October

24, 2013 Mr. Roy Gelineau, City Solicitor City of Beverly 191 Cabot Street Beverly, MA 01915 Dear Mr. Solicitor: My review of the proposed lease between the City of Beverly and Beverly Waterfront, Inc. raises several questions for which I would request clarification before I can feel comfortable casting a vote on this matter. This is a complicated document and it would be my recommendation that the City Council engage independent outside counsel to evaluate the terms of the lease in a similar capacity as the Councils independent financial analyst and provide an interpretation to the Council. Until such time that is possible, I would request the administrations point of view in writing on the following questions: 1. With litigation regarding this property still pending and impacting the issuance of the Chapter 91 Waterways licenses and with legislative approval required by Article 97 having not been secured, what is the citys benefit for executing the lease in a manner that runs contrary to the RFP stating the city will sign a lease agreement with the preferred developer after all permits and approvals have been obtained for the development and all appeal periods have expired without an appeal having been filed or otherwise resolved.? By doing so, the City Council is being asked to approve a lease that does not contain all of the obligations of the city for compliance with DEP regulations and the potential associated costs. 2. What is the basis of the $30,000 annual rent? When was the last independent appraisal of the property conducted and what was the fair market value of the property established by this appraisal? Will the entire parcel of land be subject to property taxes or will parking areas be excluded? What is the anticipated annual property tax received by the city? 3. Why has the Administration chosen an annual rent escalator tied to the Consumer Price Index? Given the scarcity of waterfront property, is it fair to assume that the CPI is the most appropriate proxy for changes in land value? Does the CPI approach potentially subject the city to decreases in the annual rent payments? Why was this preferred to a periodic revaluation method? 4. What is the proposed process for obtaining the liquor license being guaranteed to the Tenant? What results if the license cannot be obtained by the Tenant?

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What is the Administrations view of the ability for the Tenant to retain the rents paid for the subleasing of the area required for the waterdependent business? This annual rent would very likely offset the rent payments made to the city by the Tenant. In essence, a 2,000 square foot office could command a higher rent than the city is charging for a ground lease of nearly an acre of waterfront property. Related to the waterdependent business, what are the implications of the Tenant and/or the city not being able to secure a suitable tenant for this purpose? If, after 90 days, a suitable subtenant has not been found and the city exercises its right to find a sub tenant, does the Tenant lose any right to the rent from the sublease? What is the anticipated cost to the city to market the property to attract a subtenant? Does the city envision that the enforcement of parking required by the lease from June 15September 15 will be performed by an employee of the city, a police detail or an independent security firm? What is the Administrations estimate of the cost of that enforcement to the city? What is the anticipated cost for installation of parking meters? The Rent Commencement Date is specified to be at the point the Tenant attains its temporary or permanent Certificate of Occupancy. Why is the city forgoing all rent and taxes during the construction period? With regard to the slips being made available at the city marina, can you clarify whether the lease guarantees the ability for the Tenant to rent the slips and retain the rental fees or will the proceeds of the rentals come to the city? Are there currently marina slips available for rent to the general public or will this action displace members of the public currently renting or on a waiting list? Will those slips be for the personal use of the Tenant or will they be reserved for use by restaurant patrons with associated parking time limits? Was the exclusive available of slips at the marina included in the citys RFP? Under the terms of the lease, the city retains liability for the apron area. If an incident involves a known patron of the restaurant, what is the citys liability? Will the citys interest in the property be used as security for financing or are there any circumstances under which the citys interest would be subordinated to a lender or other party? How would the city intend to fulfill its obligation to provide parking for use by the tenant on another lot or parking garage within such proximity to the Premises so as to assure that the Tenant is still in compliance with all of its zoning requirements if spaces beyond the six WDU are required upon renewal of the 10 year DEP Parking Permit? Section 12 (d) appears to be a very specific clause to sanction the ability to transfer or sublet to a whollyowned subsidiary of the Tenant. Why is this included? Does the Administration have any advance knowledge that Beverly Waterfront Inc. intends to transfer or assign the lease to another one of Mr. Leones operating companies? Are there any provisions preventing individuals currently representing the citys interests in this matter from holding an interest in the current or future assignees of the lease? Is it standard practice in leases of this nature to include the ability for the Tenant to recover a multiple of costs as consideration for a lease assignment or sublease?

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 Thank you in advance for your assistance in this matter. I will look forward to your response. Sincerely, Brett Schetzsle Ward 6 City Councilor Cc: Beverly City Council Mayor William Scanlon