HomeMy WebLinkAbout05 OFFICE LEASE EXTENSION FOR 275 CENTENNIAL WAY, SUITE 104 DocuSign Envelope ID:51DF81391 F-5FF8-4FF6-BODD-F2D4343B304E
Agenda Item 5
DS
Reviewed:
AGENDA REPORT City Manager
Finance Director N/A
MEETING DATE: JUNE 15, 2021
TO: MATTHEW S. WEST, CITY MANAGER
FROM: ECONOMIC DEVELOPMENT DEPARTMENT
SUBJECT: OFFICE LEASE EXTENSION FOR 275 CENTENNIAL WAY, SUITE 104
SUMMARY
Authorization is requested to execute a five-year lease extension through June 30, 2026, for
the suite at 275 Centennial Way to provide office space for the Economic Development
Department employees and certain operational functions.
RECOMMENDATION
It is recommended the City Council authorize the City Manager to execute the attached
lease extension for Suite 104 at 275 Centennial Way, consistent with the general terms
identified in this Agenda Report.
FISCAL IMPACT
Rent under this lease extension will increase by approximately six percent from $3,844.05
per month under the current lease to $4,079.40 per month, with total annual rent being
$48,952.80. Beginning July 1, 2022, the monthly rent will increase annually by two and
one-half percent. The lease extension provides the City with a tenant termination right after
three years. In the event it becomes necessary to terminate the lease, the City will pay the
unamortized portion of the tenant improvement costs.
CORRELATION TO THE STRATEGIC PLAN:
The office lease extension supports the Economic Development Department's efforts to
implement and execute Goal A— Economic and Neighborhood Development strategies.
BACKGROUND
In 2007, the City leased office space across the street from City Hall at 275 Centennial Way
for the former Redevelopment Agency. The lease has been amended four times and the
current five-year extension expires June 30, 2021.
DocuSign Envelope ID:51DF81391 F-5FF8-4FF6-BODD-F2D4343B304E
Agenda Report — Lease Extension
June 15, 2021
Page 2
Given the extent of the Economic Development Department's responsibilities, adequate
office space for staff and operational functions continues to be necessary. The current
owner's representative for the office building at 275 Centennial Way, Kimco Realty
Corporation, has modified its initial offering to extend the lease after negotiation by staff.
The following is a summary of the major terms-
1.
erms:1. The term of the lease will be for a period of five years with the ability of the City to
terminate the lease after three years with a ninety (90) day notice.
2. Beginning July 1, 2021, the annual gross rent per month will be $1.95 per square foot,
$23.40 SF/YR, payable in advance in equal monthly installments of $4,079.40. The
lease rate will increase two and one-half percent each year. There are 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. The Landlord is providing the City with a Tenant Improvement ("TI") Allowance of
$30,000 to update the kitchen, conference room and storage shelves. Over the
previous fourteen years of the lease, the Landlord had provided $12,092 in TI
Allowances.
4. If it becomes necessary to terminate the lease on or after June 30, 2024, the City will be
responsible for paying the prorated amount of the tenant improvement costs. The costs
are distributed equally across the five year or sixty-month term and the City would pay
the prorated amount for the remaining months at the point of termination.
Staff has reviewed current market comparables for Class B and C office space in Tustin.
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 tenant, the rent proposed is reasonable and will not result in the
City incurring any additional expenditures.
DocuSigned by: DocuSigned by:
� EjQ04 4,� [AUF
,. ,4Qs
Christopher Koster Jerry Craig
Director of Economic Development Deputy Director of Economic Development
Attachment: Fifth Amendment to Lease (275 Centennial Way)
DocuSign Envelope ID:5DF8B91F-5FF8-4FF6-BODD-F2D4343B304E
FIFTH AMENDMENT TO LEASE
Building ID: 114200 Deal ID: Tenant: Master Occupant ID:
221258 1 City of Tustin 00004715
THIS FIFTH AMENDMENT TO LEASE(the"Amendment")made as of ,by and between
PK H LARWIN SQUARE SC LP(hereinafter referred to as "Landlord") and CITY OF TUSTIN (hereinafter
referred to as "Tenant"), which terms "Landlord" and "Tenant" shall include the successors and assigns of the
respective parties.
WITNESSETH:
WHEREAS,by Standard Office Lease dated December 11,2006, Landlord did lease and demise unto Tenant
certain premises (the "Leased Premises") in the Larwin Square S.C. located in Tustin, CA, as more particularly
described in the Standard Office Lease;and
WHEREAS,the Standard Office Lease has been amended and modified by: (i)First Amendment to Lease dated
February 16,2007;(ii)Second Amendment to Lease dated February 29,2012;(iii)Third Amendment to Lease dated
February 12,2013;and Fourth Amendment to Lease dated May 20,2016(said Standard Office Lease as may have
been amended,modified and assigned shall be hereinafter collectively referred to as the"Lease");and
WHEREAS,the parties hereto desire to further amend the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged,it is mutually agreed as follows:
1. The term of the Lease is hereby extended for an additional period of five(5)years commencing as of July 1,
2021,so that the term of the Lease shall now expire on June 30,2026(the"Expiration Date"). Tenant agrees
and acknowledges that there are no options to extend the term of the Lease beyond the Expiration Date.
2. Commencing July 1,2021,and continuing through and including on June 30,2026,the Gross Rent shall be as
follows:
Lease Year Annual Rent Monthly Rent
July 1,2021-June 30,2022 $48,952.80 $4,079.40
July 1,2022-June 30,2023 $50,176.68 $4,181.39
July 1,2023-June 30,2024 $51,431.04 $4,285.92
July 1,2024-June 30,2025 $52,716.84 $4,393.07
July 1,2025-June 30,2026 $54,034.68 $4,502.89
3. Tenant Improvement Allowance. (A) In consideration of Tenant remodeling the Leased Premises to a
modern first class condition in accordance with Tenant's prototype office,in accordance with plans and specifications
reviewed and approved by Landlord(the"Work"),Landlord agrees to contribute towards the costs of the Work,which
may include reasonable costs incurred for architect's,engineering,or permitting fees associated with the Work,but
specifically excludes costs incurred for Tenant's personal property,furniture,trade fixtures,equipment,inventory,and
signs,a sum equal to the lesser of(i)the actual cost of the Work,or(ii)the sum of Thirty Thousand and 00/100 Dollars
($30,000.00)(the"Tenant Improvement Allowance")upon Tenant's completion of the Work. In the event that the
cost of the Work exceeds the Tenant Improvement Allowance,such excess amount shall be borne solely by Tenant.
Landlord agrees to pay Tenant the Tenant Improvement Allowance,provided that Tenant is not in default,within
approximately thirty(30)days after Tenant has accomplished all of the following:
(a) Completed the Work pursuant to all of the terms and conditions of this Amendment and
delivering to Landlord: (i) a copy of the final Certificate of Occupancy and/or any other
approvals(e.g.building permit, certificate of completion,etc.)required by local government
agencies(e.g.the fire department)to operate Tenant's business,and(ii) the plans for Tenant's
work submitted to the municipality to complete the Work and any subsequent plans(e.g.final
as-built plans or comparable plans in Landlord's property manager's or construction manager's
sole discretion);
(b) Fumished Landlord with(i)Tenant's notarized affidavit that no changes have been made to the
plans submitted to Landlord and that all work, labor and materials have been paid for, and
delivering to Landlord(ii)final unconditional notarized lien waivers,as well as paid invoices or
statements,from the general contractor along with the general contractor's schedule of values,
or in the event Tenant does not hire a general contractor,then from Tenant's vendors,and(iii)
final unconditional notarized lien waivers from all contractors and(at Landlord's sole discretion)
subcontractors who performed work at the Leased Premises;
(c) Fully fixtured,stocked and staffed the Leased Premises and re-opened for business to the public;
(d) Submitted to Landlord a fully completed and signed"W-9 Form";
(e) Paid the fust month's Rent for the renewal term;and
(f) Sent a written request for payment of the Tenant Improvement Allowance to Landlord's
Construction/Property Manager for the Shopping Center containing the documents set forth in
(a),(b),(c)and(d)above;and in the event Tenant does not submit same to Landlord within three
hundred sixty (360) days after the date this Amendment is fully executed by Landlord and
I
DocuSign Envelope ID:5DF8B91F-5FF8-4FF6-BODD-F2D4343B304E
Tenant,then Tenant shall forever relinquish and forfeit its right to the Tenant Improvement
Allowance.
(B) Landlord and Tenant acknowledge and agree that any and all alterations,improvements,repairs or
installations made by Tenant to or upon the Leased Premises which are funded by the Tenant Improvement Allowance,
or the costs of which are reimbursed to Tenant by the Tenant Improvement Allowance,are and shall at all times remain
the property of Landlord. It is expressly agreed and acknowledged that the payment of the Tenant Improvement
Allowance is subject in all respects to satisfaction of certain conditions set forth in this Article,which conditions were
bargained for by the parties and consideration was given.The economic terms of this Amendment would have been
different(and less beneficial to Tenant)had these conditions to payment not been agreed to by the Tenant and binding
upon any assignee.
(C) In the event Tenant is in default,beyond applicable notice and cure periods,at the time Tenant is
entitled to receive the Tenant Improvement Allowance,or in the event any of Tenant's contractors,materialmen or
suppliers have not been timely paid by Tenant,then Landlord shall have the right,in addition to all other rights and
remedies available to Landlord,to apply all or any portion of the Tenant Improvement Allowance to cure Tenant's
default and to reimburse Landlord for any costs incurred by Landlord in curing such default,or pay such contractors,
materialmen or suppliers directly from the Tenant Improvement Allowance,whichever the case may be,with any
remaining balance paid to Tenant if Tenant does not default under any of its obligations under the Lease for the three
(3)month period after Landlord's application of any portion of the Tenant Improvement Allowance. Furthermore,In
the event that a bankruptcy case is commenced by or against Tenant under Title 11 of the U.S.Code(the`Bankruptcy
Code")(or other insolvency proceeding is commenced by or with respect to Tenant under other applicable law)at any
time prior to Tenant having been paid the Tenant Improvement Allowance, then, as a condition precedent to
Landlord's obligation to pay all or any remaining portion of the Tenant Improvement Allowance, Tenant, or its
proposed assignee,shall be required to provide sufficient written documentary evidence of"adequate assurance of
future performance"(as defined under the Bankruptcy Code)to Landlord that Tenant,or its assignee,will be able to
satisfy all obligations that remain under the Lease for the remaining Lease Term.Moreover,no payment of any Tenant
Improvement Allowance(or portion thereof)shall be paid to(a)Tenant unless and until an order of the bankruptcy
court has been entered and has become a"final order"approving the assumption of the Lease,or(b)any assignee
unless and until an order of the bankruptcy court has been entered and has become a"final order"approving the
assumption and assignment of the Lease to the assignee.
4. Termination Right. Notwithstanding anything stated in the Lease to the contrary,provided Tenant is not in
default under any of the terms or conditions of the Lease,Tenant shall have the right to terminate the Lease at any
time,on or after June 30,2023,on not less than ninety(90)days prior written notice to Landlord upon the following
terms and conditions: (i) Tenant provides written notice to Landlord (the "Termination Notice") that Tenant is
exercising its right to terminate this Lease;(ii)at the time Landlord receives the Termination Notice the Lease is in
full force and effect and Tenant is not in default thereunder and no act has occurred or is continuing which,after notice
or lapse of time,or both,would constitute a default hereunder;(iii)the Termination Notice is clear and unequivocally
states that Tenant is exercising its right to terminate and specifies a date not less than ninety(90)days from the date
that Landlord receives the Termination Notice upon which the Lease shall terminate(the"Lease Termination Date");
and(iv)the Termination Notice is accompanied by Tenant's certified check payable to Landlord in an amount equal
to the unamortized portion of up to$30,000.00 of the Tenant Improvement Allowance actually received by Tenant
pursuant to the Fourth Amendment to Lease as special consideration to Landlord for the early termination of the Lease.
In the event that Tenant elects to terminate this Lease in accordance with the provisions of this Article,then and in
such event the Lease shall terminate on the Lease Termination Date as if such date was the date originally set forth
for the expiration of this Lease.The right to terminate contained in this Article is a limited one time right to terminate
this Lease.A failure to strictly comply with the terms and conditions of this Article,TIME BEING THE ESSENCE
OF THE RIGHTS GRANTED HEREUNDER,shall constitute a waiver of the rights granted to Tenant in this Article.
Tenant will remain liable to Landlord for all payment obligations(including,without limitation,rent,additional rent,
and tax,if any)and all other obligations under the Lease(including Tenant's obligation to insure the Leased Premises)
accrued through(and including)the Lease Termination Date.
5. Miscellaneous.
(A) Addresses for notice purposes are as follows:
To Tenant:
City of Tustin
300 Centennial Way,Suite 104
Tustin,CA 92780
Attn: Jerry Craig
Telephone No.: 714-573-3121
Property Manager/Operations Email Address: jcraig@tustinca.org
To Landlord:
Kimco Realty Corporation
2429 Park Avenue
Tustin,CA 92782
Attn.:Legal Department
with a copy to:
2
DocuSign Envelope ID:5DF8B91F-5FF8-4FF6-BODD-F2D4343B304E
c/o Kimco Realty Corporation
Attn: Legal Department
500 North Broadway
Suite 201
Jericho,NY 11753
(B) It is mutually understood and agreed that the Lease shall be and remain in full force and effect, as
modified and amended hereby, and Landlord and Tenant hereby ratify and confirm the Lease as amended
hereby. Without limitation of the foregoing,Landlord hereby confirms its granting of the Leased Premises to
Tenant,and Tenant hereby confirms its acceptance of the Leased Premises on all of the terms and conditions of
the Lease as hereby amended.
(C) If Tenant is not an individual,the person signing this document on behalf of Tenant represents(by such
signature)that he or she has been duly authorized by Tenant to execute this document and that such signature
creates a binding obligation of Tenant.
(D) Tenant acknowledges that,no default exists on the part of Landlord under the Lease as of the date hereof.
(E) In the event of a discrepancy between the Lease and this Amendment,this Amendment shall prevail. If
not defined herein,all capitalized terms used in this document shall have the meaning ascribed to them in the
Lease unless the context otherwise requires. This Amendment contains all of the agreements of the parties hereto
with respect to the matters contained herein,and no prior agreement(other than the Lease),arrangement or
understanding pertaining to any of such matters shall be effective for any purpose.
(F)Intentionally Deleted.
(G) No Broker. Tenant represents and warrants to Landlord that it has not dealt with any broker in
connection with this Amendment and Tenant does hereby agree to defend, indemnify and hold Landlord
harmless of and from any claim of or liability to any broker,finder,or like agent with whom Tenant may have
dealt in connection with this transaction.
(FI) OFAC. Tenant represents and warrants to Landlord that neither Tenant nor any of its subsidiaries,
directors,officers,or employees,nor,to the knowledge of the Tenant,any agent or affiliate or representative of
Tenant(i)is the target of any sanctions administered or enforced by the U.S.Government(including,without
limitation,the Office of Foreign Assets Control of the U.S.Department of the Treasury or the U.S.Department
of State and including,without limitation,the designation as a"specially designated national' or"blocked
person" (collectively, "Sanctions")), (ii) is engaged in activities in violation of Sanctions; or(iii)has been
convicted,pleaded nolo contendere,indicted,arraigned or detained on charges involving money laundering or
predicate crimes to money laundering. In the event any of the representations in this Article are determined to
be false now or at any time during the Lease Term,Tenant shall be deemed to have committed an incurable
default,entitling Landlord,in addition to all other remedies at law or in equity,to immediately terminate the
Lease on written notice to Tenant.
(I) The parties hereby each agree that its authorized signatories may receive and review this Fifth
Amendment to Lease via electronic record and may sign this Fifth Amendment to Lease via electronic digital
signature(i.e.,DocuSign or similar electronic signature technology),and the parties may rely on such electronic
digital signatures as if they are original signatures by each party or duly authorized representatives of each party.
Remainder of Page Left Intentionally Blank
Signature Page to Follow
3
DocuSign Envelope ID:5DF8B91F-5FF8-4FF6-BODD-F2D4343B304E
IN WITNESS WHEREOF,the parties have executed this instrument effective as of the date of the Agreement.
LANDLORD:
PK H LARWIN SQUARE SC LP
By: PK II Larwin Square GP LLC,its general
partner
By: PK II Holdco LLC,its member
By: PRK Holdings II LLC,its managing
member
By: Kimco PK,LLC,its managing member
By: Kimco PK Inc.,its managing member
BY:
NAME:
TITLE:
DATE:
TENANT:
CITY OF TUSTIN
BY:
NAME:
TITLE:
DATE:
4