HomeMy WebLinkAbout06 FIFTH AMENDMENT TO THE RENTAL AGREEMENT WITH NATIONAL OFFICE LIQUIDATORSMEETING DATE: JULY 3, 2018
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: ECONOMIC DEVELOPMENT DEPARTMENT
SUBJECT: FIFTH AMENDMENT TO THE RENTAL AGREEMENT BETWEEN
THE CITY OF TUSTIN AND NATIONAL OFFICE LIQUIDATORS,
INC. FOR A PORTION OF THE BUILDING LOCATED AT 15171
DEL AMO AVENUE
SUMMARY
Approval is requested to amend the Rental Agreement between the City and National
Office Liquidators, Inc. (Tenant), for a City -owned property located at 15171 Del Amo
Avenue.
RECOMMENDATION
The City Council authorize the City Manager to execute the Fifth Amendment to the
Rental Agreement with National Office Liquidators, Inc. in a form substantially
consistent with the attachment and support the finding that the amended Rental
Agreement is at market value and no further policy directions, as outlined in Tustin City
Code Section 7960(B), are required.
FISCAL IMPACT
The current Rental Agreement for 28,000 square feet expires July 31, 2018, with the
Tenant paying a monthly rent of $13,367.34. The Fifth Amendment will become
effective August 1, 2018, and the monthly rent will increase to $21,000. The term is for
three years and the rent will increase annually at 3%. Although it is standard business
practice for the brokerage fees to be paid upon agreement execution and to be based
on the total rent generated during the term of an agreement, fees will be paid annually
in order to reflect the option for the City to terminate at any time after the first year.
CORRELATION TO THE STRATEGIC PLAN:
The Fifth Amendment with National Office Liquidators, Inc. is consistent with the City's
value of Fiscal Stewardship.
Agenda Report
July 3, 2018
Page 2
BACKGROUND
In January 2010, the City entered into a brokerage agreement with Lee & Associates to
seek tenants for the building as a light industrial use, distribution use, or warehouse use
(the legal non -conforming uses currently authorized on the property). On March 15,
2011, the City Council authorized an eighteen -month Rental Agreement with the Tenant
for 28,000 square feet of the existing 84,000 square foot building. On September 4,
2012, the City Council authorized a First Amendment to the lease, extending the term
through August 31, 2013. On March 19, 2013, the City Council authorized a Second
Amendment, adding an additional 10,000 square feet through the term of the lease,
August 31, 2013. On July 16, 2013, the City Council authorized a Third Amendment,
increasing the total rental space to 42,000 square feet for a five-year Term, expiring
August 1, 2018. On July 18, 2015, The City Council authorized a Fourth Amendment,
decreasing the total rental space to 28,000 square feet for the balance of the five-year
Term.
Effective August 1, 2018, the negotiated rent rate is $.75 per square foot ($21,000 per
month) for 28,000 square feet and the premises are rented on a triple -net basis,
meaning the Tenant will pay all real estate taxes, insurance, maintenance, repairs,
utilities and other items associated with tenancy. Unless the City provides a six-month
termination notice prior to the Agreement's termination, the termination date will be July
31, 2021.
Tustin City Code (TCC) Section 7960, as enacted by Ordinance No. 1389, outlines the
process City staff must follow for the approval, extension or modification of any existing
City real property lease for less than market value. In the event a lease is less than
market value, then staff must seek policy direction from the City Council.
Staff, in working with Lee & Associates, has reviewed comparables to confirm current
asking rates for buildings in the same market range as the Del Amo building and the
proposed Fifth Amendment to the Rental Agreement is not for less than market value.
As a result, the proposed Fifth Amendment to the Rental Agreement does not trigger
further actions as outlined in TCC Section 7960(B). Staff is available for any questions
the City Council may have.
John Buchanan Jerry CraiWi�7f
Direc or of Economic Development Deputy Domic Development
Attachment: Fifth Amendment to the Rental Agreerdent between the City and National
Office Liquidators
FIFTH AMENDMENT
TO THE RENTAL AGREEMENT BETWEEN
THE CITY OF TUSTIN
AND
NATIONAL OFFICE LIQUIDATORS, LLC
Fifth Amendment
This FIFTH AMENDMENT TO THE RENTAL AGREEMENT (this “”) is
Fifth Amendment Date
entered into as of July 3, 2018 (the “”) by and between the CITY OF TUSTIN,
City
a municipal corporation of the State of California (“”), and National Office Liquidators, LLC, an
Tenant
Arizona limited liability company, (“”). City and Tenant are sometimes referred to herein
PartyParties
individually as a “” and collectively as the “”.
RECITALS
A. The City and the Tenant entered into that certain Rental Agreement dated as of June 1,
2011, and as amended by that First Amendment to the Rental Agreement (“First Amendment”) dated as
of September 4, 2012, and as amended by that Second Amendment to the Rental Agreement (“Second
Amendment”) dated as of April 1, 2013, and as amended by that Third Amendment to the Rental
Agreement (“Third Amendment”) dated as of August 1, 2013, and as amended by that Fourth
Amendment to the Rental Agreement (collectively, the “Original Rental Agreement”) dated as of August
1, 2015 pursuant to which, among other things, the City agreed to rent to the Tenant a certain portion of
the real property, 28,000 square feet, located at 15171 Del Amo Avenue in the City of Tustin (the
“Original Premises”) as defined in the Original Rental Agreement for the purpose of a showroom for
retail sales, distribution and/or warehouse use only; and
B. The City is the owner of the Premises as more particularly described in Exhibit A of the
Original Agreement, incorporated herein and hereby made a part of the Fifth Amendment as though fully
set forth ; and
C. The Term of the Original Rental Agreement expires July 31, 2018; and
D. The Tenant desires to extend the term of the Original Rental Agreement through July 31,
2021 and the extension of the Original Rental Agreement by this Fifth Amendment is at market value
and does not trigger further actions as outlined in Tustin City Code Section 7960(B); and
E. The Parties desire to amend the Original Rental Agreement by executing this Fifth
Amendment.
AGREEMENT
NOW, THEREFORE
, in consideration of the foregoing Recitals and of the promises and mutual
covenants incorporated within the Original Rental Agreement, which are incorporated in the operative
provisions of this Amendment by this reference as though set forth in their entirety, the Parties agree as
follows:
Modification to the Original Rental Agreement.
1. The following sections of the Original
Rental Agreement are hereby amended as follows:
(a) Section 4 is hereby deleted in its entirety and replaced as follows:
1
1322041.1
“4. TERM: The term of this Rental Agreement shall commence August 1, 2018,
Commencement Date
(“”) and shall be in full force through July 31, 2021, unless
Termination Date
otherwise terminated as provided herein (“”). At any time following
the one year anniversary of the Commencement Date, the City may terminate this Rental
Agreement, for any reason, by providing six (6) months prior written notice of
termination to the other party. Tenant will not receive approval to occupy and may not
occupy the Premises until they have provided satisfactory evidence of insurance as
required by Section 19. of the Original Agreement.”
(b) Section 5.1 is hereby deleted in its entirety and replaced as follows:
“5.1 Base Rent.
5.1.1 Effective August 1, 2018, the Tenant shall pay the City the monthly sum of
Twenty One Thousand Dollars ($21,000) for 28,000 square feet of space, payable in
advance. In subsequent years, the rent shall increase 3% annually. Effective August 1,
2019, the Tenant shall pay the City the monthly sum of Twenty One Thousand Six
Hundred and Thirty Dollars ($21,630). Effective August 1, 2020, the Tenant shall pay
the City the monthly sum of Twenty-Two Thousand Two Hundred and Seventy-Eight
Dollars and Ninety Cents ($22,278.90). If the Fifth Amendment Date is other than the
first day of a calendar month, the rent payable hereunder shall be prorated by the City on
the basis of a thirty (30) day month. Rental installments shall be paid by giving such
payments to the City, directed to the Finance Department, at 300 Centennial Way, Tustin,
CA 92780. Checks should be made out to the "City of Tustin".
(c) Subsection 6.1.2 is hereby added to read as follows:
“6.1.2 Notwithstanding Tenant’s obligations to protect, maintain and repair the
Premises as set forth in this Section 6, City shall remain responsible, at its sole cost and
expense, to maintain the exterior roof of the Premises.
No Other Changes.
2. This Fifth Amendment is supplemental to the Original Rental
Agreement and is by reference made part of said Original Rental Agreement. All sections of the Original
Rental Agreement not specifically amended herein shall remain in full force and effect. In the event of
any conflict or inconsistency between the provisions of this Fifth Amendment and any provisions of the
Original Rental Agreement, the provisions of this Fifth Amendment shall in all respect govern and
control. Unless otherwise specifically defined herein, terms used in this Fifth Amendment shall have the
same meaning as ascribed to them in the Original Rental Agreement. The execution and delivery of this
Fifth Amendment shall not operate as a waiver of or, except as expressly set forth herein, an amendment
of any right, power or remedy of either party in effect prior to the date hereof.
Counterparts
3.. This Fifth Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the Parties hereto may
execute this Fifth Amendment by signing any such counterpart.
<<<<<<<<<<<<SIGNATURE PAGE FOLLOWS>>>>>>>>>>>>
2
1322041.1
IN WITNESS WHEREOF, City has authorized this Fifth Amendment between the City of Tustin
and National Office Liquidators, LLC to be executed for and on behalf of the City of Tustin, and Tenant
has caused the same to be executed by its duly authorized officer on the date first above written.
“CITY”
City of Tustin, California
Dated: _______________ _____________________________
Jeffrey C. Parker, City Manager
ATTEST
______________________________
Erica N. Yasuda
City Clerk
APPROVED AS TO FORM
_______________________________
David E. Kendig
City Attorney
“TENANT”
National Office Liquidators,
an Arizona limited liability company
By: _____________________________
Name: _____________________________
Title: _____________________________
By: _____________________________
Name: _____________________________
Title: _____________________________
3
1322041.1