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HomeMy WebLinkAbout11 LEASE EXTENSIONAgenda Item 11 J~ 1 ~T j~ l (~1 °~ Reviewed: r, 1-1 ~~J~r~. ~1 ~ 1-1 J~~..~~r~ V J~ 1 City Ntanager -- Finance ©irector MEETING DATE: FEBRUARY 21, 2012 TO: JEFFREY C. PARKER, CITY MANAGER FROM: CITY MANAGER'S OFFICE SUBJECT: OFFICE LEASE EXTENSION FOR 275 CENTENNIAL WAY, SUITE 104 AND SUITE 104 A SUMMARY Authorization is requested to execute a lease extension for two suites located at 275 Centennial Way to provide supplemental office space for city hall employees and certain operational functions. REC4MMENDATlflN It is recommended that the City Council authorize the City Manager to execute a lease extension for Suites 104 and 104 A at 275 Centennial Way, consistent with the general terms identified in this Agenda Report and subject to final review and approval of the lease extension by the City Attorney. FISCAL IMPACT Rent during the extension term of the lease would be $3,661 per month with total annual rent of $43,932. The Tustin Community Redevelopment Agency previously funded this expense in its FY 2011-12 RDA budget and had appropriated adequate funds for this lease obligation. The lease, as an RDA obligation necessary for administrative support of the administrative functions of the Agency, has been included in the Enforceable Obligation Payment Schedule {FOPS} and on the Initial Recognized Obligation Payment Schedule ~IROPS} and will be included in any future administrative budget transmitted to the Oversight Board. The Redevelopment Obligation Retirement fund for the Town Center, South Central, and MCAS Tustin project areas will fund this continued administrative obligation unless otherwise directed by the Oversight Board in the future, at which point reconsideration andlor termination would be reviewed. Agenda Report -Lease Extension February 21, 2012 Page 2 BACKGRC}UND In 2006, it was determined that current Tustin Legacy development activi#y and other program demands affected a number of City operating departments placing a considerable space constraint at City Hall on staff work spaces and significantly affected the ability of staff to effectively operate. As a result, the City entered into a lease for office space located across the street from City Hall at 275 Centennial Way. The original lease had a three year term, with a two year extension period which expires February 29, 2012. Given the extent of enforceable obligations of the former Tustin Community Redevelopment Agency {"Agency"), it is expected that additional office space will continue to be necessary, at least on a temporary basis, while the Successor Agency to the Agency unwinds redevelopment activities and continues to meet or modify its enforceable obligations, based on direction of the Oversight Board. In any event, it has been the Agency's and City's position that adequate office space for staff is a necessary administrative enforceable obligation that was adopted originally as part of the Fiscal Year 2011-12 budget and will be necessary for the time being. The current owner's representative for the office building at 275 Centennial Way, Kimco Realty Corporation, has recently modified its initial offering to extend the lease after a good deal of negotiation by staff. The following is a summary of the major terms: The term of the lease will be for a period of one year, with the ability of the City as the Successor Agency to terminate with a sixty {60) day notice. 2. The gross rent per month for the first year will be $1.75 per square foot {or $21.00 SFIYR) payable in advance in equal monthly installments of $3,661 beginning March 1, 2012. There will be no additional common area charges. Landlord is responsible for providing heat and air conditioning services, electricity {within limits of the lease}, building janitorial services and building maintenance services. Staff has reviewed current market comparables for Class B and C office space in Tustin. flffce comparables have been found in a broad range not in several cases inconsistent with the rent level proposed at the subject property. With the specific services provided by the owner, which would typically result in additional common area charges that can significantly escalate the gross rent expense for a tenant, the rent proposed seems reasonable and will not result in the City having to incur any additional expenditures for janitorial services or other common area charges. The City has not yet received the final lease extension from the owner's representative, but has received a written proposal which is the basis of the anticipated lease Agenda Report - lease Extension February 21, 20112 Page 3 extension. Given the timing related to termination of the current lease (February 29#''), staff is requesting that the Council allow the Ci#y Manager to execute any final lease extension consistent with the general terms summarized in this report, subject to final review and approval of the City Attorney prior to execution. f Christine Shingleton Assistant Executive director