Resolution authorizing the Director of Property to execute a Second Amendment to a Lease between the City and La Cocina, Inc. related to the lease of City-owned property located at 101 Hyde Street to extend the lease for an additional five years, from January 1, 2027, for a total term of July 9, 2019, through December 31, 2031, with no change to the annual base rent of $12,000; make certain modifications to the Second Amendment to Lease and take certain actions in furtherance of this Resolution, as defined herein; and to authorize the Director of Property to enter into amendments or modifications to the lease that do not materially increase the obligations or liabilities to the City and are necessary to effectuate the purposes of the lease or this Resolution.

This resolution authorizes a Second Amendment to the Lease between the City and La Cocina, Inc. for the property at 101 Hyde Street (Assessor’s Parcel Block No. 0346, Lot No. 003A). The amendment extends the lease for an additional five years, from January 1, 2027, to December 31, 2031, making the total lease term from July 9, 2019, through December 31, 2031. The annual base rent remains $12,000, with no change to the 5% percentage rent of net income, which La Cocina has historically not paid due to operating at a loss.

Key Financials & Terms:

• The City will continue to pay for standard utilities, estimated at $123,000 over the five-year extension (based on FY 2024-25 costs of $21,894 and 3% annual escalation).
• This results in a projected net cost to the City of approximately $63,000 over the extension term, as the $60,000 in base rent collected is less than the utility costs.
• The City previously reimbursed La Cocina $1,465,000 for tenant improvements and $106,528.02 for sidewalk accessibility upgrades.
• The Second Amendment includes a new early termination clause, allowing the City (through MOHCD) to end the lease any time after the second year of the extension with 365 days' notice.

Background & Purpose: The 7,500 square-foot property was acquired by the City in 2016 for future affordable housing development, with a developer contributing $5 million for housing construction and $1 million for temporary use. La Cocina, a non-profit supporting low-income food entrepreneurs, operates a shared-use commercial kitchen and light manufacturing space. The Mayor's Office of Housing and Community Development (MOHCD) has not yet prioritized the site for affordable housing development but has committed to issuing a Request for Qualifications (RFQ) for a development team within two years of this lease extension.

This lease extension ensures that La Cocina, Inc. continues to operate its food business incubator and commercial kitchen at 101 Hyde Street in the Tenderloin. This provides vital support for low-income food entrepreneurs and offers community programming, preventing the site from becoming vacant and potentially attracting blight. However, the arrangement is a net cost to the City, as the City's utility payments exceed the rent collected, effectively subsidizing the non-profit's operations while the site's long-term affordable housing development remains stalled.

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