUSIVE NEGOTIATING AGREEMENT (ENA) AND HIRING KEYSER MARSTON ASSOCIATES (KMA) TO ASSIST IN THE PROCESS OF ALL NEGOTIATIONS a. Background At the May 13, 2015 Council meeting, City staff presented a staff report related to a proposal by INTREPID to build the PERFORMING ARTS THEATRE. As noted in the report, the Encinitas Ranch Development Agreement, adopted in 1994 (DEVELOPMENT AGREEMENT), set aside a .7 acre parcel (Lot 16) in the Encinitas Ranch Town Center for the development of a performing arts theater. Pursuant to the DEVELOPMENT AGREEMENT, the City maintains the right to acquire the parcel (via an irrevocable offer of dedication) for such purposes. We have included the staff report (along with the April 6, 2015 INTREPID proposal) for more detailed reference as Attachment “A” to this report. b. Recommendations After conducting several meetings, the Subcommittee recommends that the Council direct the City Manager, in consultation with the Subcommittee, to: (1) negotiate and execute an ENA in substantial form as contained in Attachment “B” to this report, and (2) hire the services of KMA, advisors in public/private real estate development, to assist in the process of all negotiations, at a cost not to exceed twenty-five thousand dollars ($25,000), consistent with the KMA proposal dated June 12, 2015, as contained in Attachment “C” to this report. The reasoning for these recommendations is discussed below.

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c. Exclusive Negotiating Agreement The acceptance of the irrevocable offer of dedication of the parcel by the City is a significant component of consideration to the City resulting from the DEVELOPMENT AGREEMENT, and a viable performing arts facility would be a significant arts and cultural resource to the community. Viability in this sense means a long term commitment to a thriving and successful performing arts venue. Consequently, ensuring that a potential lessee such as INTREPID is a qualified lessee is crucial in moving towards that goal. However, such an important decision may only be made after careful consideration and due diligence is performed by the City in conjunction with INTREPID. As such, the Subcommittee is recommending that the City execute an ENA with INTREPID regarding the potential lease of the parcel related to their April 6, 2015 proposal. Essentially, the ENA (Attachment “B”), if executed, would obligate the parties to do the following:

agree (in good faith) to negotiate exclusively with each other for a period not to exceed 180 days (from the date of execution) for purposes of anticipating and planning a potential lease;

communicate with each other regarding issues related to a potential lease including meeting, telephone conferencing, and exchanging written information; and

assume any loss and risk associated with executing the ENA and other reliance. d. Keyser Marston Associates The potential partnership between the City and INTREPID via a lease agreement to develop the parcel as proposed is unique to the City. Presently, the City does not have any person on staff qualified to assess, evaluate, negotiate and/or formulate recommendations regarding the INTREPID proposal. Last week, the Subcommittee met with Paul Mara, of KMA, to initially discuss the INTREPID proposal. Mr. Mara demonstrated substantial knowledge and experience in real estate market assessment, financial feasibility, planning and public/private partnerships. More importantly, Mr. Mara and KMA have recent experience with performing arts venues including projects in Burbank, Culver City, Livermore, and Thousand Oaks, as noted in their proposal (Attachment “C”). KMA services would significantly increase the likelihood of a successful partnership with INTREPID in the event the City moves forward with their proposal.

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MEETING DATE: May 13, 2015

PREPARED BY: Jim Gilliam DEPT. DIRECTOR: Larry Watt

DEPARTMENT: City Manager’s Office CITY MANAGER: Larry Watt

SUBJECT: Council discussion and direction regarding Intrepid Theater Company’s proposal to build a performing arts theater on the theater pad (Lot 16) at the Encinitas Ranch Town Center. RECOMMENDED ACTION:

Direct staff to enter in to lease negotiations with Intrepid Theatre Company to build a performing arts theater on Lot 16 at the Encinitas Ranch Town Center and pending successful negotiations, bring back proposed lease agreement for Council consideration within 90 days. STRATEGIC PLAN: This item addresses the Arts and Culture Intent Motion, “A strategy to develop the Theater Pad,” and would impact the Strategic Plan due to this Council action. FISCAL CONSIDERATIONS: If negotiation discussions are approved by Council, fiscal impacts will be determined during negotiations and be brought back to Council if a mutually agreeable lease is developed. BACKGROUND: The Encinitas Ranch Specific Plan, adopted on September 28, 1994, called for the development of “a cultural center within the City of Encinitas with facilities such as theaters, an amphitheater, and a museum (section 2.2.5).” The Specific Plan Development Agreement set aside a .7 acre parcel (Lot 16) in the Encinitas Ranch Town Center for the development of a performing arts theater. The theater pad would allow for a building not to exceed 15,000 sq. ft. The land for the performing arts theater was originally owned by the Carltas Company and Zelman Development Company, and was to be dedicated, or given, to the theater organization that can successfully fund and build a theater on the parcel. To this end, the Poinsettia Center for the Arts was the project first slated for the theater pad but was unsuccessful in raising the funds necessary to build the theater and instead, relocated to a theater in Oceanside. The Development Agreement further stated that if the Carltas Company and Zelman Development Company was unable to secure a theater company to build a performing arts theater on the site, ownership of the theater pad would then pass to the City of Encinitas. An irrevocable offer of dedication was granted to the City of Encinitas, Doc #2001-0536902, recorded on July 31, 2001 (hereinafter referred to as IOD). The IOD dedicates in fee to the City

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of Encinitas, Lot 16 of Map No. 13333, City of Encinitas Tract No. 94-066. The City of Encinitas has the option of accepting this dedication but has not yet accepted the offer of dedication. With the intended dedication of the theater pad to the City of Encinitas, the City took on the challenge to locate a theatre company to fund and build the theater. In 2004, the City entered into discussions with the North Coast Repertory Theatre, who proposed building a 300 seat main stage theater and a 99 seat black box performance space. Initial architectural plans and a draft lease agreement were developed but discussions ended when the North Coast Repertory Theater decided to stay in Solana Beach. In October 2005, the Commission for the Arts began a search process by mailing letters of interest to 165 theater companies from throughout San Diego County. The letter sought to identify a company that 1) had an interest in locating to the City of Encinitas, and 2) had the capacity to fund and build a performance theater on City of Encinitas-owned land. An Ad Hoc committee evaluated the responses and Miracle Theater Productions was determined to be the most promising proposal for a long-term partnership with the City. On August 23, 2006, a presentation was made to the City Council by Miracle Theater Productions who proposed to enter into a land lease agreement with the City and build a performing arts theater at their expense. The proposal outlined the development of a multi-use entertainment and performing arts venue, named Encinitas Stages, that would include five (5) separate performance stages, a restaurant, support areas such as dressing rooms, offices, box office, and indoor and outdoor exhibition space for the visual arts. After months of negotiations, discussions ended when Miracle Theater Productions was unable to secure a loan for the project (they proposed to use the land as collateral but this was not legally possible). In 2008, discussions with the North Coast Repertory Theater restarted but once again they determined to stay in Solana Beach and build a new theatre in a proposed parking structure near the Solana Beach train station. That project was eventually terminated due to significant challenges. IRREVOCABLE OFFER TO DEDICATE: On September 23, 2009, the City Council approved revisions to the IOD, per resolution # 2009-47. On March 16, 2010, an amendment to the IOD was recorded in the County of San Diego, Doc# 2010-0130095. The amendment to the IOD provides additional options for use or sale of Lot 16, the performing arts theater. The options/changes are as follows:

1) Develop as a community-oriented use only 2) Develop with another allowed use in addition to a community-oriented use 3) Allow the community-oriented use to be located elsewhere within the city on a

property as a result of Lot 16 being sold or traded at the discretion of the City. If Lot 16 is sold, the value is based on 10,000 square feet of commercial building area

4) Include a mechanism for the owners of the properties abutting Lot 16 (Lot 15 and Lot 17 of Map 13333) and the owners of at least fifty one percent (51%) of the total land area within the shopping center to consent to the development of Lot 16 with anything or in addition to a community-oriented use

ALLOWED USE: The theater pad in the Encinitas Ranch Town Center is zoned ER-C, which allows several different use types. In short, permitted uses cover a broad range of typical commercial uses: retail, office, medical, theaters and places of public assembly, personal services, restaurants (no alcohol), etc. Uses permitted conditionally with a major use permit include automotive uses,

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churches, hotel/motel, restaurant (w/ alcohol), storage, commercial parking lot, etc. Uses permitted conditionally with a minor use permit include auto/truck sales/rental, car wash, bar, home improvement center, recording studio. Since the property is located within the Coastal Zone, a Coastal Development Permit would be required along with Design Review. Generally, permit processing time for such a commercial property ranges from six to twelve months and potentially longer if the application includes a use permit. ANALYSIS: The City has a role to play in the cultivation and support of its cultural resources. Building a theater addresses the first goal of the 2002 Arts Master Plan, to “make the arts available to all Encinitas citizens.” The Arts Master Plan calls for “the development of a multi-use performing arts space.” The Commission for the Arts 2002 survey, with responses from 601 residents, concluded:

1) What do you and your family enjoy most: live theater (72%--highest response) 2) Which venues should be encouraged in Encinitas: performing arts center (66%--

highest response) The city is currently updating the Arts Master Plan that will include a Feasibility Study/Needs Assessment for arts facilities to include short-term, long-term and public/private partnerships. INTREPID PROPOSAL: On January 21, 2015, Intrepid Theatre Company sent a proposal to the City Council to build a performing arts theater, at their expense, on Lot 16 (Attachment A). The proposal includes the following:

1) A two-phased approach to establish a best-in-class community based theater facility in Encinitas. Phase One is to build a small 130 seat theater within the next 12-18 months. Phase Two is to build out a larger theater complex that will encompass the existing 130 seat building and will include maximizing the full potential of the space with an additional 300-400 seat theater. The timeline for that is six to eight years.

2) For Phase One, Intrepid will construct a 130 seat theater including professional-grade lighting, sound, staging and audience accommodations. Funding for this community theatrical hub will be supported by a $350,000 capital campaign launching in 2015.

3) A request that the City will bring the utilities into the building and cover monthly utility costs as part of their overall site management spending. The cost to bring the utilities to the property is yet to be determined. Estimated annual utility cost for the theater is $11,000 based on a comparison of two theaters of similar size.

4) Intrepid will allocate 25-30% of the year to providing performance space to local Encinitas arts organizations.

In a letter to the Mayor and City Council dated April 6, 2015 (Attachment B), Intrepid requested a lease with the following terms:

1) 55 year lease at the sum of $1 per year payable to the City of Encinitas 2) Construction of a performing arts theater, not to exceed 15,000 square feet, solely at the

cost of Intrepid Theatre Company 3) Within the span of the lease, Intrepid will work with the city to construct both Phase One

and Phase Two of the facility. Intrepid commits to seeking input from the City with respect to design and features desired to meet the needs of the broader Encinitas arts community.

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4) The City commits to assisting Intrepid with achieving required approvals and permits in an expedient manner

5) Should the City and Intrepid be unable to reach fair and reasonable renewal terms at the end of the lease, Intrepid would be compensated fairly and appropriately for their investment to date in the theater facility

PLANNING DEPARTMENT REVIEW: The uses discussed are consistent with anticipated uses for the site discussed in the Encinitas Ranch Specific Plan. The proposed ultimate building size of 15,000 square feet is consistent with the building size for a theater as per the land use plan of the ERSP. Existing parking areas would accommodate the proposed 15,000 square-foot building without modification to the parking areas or the language of the ERSP. Anything larger would require a parking study, modification of the ERSP, and potentially modifications to the number of spaces and layout of existing parking areas. ENVIRONMENTAL CONSIDERATIONS: The project would be subject to all of the development standards of the Encinitas Ranch Commercial (ER-C) Zone and would require Design Review and Coastal Development Permit approval by the Planning Commission, followed by departmental review and approval of any required grading and/or building permits. ATTACHMENTS: Attachment A: Intrepid Theatre Company Proposal Attachment B: Intrepid Theatre Company Letter Attachment C: Lot 16 aerial images

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City of Encinitas505 S. Vulcan AvenueEncinitas, California 92024-3633 To Whom It May Concern:

“The arts are not a frill. The arts are a response to our individuality and our nature, and help to shape our identity. What is there that can transcend deep difference and stubborn divisions? The

arts. Art has the potential to unify. The arts do not discriminate. The arts can lift us up.” - Congresswoman Jordan

We at Intrepid Theatre Company believe strongly in the connection between the development of a community and the presence of an artistic center and are pleased to offer our support to the City’s vision to establish a thriving performing arts environment to strengthen the community of Encinitas. We are respectfully submitting the enclosed as a Letter of Intent with the City of Encinitas for use of the vacant pad at the Encinitas Ranch Town Center in Encinitas. Recognizing that the vacant pad is zoned for performing arts, our proposal directly aligns with this statute as well as with the philosophical desires of the Encinitas community to have a performing arts venue for live theatre. The results of the city’s 2002 Arts Master Plan Survey1, with 601 respondents, identified theatre, at 72%, was the top choice for personal enjoyment in the arts by residents. To the question regarding arts venues, a performing arts center, at 66%, was the top choice of residents. This project directly addresses the needs and preferences of Encinitas residents. Who we are

Intrepid has been a proud resident of the City since 2010, when we opened our second season on the campus of San Dieguito Academy. Since 2010, Intrepid has expanded in both programming and subscriber base, consistently posting 70-75% revenue growth year over year. We have served over 35,000 patrons through our mainstage productions alone, with over 65% of those patrons being local Encinitas/Leucadia residents.

Since its inception, Intrepid has cultivated its contributions to the theatre community in meaningful and engaging ways. Each year, we produce a season of critically-acclaimed theatre on our mainstage, consisting of both contemporary and classical plays, as well as musicals.

In addition to our mainstage programming, for the past two years, Intrepid has hosted an annual Staged Reading Series at the Encinitas Library, presenting 12 plays over 12 months that tackle a dynamic and diverse array of themes, stories and perspectives. These readings encourage conversation and community socialization and we are proud to have a 70% retention rate in attendees from one reading to the next.

1 Arts Master Plan, page 42, http://www.encinitasca.gov/modules/showdocument.aspx?documentid=2177

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Over 2,500 patrons have attended the Staged Reading Series and over 80% of this audience calls Encinitas home.

Alongside engaging entertainment, we know that there is also more for us to contribute to our community. Intrepid deeply values education. Our Education Tour takes workshops and 50-minute professional adaptations of Shakespeare plays to public and private schools throughout all of Southern California for students ages 6-18. This program is very popular, with over 80% of schools inviting us back year after year. We have found over and over again that exposure to Shakespeare performances can help both students with learning disabilities and English as Second Language learners to overcome the barriers to academic success. We have served over 55,000 students through this program and are pleased to be working with local foundations to offer these experiences to underfunded schools going forward. In addition to our Education Tour, Intrepid offers after-school youth drama classes and our incredibly successful Camp Intrepid sessions each summer. Camp Intrepid and the after-school programs have served over 275 children since starting these programs two years ago. Again recognizing that there are often financial challenges within families, Intrepid has been supported by the City of Encinitas and the Mizel Family Foundation Community Grant Program to offer $8000 in scholarship monies for students who would like to attend Camp Intrepid. Additionally, we have received private donations towards after-school youth drama class scholarships. Both Intrepid’s productions and educational programming are in demand in this community and we have seen the numbers support our growth. To date, Intrepid has served close to 100,000 patrons. And we are just beginning.

Intrepid’s impact moving forward

Over the years, we have paid attention to our neighborhood supporters and to what keeps bringing guests back through our doors. As Intrepid moves into its next phase of evolution, we are incorporating this feedback into our expanded programming. When we open our new venue, we will be excited to inaugurate the name “Intrepid Theatre Company,” a title we feel better serves our vision of what we will offer to our community. Here is a snapshot of our continued programming as well as the new endeavors we plan to implement under our new roof to support this vision:

• Produce mainstage productions that will include a season of diverse voices and perspectives – comedies, modern dramas, musicals, classics

• Introduce off-night programming, which will include a lecture series that ties into productions, as well as off-night shows

• Produce the Staged Reading Series (12 plays over 12 months)• Continue the successful Shakespeare Education Tour• Provide after-school youth drama classes and programs (for ages 7-18)• Run Camp Intrepid summer sessions (for ages 5-18) • Launch the Professional Theater for Young Audiences Series• Mount play festivals celebrating specific voices in our community, including a Female

Playwrights Festival and a Latino Playwrights Festival• Include special needs-focused after-school theatre classes and camps in addition to our current

educational programs• Celebrate the extraordinary local musical theatre talent with monthly Cabaret nights

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• Explore the individual perspective through the Giving Voice Festival, a combination of workshops, classes, and theatre production focusing on storytelling, solo performance and new original work

• Extend some of our productions to include sensory-friendly performances and performances for the hearing-impaired

• Throw an open house party/town hall twice per year to celebrate the community and solicit feedback on how to continue to be a place of connection

There will be no “dark” nights at Intrepid Theatre Company. Through this array of engaging programming, our theater will be constantly filled with sounds of conversation and connection as we discover more and more ways to involve the community by offering theatrical experiences that enlighten and inspire, that create dialogue and foster understanding. These are the foundations of an artistic stronghold. These are the priorities of an evolved society.

The proposed partnership

As Intrepid matures, we are seeking a venue that will house our evolution. We understand that the City of Encinitas is evolving as well. We share the common goal of bringing conversation into the community through a prioritized development of an artistic center. Intrepid can help the City of Encinitas achieve that goal.

We propose the following partnership:• A two phased approach to establish a best in class community based theatre facility in

Encinitas. Phase One is to build a small 130 seat theatre within the next 12-18 months. Phase Two is to build out a larger theatre complex that will encompass the existing 130 seat building and will include maximizing the full potential of the space with an additional 300 - 400 seat theatre. The timeline for that is 6 to 8 years.

• For Phase One Intrepid will construct a 130 seat theatre including professional-grade lighting, sound, staging and audience accommodations. Funding for this community theatrical hub will be supported by a $350,000 capital campaign launching in April 2015.

• The City will bring the utilities into the building and cover monthly utility costs as part of their overall site management spending.

• Intrepid will allocate 25-30% of the year to providing performance space to local Encinitas arts organizations.

The business case behind the partnership

Not only do the arts have a beneficial impact on the local economy by attracting residents, visitors, and investors, investing in the arts increases social capital2 and community cohesion by:

• creating a venue that draws people together who would otherwise not be engaged in constructive social activity

• fostering trust between participants and thereby increasing their generalized trust of others

2 Social capital refers to connections among individuals - social networks and the norms of reciprocity and trustworthiness that arise from them

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• arts events may be a source of pride for residents in the community, increasing their sense of connection to that community

• increasing the scope of individuals’ social networks• providing an experience for organizations involved to enhance their capacities. Much of this

comes when organizations’ establish ties and learn how to work, consult and coordinate with other organizations in order to accomplish their goals.3

Intrepid supports the local economy. Encinitas is a mecca for small businesses and independent business owners. As a small business ourselves, we understand the importance of receiving support from the community. Recent studies conducted by New Village Arts, a theater company in Carlsbad Village, have found that over 50% of the theatre attendees patronized businesses in the village, either before or after the show, spending between $30-$60 per person. From a broader perspective, the City of San Diego saw over $3.1 million in spending by nonprofit arts and culture audiences in 2010 and over 17,000 jobs created by the arts and culture industry. Solidifying and encouraging these partnerships in the community is a priority for Intrepid, and we are happy to know that our company’s presence would be a major fiscal advantage to the local community as well4.

Intrepid is thrilled with the opportunity to cultivate its arts programming and community engagement through this partnership with the City, a partnership that would solidify the City’s investment in creating a first-class performing arts center in Encinitas. Intrepid is primed to be a cornerstone for the City’s investment.

We look forward to discussing the potential of this partnership with you as well as the artistic potential of the City we all love.

Sincerely,

Christy YaelChristy Yael-CoxProducing Artistic DirectorIntrepid Shakespeare Company

3 Guetzkow, Joshua. 2002. “How the Arts Impact Communities: An introduction to the literature on arts impact studies.” Princeton University.

4 Source: Arts and Economic Prosperity IV, Americans for the Arts 2012

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City of Encinitas505 S. Vulcan AvenueEncinitas, California 92024-3633

April 6, 2015

Dear Mayor and Council Members;

Enclosed please find a request to Approve the Terms of a Lease Agreement with Intrepid Theatre Company for the Development of a Performing Arts Theatre on the Encinitas Ranch Parcel.

Background:

On January 21, 2015 a proposal was submitted to the City by Intrepid Theatre Company to enter in a land lease agreement with the City of Encinitas and build, at the expense of Intrepid Theatre Company, a performing arts theatre on the Encinitas Ranch theatre parcel. The proposal outlines the development of a multi-use venue that would include space to operate mainstage productions, monthly readings, various daytime, after school and summer programs, and community festivals and other social events.

The proposal outlines the following benefits to the community:• The establishment of a permanent professional theatre company in Encinitas• A variety of arts, entertainment and educational programming for the city• Produce mainstage productions that will include a season of diverse voices and perspectives -

comedies, modern dramas, musicals, classics• Introduce off-night programming, which will include a lecture series that ties into productions, as

well as off-night shows• Produce the Staged Reading Series (12 plays over 12 months)• Continue the successful Shakespeare Education Tour• Provide after-school youth drama classes and programs (for ages 5-18)• Run Camp Intrepid summer session (for ages 5-18)• Launch the Professional Theatre for Young Audiences Series• Mount play festivals celebrating specific voices in our community, including a Female Playwrights

Festival and a Latino Playwrights Festival• Include special needs focused after-school theatre classes and camps in addition to our current

educational programs• Celebrate the extraordinary local musical theatre talent with monthly Cabaret nights• Explore the individual perspective through the Giving Voice Festival, a combination of workshops,

classes, and theatre production focusing on storytelling, solo performance and new original work. Program participants include professional artists as well as local community residents.

• Extend some of our productions to include sensory-friendly performances and performances for the hearing-impaired

• Continue our partnerships with Encinitas elementary, middle, and high schools and expand programs to include a ‘free ticket’ field trip to see a theatre production once per year

• Offer discounted tickets to local military and military families• Throw an open house party/town hall twice per year to celebrate the community and solicit feedback

on how to continue to be a place of connection• Intrepid will allocate 25-30% of the year to providing performance space to local Encinitas arts

organization at a discounted rate

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We request a lease arrangement with the following terms:

1. 55 year lease at the sum of $1 per year payable to the City of Encinitas2. Construction of a performing arts theatre, not to exceed 15,000 square feet, solely at the cost of

Intrepid Theatre Company3. City of Encinitas to bring the utilities into the building and cover monthly utility costs as part of their

overall site management spending4. Within the span of the lease, Intrepid will work with the city to construct both Phase 1 and Phase 2 of

the facility. Intrepid commits to seeking input from the City with respect to design and features desired to meet the needs of the broader Encinitas Arts Community. The City commits to assisting Intrepid with achieving required approvals and permits in an expedient manner.

5. Should the City and Intrepid be unable to reach fair and reasonable renewal terms at the end of the lease, Intrepid would be compensated fairly and appropriately for their investment to date in the theatre facility

The above lease terms have minimal financial impact or risk for the City of Encinitas and significant return for the constituents.

I look forward to meeting with you to review the above and proceed with the development of a mutually beneficial lease arrangement.

Sincerely,

Christy YaelProducing Artistic DirectorIntrepid Theatre Company

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Lot 16, Performing Arts Theater Pad, Encinitas Ranch Town Center

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EXCLUSIVE NEGOTIATING AGREEMENT

TO POSSIBLY LEASE REAL PROPERTY

1. PARTIES AND DATE.

This exclusive negotiating agreement is made on this __day of ______, 2015, by and

between the City of Encinitas, a municipal corporation organized and established pursuant to the

laws of the State of California, hereinafter referred to as “City,” and Intrepid Theatre Company, a

________________________________, having its principal office at

____________________________, ____________, CA _____, hereinafter referred to as

“Developer,” and together both parties sometimes collectively hereinafter referred to as

“Parties,” subject to the terms and conditions set forth below.

2. RECITALS.

2.1 City possesses rights to obtain title in certain real property in the City of

Encinitas, California, a .7 acre parcel (Lot 16) located in the Encinitas Ranch Town Center, and

more specifically, identified as parcel ___________ in the records of the San Diego County

Assessor (the “Property”). The Property is shown on the site map and parcel map, Exhibit “A,”

attached hereto and incorporated herein by this reference.

2.2 The Parties anticipate that at some point in the future, City may lease the

Property to Developer for the development of a performing arts facility complete with related

uses subject to certain terms and conditions (the “Lease”). Said facility would provide a

performing arts venue complete with related uses as generally described in Exhibit “B,” attached

hereto (the “Project”).

The Parties now desire to execute this Agreement to obligate each other to

negotiate exclusively with the other party for purposes of potentially executing the Lease.

3. TERMS.

3.1 Period of Good Faith Exclusive Negotiations; Term and Obligations.

Parties in good faith agree to negotiate exclusively with each other for a period

not to exceed 180 days from the date of execution of this Agreement for purposes of anticipating

and planning the potential lease. The obligation to negotiate in good faith requires Parties to

communicate with each other regarding those issues related to the potential execution of the

Lease including exchanging information as necessary through meetings, telephone conferences,

and written correspondence. During the said 180 day period, the City shall not consider leasing

or otherwise committing the Property to another individual or entity. Developer, and its

affiliated companies, partnerships, or corporations shall not consider or entertain offers to lease

or purchase other property to develop facilities the same or substantially similar to the Project

within a 100-mile radius of the Property.

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3.2 Termination

This Agreement shall automatically terminate upon the expiration of the 180 day

term identified in section 3.1 of this Agreement. The City shall have the right to terminate this

Agreement at any time after providing the Developer with 30 days written notice communicating

the City’s intent to terminate. If this Agreement is terminated, City and Developer shall return to

each other all information and materials which have been received from the other party pursuant

to this Agreement.

3.3 Parties Assume Loss and Risks Associated with Executing this Agreement

and other Reliance.

The Parties acknowledge and agree that conditions precedent deemed necessary to

effectuate the Lease by the respective Parties may not occur and thereby the City may not lease

the Property to Developer. As such, Parties acknowledge and agree that any past, present or

future time, resources or expenditures made in reliance upon this Agreement or the anticipation

of Developer acquiring rights to the Property (via leasehold, license or any legal or informal

commitment) shall be at the sole, absolute and exclusive risk of the party expending the same

and the other party shall not be held liable or responsible.

4. GENERAL PROVISIONS

4.1 Governing Law.

This Agreement shall be governed by and construed in accordance with the laws

of the State of California.

4.2 Good Faith Efforts.

The Parties represent, agree and covenant that they will in good faith use their

respective best efforts to comply with the terms of this Agreement.

4.3 Assignment.

No assignment of obligations herein may be made by either party without the

express written consent of the Parties.

4.4 Integration Clause.

This Agreement constitutes the entire agreement of the Parties regarding the

subject matter contained herein and shall not be effected nor interpreted by any independent

communications or written instruments.

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4.5 Costs and Attorneys’ Fees Regarding Negotiating and Executing this

Agreement.

The Parties agree that each of them shall be responsible for paying their

respective costs and attorneys’ fees with respect to all aspects of negotiating and executing this

Agreement.

4.6 Counterparts.

This Agreement may be executed in counterparts, each of which shall be deemed

acceptable as original documents.

4.7 No Recordation.

In no event may this Agreement or any memorandum thereof be recorded against

the Property.

4.8 Indemnification.

Except as to the sole negligence, active negligence or willful misconduct of City,

Developer shall defend, indemnify and hold the City, its elected officials, and employees,

harmless from any and all loss, damage, claim for damage, liability, expense or cost, including

reasonable attorneys’ fees, which arise from the performance of work under this Agreement by

developer or any of the Developer’s employees, agents or consultants and from all claims by

developers, employees, agents or consultants for compensation for services rendered to

Developer in the performance of the Agreement, notwithstanding that City may have benefited

from their services. This indemnification provision shall apply to the acts or omissions, willful

misconduct or negligent conduct, whether active or passive, on the part of Developer’s

employees, consultants or agents. The Parties expressly agree that any payment, attorneys’ fees,

costs or expense City incurs or makes to or on behalf of any injured employee under the City’s

self-administered workers’ compensation is included as a loss, expense or cost for the purposes

of this section if caused by Developer’s negligence, and that this section shall survive the

expiration or early termination of this Agreement. Throughout the duration of this Agreement,

the City asserts and affirms that it is not currently in negotiation with any other party regarding

the Property.

4.9 Amendments.

This Agreement may be amended or supplemented only by written documents

signed by both Parties.

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4.10 Notices and Requests. Notices and requests to City shall be delivered at

the following address served upon City or Lessee or any person hereafter authorized by either in

writing to receive such notice or may be served by certified letter addressed to the appropriate

address hereinafter set forth or to such other address as City and Lessee may hereafter designate

by written notice.

Intrepid Theatre Company

City Manager ______________________

City of Encinitas ______________________

505 S. Vulcan Avenue ______________________

Encinitas, CA 91924 ______________________

IN WITNESS WHEREOF City and Developer have hereby executed this

Agreement on the date first written above.

CITY OF ENCINITAS

A Municipal Corporation

Date: ____________________ By_____________________________

CITY MANAGER

Date: ____________________ Attest_____________________________

KATHY HOLLYWOOD, City Clerk

LESSEE

INTREPID THEATRE COMPANHY

Date: ____________________ By_____________________________

Date: ____________________ By_____________________________

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555 West Beech St., Suite 460 SAN Diego, CALIFORNIA 92101 PHONE: 619 718 9500 FAX: 619 718 9508

WWW.KEYSERMARSTON.COM 15107ndh 99900.000.003

ADVISORS IN: REAL ESTATE

AFFORDABLE HOUSING ECONOMIC DEVELOPMENT

SAN FRANCISCO A. JERRY KEYSER

TIMOTHY C. KELLY KATE EARLE FUNK DEBBIE M. KERN

REED T. KAWAHARA DAVID DOEZEMA

LOS ANGELES

KATHLEEN H. HEAD JAMES A. RABE

GREGORY D. SOO-HOO KEVIN E. ENGSTROM

JULIE L. ROMEY

SAN DIEGO PAUL C. MARRA

ADVISORS IN: REAL ESTATE

AFFORDABLE HOUSING ECONOMIC DEVELOPMENT

SAN FRANCISCO A. JERRY KEYSER

TIMOTHY C. KELLY KATE EARLE FUNK DEBBIE M. KERN

REED T. KAWAHARA DAVID DOEZEMA

LOS ANGELES

KATHLEEN H. HEAD JAMES A. RABE

GREGORY D. SOO-HOO KEVIN E. ENGSTROM

JULIE L. ROMEY

SAN DIEGO PAUL C. MARRA

June 12, 2015 Mayor Kristin Gaspar City of Encinitas 505 Vulcan Avenue Encinitas, CA 92024 Re: Proposal for Consulting Services

Intrepid Theatre Company Dear Mayor Gaspar: Thank you for taking the time to meet with me recently to discuss the Intrepid Theatre Company (Intrepid) proposal. This letter presents the Keyser Marston Associates, Inc. (KMA) proposal to assist the City of Encinitas (City) with financial analysis and negotiations of a lease agreement with Intrepid. As background, Intrepid proposes to lease a 0.7-acre City-owned parcel in the Encinitas Ranch Town Center for development of a performing arts venue. Intrepid has presented initial business terms for the City’s consideration, including conceptual plans for phased development of two theatres comprising 130 seats and 300-400 seats, respectively. City officials have requested KMA’s assistance in evaluating the Intrepid proposal, preparing analyses of financial capacity and projected operating income and expenses, and negotiating appropriate business terms for a lease and/or development agreement. To meet this objective, KMA proposes the following work program: 1. Participate in a kickoff/information exchange meeting with the City and Intrepid to review their

development plans, financing approach, and historical operating performance 2. Identify any additional data and documents required from Intrepid, including project description,

development budget, and projected operating income and expenses 3. Conduct independent market and industry research to verify typical development budgets and

operating income and expense parameters for comparable theatres 4. Prepare a preliminary financial pro forma and cash flow for the proposed project and review the

project feasibility conclusions with the City 5. Recommend appropriate business terms for the City/Intrepid agreement(s) 6. Participate in negotiation sessions (meetings and/or teleconferences) with the City and Intrepid

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15107ndh 99900.000.003

K E Y S E R M A R S T O N A S S O C I A T E S, I N C

KEYSER MARSTON ASSOCIATES, INC. (KMA) has one of the most prominent real estate advisory practices on the West Coast, with experience in all types of commercial and residential real estate. Founded in 1973, the firm has served over 700 clients on more than 2,000 projects. Representative public sector clients include nearly every major municipality in California, cities, ports and military bases throughout the west, county and special districts, as well as public and private colleges and universities. While we are best known for our role as advisors to public sector and institutional clients, our extensive private sector practice includes major corporations, financial institutions, life insurance companies, law firms, landowners and developers. A unique strength of KMA is the depth, continuity and availability of our principals. Our principals bring an average of more than 20 years of practical experience in working with business and government, and provide convenient and personal service to our clients. KMA provides services through its three offices in California: San Francisco Los Angeles, and San Diego.

San Francisco Ferry Building

KMA's principals are frequent speakers to industry groups such as the Urban Land Institute, International Council of Shopping Centers, League of Cities, and other similar organizations. KMA's principals have served on the Governor's Task Force on Military Base Reuse and have advised the California Legislature's Committee on Economic Development.

S E R V I C E S

♦R E A L E S T A T E Market Assessment Financial Feasibility Strategic Plans Public/Private Partnerships

♦A F F O R D A B L E H O U S I N G ♦E C O N O M I C D E V E L O P M E N T ♦F I S C A L I M P A C T

V I S I T U S A T : W W W . K E Y S E R M A R S T O N . C O M

SAN FRANCISCO Keyser Marston Associates, Inc. 160 Pacific Avenue, Suite 204 San Francisco, CA 94111 (415) 398-3050 fax: (415) 397-5065

LOS ANGELES Keyser Marston Associates, Inc. 500 South Grand Avenue, Suite 1480 Los Angeles, CA 90071 (213) 622-8095 fax: (213) 622-5204

SAN DIEGO Keyser Marston Associates, Inc. 555 West Beech St., Suite 460 San Diego, CA 92101 (619) 718-9500 fax: (619) 718-9508

Petco Park, San Diego

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15107ndh 99900.000.003

PAUL C. MARRA, MANAGING PRINCIPAL

Mr. Marra is Managing Principal of Keyser Marston Associates, Inc.’s San Diego office. He has 30 years experience in real estate market and financial evaluation, fiscal and economic impact assessments, and public/private partnerships. KEY ROLE Mr. Marra provides advisory services to public agencies and private clients in Southern California. His areas of concentration include: Feasibility analyses for market-rate and

affordable housing Assessment of development potential

and revitalization strategies Developer solicitation and negotiations Affordable housing policy and

transactions

SPECIFIC AREAS OF EXPERTISE Mixed-Use And Transit-Oriented Development Mr. Marra analyzes feasibility for housing developments ranging from high-rise condominiums to in-fill and mixed-use developments. He has assisted cities and transit districts with developer selection and transaction structuring for multi-family and mixed-use developments at transit stations. Mr. Marra led the financial feasibility analyses and developer negotiations for the Mercado del Barrio mixed-use development near the Barrio Logan trolley station. Economic Development Mr. Marra assists cities and urban planners in evaluating the potential for new in-fill and mixed-use development in older commercial districts, including preparation of implementation strategies and infrastructure financing plans. He recently assisted the City of Imperial Beach in updating zoning for its commercial corridors, and worked with Southwest Riverside County cities to identify mixed-use development opportunities along the Highway 395 Corridor. Public/Private Partnerships Mr. Marra has assisted cities and transit districts with developer selection and transaction structuring for multi-family, commercial, hospitality, and mixed-use developments. His projects include “town center” entertainment retail developments such as the proposed University Village “main street” district

in San Marcos; repositionings of regional malls in Escondido and San Diego; and ground lease negotiations for coastal resort hotels in Imperial Beach and Oceanside.

Fiscal And Economic Impact Mr. Marra analyzes fiscal impacts for large-scale developments and Specific Plans/General Plan. He prepared nexus analyses for the Downtown San Diego park and recreation development impact fee and the City of Carlsbad affordable housing fee. He managed the formation of the first Infrastructure Financing District (IFD) in the State, at Legoland Park in Carlsbad. PROFESSIONAL CREDENTIALS

Mr. Marra served as the 2012 President of Lambda Alpha International San Diego chapter, and he is a member of the Urban Land Institute, American Planning Association, San Diego Housing Federation, and Citizens Coordinate for Century 3 (C3). He chaired the 2014 Urban Land Institute (ULI) Technical Assistance Panel (TAP) for the Baja California Center property in Rosarito, Mexico. Mr. Marra graduated Phi Beta Kappa from The Johns Hopkins University with a B.A. degree in sociology. He studied in Latin America as an exchange student and maintains his fluency in Spanish.

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KEYSER MARSTON ASSOCIATES, INC. HOURLY FEE SCHEDULE

______________________________________________

2014/2015 A. JERRY KEYSER* $280.00 MANAGING PRINCIPALS* $280.00 SENIOR PRINCIPALS* $270.00 PRINCIPALS* $250.00 MANAGERS* $225.00 SENIOR ASSOCIATES $187.50 ASSOCIATES $167.50 SENIOR ANALYSTS $150.00 ANALYSTS $130.00 TECHNICAL STAFF $95.00 ADMINISTRATIVE STAFF $80.00

Directly related job expenses not included in the above rates are: auto mileage, parking, air fares, hotels and motels, meals, car rentals, taxies, telephone calls, delivery, electronic data processing, graphics and printing. Directly related job expenses will be billed at 110% of cost. Monthly billings for staff time and expenses incurred during the period will be payable within thirty (30) days of invoice date.

* Rates for individuals in these categories will be increased by 50% for time spent in court testimony.

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