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HomeMy WebLinkAbout10 OFFICE LEASE AMENDMENT NO. 6 FOR 275 CENTENNIAL WAYDocusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 t AGENDA REPORT �s , MEETING DATE: TO: FROM: SUBJECT: ►y,IJi1_1ZY11a J U N E 16, 2026 ALDO E. SCHINDLER, CITY MANAGER Agenda Item 10 Reviewed: City Manager Finance Director BRIAN MONCRIEF, DEPUTY CITY MANAGER — REAL PROPERTY OFFICE LEASE AMENDMENT NO. 6 FOR 275 CENTENNIAL WAY Request for authorization to enter into a Sixth Amendment to Lease with PK II LARWIN SQUARE SC LP ("Landlord"), extending the term to June 30, 2031, at 275 Centennial Way to provide supplemental office space for City staff. RECOMMENDATION: Approve and authorize the City Manager to execute the Sixth Amendment to Lease with PK II LARWIN SQUARE SC LP, in the form attached hereto, subject to any non - substantive modifications as may be recommended by the City Attorney. FISCAL IMPACT: The monthly rent will increase by three percent from $4,502.89 to $4,638.00, with the new total annual rent being $55,656. Thereafter, the monthly rent will increase at a rate of three percent annually on July 1. The City will pay a fee of $10.00 as consideration for the amendment. There is sufficient appropriation in the 2026-27 Budget to support lease payments. Future annual lease amounts will be incorporated in the budget for City Council's consideration. CORRELATION TO THE STRATEGIC PLAN: Authorizing and approving the Sixth Amendment to Lease contributes to the fulfillment of Strategic Plan Goal A: Economic and Neighborhood Development, since the Sixth Amendment will allow staff to continue to strengthen and facilitate business relationships for economic development purposes. Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 City Council Agenda Report Office Lease Amendment No. 6 for 275 Centennial Way June 16, 2026 Page 2 BACKGROUND AND DISCUSSION: The City has leased approximately 2,092 square feet of supplemental office space at 275 Centennial Way since December 2006. On June 15, 2021, the City Council approved the Fifth Amendment to Lease, extending the term for an additional five years ending on June 30, 2026. A continued need for supplemental office space is projected over the next five years. The proposed Sixth Amendment is competitive with market lease comparables for office space proximate to City Hall. The following is a summary of the salient terms of the Sixth Amendment: 1. Term: five years commencing on July 1, 2026, and ending on June 30, 2031; 2. Monthly Rent: $4,638 ($2.22/square foot/month); 3. Annual Increases: 3.0% increases to occur on July 1; 4. Utilities: the Landlord is responsible for paying for utility services; 5. Tenant Improvement Allowance: the Landlord is providing a tenant improvement allowance ("T.I. Allowance") of $10,000 to replace blinds within the offices. The T.I. Allowance has been incorporated evenly into the rental payments; 6. Early Termination: the City may terminate the lease with a 120-day advance written notice to the Landlord after January 1, 2029. If the City invokes the termination clause, then the City would be responsible for paying the prorated amount of the T.I. Allowance back to the Landlord. hale, dlui tn-t,f Brian Moncrief Deputy City Manager — Real Property Attachments: C�- Carlos Marquez Real Property Manager 1. Sixth Amendment to Lease between the City of Tustin and with PK II LARWIN SQUARE SC LP Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 SIXTH AMENDMENT TO LEASE Deal ID: Tenant DBA: Master Occupant ID: Building ID: 114200 267914 1 City of Tustin 00004715 THIS SIXTH AMENDMENT TO LEASE (the "Amendment") made as of (the "Effective Date"), by and between PK II 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 Shopping Center located in Tustin, California, 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; (iv) Fourth Amendment to Lease dated May 20, 2016; and (v) Fifth Amendment to Lease dated June 23, 2021 (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, in consideration of the premises and the sum of Ten and no/100 Dollars ($10.00) and other good and valuable considerations, in hand, paid by Tenant to Landlord, the receipt and sufficiency of which is hereby acknowledged, it is mutually agreed as follows: Extended Term. The term of the Lease is hereby extended for an additional period of five (5) years commencing as of July 1, 2026, so that the term of the Lease shall now expire on June 30, 2031 (the "Expiration Date"). Tenant agrees and acknowledges that there are no options to extend the term of the Lease beyond the Expiration Date. Rent. Commencing July 1, 2026, and continuing through and including the Expiration Date, the Rent shall be as follows: Lease Year Annual Rent Monthly Rent July 1, 2026-June 30, 2027 $55,656.00 $4,638.00 July 1, 2027—June 30, 2028 $57,325.68 $4,777.14 July 1, 2028—June 30, 2029 $59,045.45 $4,920.45 July 1, 2029—June 30, 2030 $60,816.81 $5,068.07 July 1, 2030-June 30, 2031 $62,641.31 $5,220.11 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 Ten Thousand and 00/100 Dollars ($10,000.00) (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: 114200-City of Tustin-6th amend [267914] v2-FINAL � Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 (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) Furnished 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" and the utility bill authorization form(s) required under Article 6 of this Amendment; (e) Paid the first 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 no later than June 30, 2027, 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. 114200-City of Tustin-6th amend [267914] v2-FINAL � Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 Termination Right. Paragraph 4 of the Fifth Amendment to Lease is hereby deleted in its entirety and replaced with the following in lieu thereof: "Termination Right. 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 January 1, 2029, on not less than one hundred twenty (120) 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 one hundred twenty (120) 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 Ten Thousand and 00/100 Dollars ($10,000.00) of the Tenant Improvement Allowance actually received by Tenant pursuant to this Sixth 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." California Certified Access Specialist Inspection. Pursuant to the requirements of California Civil Code Section 1938, Landlord hereby notifies Tenant that the Leased Premises has not been inspected by a California Certified Access Specialist (a "CASp"). As required by California Civil Code Section 1938(e), Tenant is hereby notified that: "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction -related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction - related accessibility standards within the premises." Should Tenant elect to have the Leased Premises inspected by a CASp (the "Inspection"), the Inspection will be at Tenant's sole cost and expense, limited to the Leased Premises and must be performed by a CASp who has been approved by Landlord prior to the Inspection, which approval shall not be unreasonably conditioned or delayed. Any Inspection must be performed in a manner which minimizes the disruption of business activities in the Shopping Center and at a time mutually convenient to Landlord and Tenant. Landlord reserves the right to be present during the Inspection. Tenant agrees to: (i) promptly provide to Landlord a copy of the report or certification prepared by the CASp (the "Report"), if any, and (ii) keep the information contained in the Report confidential, except to the extent required by law, including the Public Records Act, or to the extent disclosure is needed in order to complete any necessary modifications or improvements required to comply with all applicable accessibility standards under state or federal law as well as any other improvements or alterations required by the Report or that may be otherwise required to comply with applicable Laws or accessibility requirements (the "Access Improvements"). In the event there is a need to perform Access Improvements, Tenant agrees that it will promptly complete all of the Access Improvements, at its sole cost and expense, as part of the Tenant's Work or alterations to the Leased Premises, in accordance with Plans approved by Landlord pursuant to the Lease. This Section only applies to the Access Improvements and does not in any way amend or modify any other repair, maintenance, compliance with Law or other obligation of Landlord or Tenant under the Lease. 114200-City of Tustin-6th amend [267914] v2-FINAL � Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 If Tenant elects to obtain a CASp inspection and the resulting CASp report identifies Access Improvements for which Tenant is responsible under this Section, Tenant shall, following completion of such Access Improvements and at Tenant's sole cost and expense, provide Landlord with an updated CASp report or CASp certification confirming completion of such Access Improvements. Tenant shall have no obligation to obtain any CASp report except as provided in the immediately preceding sentence. Miscellaneous. (A) Addresses for notice purposes are as follows: To Tenant: City of Tustin 300 Centennial Way, Suite 104 Tustin, CA 92780 Attn: Carlos Marquez Telephone No.: 714-573-3107 Email Address: cmarquez@tustinca.org To Landlord: PK II Larwin Square SC LP 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 Amendment on behalf of Tenant represents (by such signature) that he or she has been duly authorized by Tenant to execute this Amendment 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 Effective Date. (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 Amendment 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) Utilities. Tenant agrees to cooperate with Landlord in connection with its obligations, if any, to comply with utility disclosure regulations and the collection of data relating to utility consumption at the Leased Premises, and any similar regulations. In furtherance thereof, to the extent that Landlord is required by law to disclose any data relating to utility consumption, building performance standards (BPS), and/or any similar type of disclosure requirements for the Leased Premises or Shopping Center, Tenant agrees to provide such data to Landlord within thirty (30) days after Landlord's request. In addition, as requested by Landlord from time to time, Tenant shall deliver to Landlord a utility bill authorization letter in a form required by the applicable utility companies that serve the Leased Premises, and is reasonably acceptable to Landlord, to allow Landlord to obtain such information directly from the respective utility companies. If Tenant fails to perform or observe any of the foregoing, therefor then in addition to any other remedies available to Landlord, 114200-City of Tustin-6th amend [267914] v2-FINAL IDS Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 Landlord shall have the right (but not the obligation) to obtain such data on Tenant's behalf as its agent or attorney -in -fact. (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. (H) OFAC/FCPA. Tenant and Landlord represent and warrant to each other that neither the representing party, nor any of its subsidiaries, directors, officers, or employees, nor, to the knowledge of such representing party, any agent or affiliate or representative of such party (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 Tenant default, entitling Landlord, in addition to all other remedies at law or in equity, to immediately terminate the Lease on written notice to Tenant. Landlord and Tenant each warrant, represent, covenant and agree that it shall comply with all applicable anti - bribery and anti -corruption laws, including the U.S. Foreign Corrupt Practices Act ("Anti -Corruption Laws") in connection with all obligations under the Lease. No payments of money, gifts or anything of value have been or shall be offered, promised or paid, directly or indirectly, to any person or entity to corruptly influence the acts any government official or member of their family with or without corrupt intent or to obtain or receive an improper advantage. The parties shall keep appropriate records to establish compliance with this provision. (I) Tenant hereby waives any and all rights that it may otherwise have pursuant to Sections 827 and 1946.1 of the Civil Code of California or any similar or successor provisions of law, now or hereinafter in effect to the maximum extent permitted by law. In addition, Tenant represents, warrants and covenants to Landlord that it is not a "qualified commercial tenant" as used and/or defined in Sections 827, 1632, 1946.1 and 1950.9 of the Civil Code of California or any similar or successor provisions of law. Tenant acknowledges this document was negotiated in the English language. (J) The parties hereby each agree that its authorized signatories may receive and review this Amendment via electronic record and may sign this Amendment 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] 114200-City of Tustin-6th amend [267914] v2-FINAL DS Docusign Envelope ID: 358C2907-8737-8327-823E-C74D6AE09DF2 IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date. LANDLORD: PK II LARWIN SQUARE SC LP, a Delaware limited partnership By: PK II Larwin Square GP LLC, its general partner By: KRCX California Realty, LLC, its member By: _ Name: Title: Date: Jason Lee Vice President TENANT: CITY OF TUSTIN By: Name: Title: Date: 114200-City of Tustin-6th amend [267914] v2-FINAL