HomeMy WebLinkAbout07 275 CENTENNIAL WAY OFFICE LEASE EXTENSIONAGENDA REPORT
Agenda Item
Reviewed:
City Manager
Finance Director
7
MEETING DATE. FEBRUARY 19 2013
TO JEFFREY C PARKER, CITY MANAGER
FROM: SUCCESSOR AGENCY
SUBJECT OFFICE LEASE EXTENSION FOR 275 CENTENNIAL WAY SUITE 104
AND SUITE 104A
SUMMARY
Authorization is requested to execute a lease extension through June 30 2016 for two
suites located at 275 Centennial Way to provide supplemental office space for
Successor Agency employees and certain operational functions.
RECOMMENDATION
It is recommended the City Council, acting as the Successor Agency to the former
Redevelopment Agency (RDA) authorize the City Manager to execute a lease
extension for Suites 104 and 104A 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 monthly rent will not increase during the lease term and
the Landlord is waiving the first three months of rent. The lease, as an RDA obligation
necessary for operational support of the Agency has been included in the previous
Recognized Obligation Payment Schedules (ROPS) and will be included in the 13 -14A
ROPS (4th ROPS) transmitted to the Oversight Board The Redevelopment Obligation
Retirement fund will fund this continued operational obligation unless otherwise directed
by the Oversight Board in the future, at which point reconsideration and /or termination
would be reviewed
BACKGROUND
In 2007 the City entered into a lease for Redevelopment Agency office space located
across the street from City Hall at 275 Centennial Way The original lease had a three
Agenda Report — Lease Extension
February 19 2013
Page 2
year term with lease extension options. The current one year extension expires
February 28 2013
Given the extent of Successor Agency enforceable obligations, additional office space
continues to be necessary while the Successor 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 operational 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
negotiation by staff The following is a summary of the major terms.
1 The term of the lease will be for a period of three years and four months (40
months) with the ability of the City as the Successor Agency to terminate the lease
after twelve months with a ninety (90) day notice.
2. The Landlord is waiving the first three (3) months of rent for the renewal term.
Beginning June 1 2013 the annual gross rent per month will be $1 75 per square
foot, $21 00 SF/YR, payable in advance in equal monthly installments of $3 661
The lease rate of $3 661 per month is the same amount the City is currently paying.
Factoring in the three months of waived rent, the effective rate will be $1 62 per
square foot, $19 425 SF/YR. 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
3 If it becomes necessary to terminate the lease during the first year (March 1 2013 —
February 28 2014), the City will be responsible for paying the entire year of rent,
including the three months of waived rent. If it becomes necessary to terminate the
lease during the second year (March 1 2014 — February 28 2015) the City will
reimburse the Landlord for two months of waived rent. If the lease is terminated
between during the third year (March 1 2015 — February 29 2016), the City will
reimburse the Landlord for one month of waived rent.
Staff has reviewed current market comparables for Class B and C office space in
Tustin. Office comparables have been found in a broad range and not inconsistent with
the rent level proposed at the subject property With the close proximity to City Hall and
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
Agenda Report — Lease Extension
February 19 2013
Page 3
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 lease extension for the Successor Agency is an enforceable obligation which will
also require Oversight Board approval at their February 26 2013 meeting 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 extension. Given
the timing related to termination of the current lease (February 29th) staff is requesting
that the Council allow the City Manager to execute the 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.
/Jerry Craig
Program M