REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF THE COUNTY OF SAN BERNARDINO
AND RECORD OF ACTION
December 19, 2023
FROM
TERRY W. THOMPSON, Director, Real Estate Services Department
CHERYL ADAMS, Deputy Executive Officer, Human Services
SUBJECT
Title
Lease Agreement with WM Inland Investors IV, LP for Office Space in San Bernardino
End
RECOMMENDATION(S)
Recommendation
1. Find that approval of a Lease Agreement with WM Inland Investors IV, LP for office space is an exempt project under the California Environmental Quality Act Guidelines Section 15301 - Existing Facilities (Class I).
2. Approve the Real Estate Services Department’s use of an alternative procedure in lieu of a formal Request for Proposal as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for San Bernardino County Use, to lease approximately 37,570 square feet of office space located at 500 Inland Center Drive, Suite 301L in San Bernardino, for a 10- year term projected to commence on April 1, 2025, in the amount of $16,130,938, with two five-year options to extend.
3. Approve a 10-year lease agreement with two five-year options to extend the term with WM Inland Investors IV, LP, for a term expected to commence on April 1, 2025 through March 31, 2035, subject to landlord’s completion of tenant improvements, for approximately 37,570 square feet of office space in San Bernardino, for the Human Services - Program Integrity Division, in the amount of $16,130,938.
4. Authorize the Purchasing Agent to issue purchase orders, as necessary, for a total amount not to exceed $100,000, for approved unforeseen contingencies and/or approved change orders that may arise in order to complete the tenant improvements set forth in the 10-year Lease Agreement with WM Inland Investors IV, LP (Four votes required).
5. Direct the Clerk of the Board of Supervisors to file and post the Notice of Exemption for the project as required under the California Environmental Quality Act.
(Presenter: Terry W. Thompson, Director, 387-5000)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
FINANCIAL IMPACT
Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The total cost of this 10-year Lease Agreement (Lease) is $16,130,938. Lease payments will be made from the Real Estate Services Department (RESD) Rents budget (7810001000) and reimbursed from the HS Administrative Claim budget (5012701000). Other costs associated with this Lease include electric utility costs in excess of the electric service utility cap, which will be paid from the HS Administrative Claim budget annually. Sufficient appropriation will be included in future recommended budgets.
Annual lease costs are as follows:
|
Period |
Annual Lease Cost |
Annual W/Amortization of Improvement Cost |
|
April 1, 2025 - March 31, 2026 |
$1,127,100 |
$1,448,100 |
|
April 1, 2026 - March 31, 2027 |
$1,160,913 |
$1,481,913 |
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April 1, 2027 - March 31, 2028 |
$1,195,740 |
$1,516,740 |
|
April 1, 2028 - March 31, 2029 |
$1,231,612 |
$1,552,612 |
|
April 1, 2029 - March 31, 2030 |
$1,268,561 |
$1,589,561 |
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April 1, 2030 - March 31, 2031 |
$1,306,618 |
$1,627,618 |
|
April 1, 2031 - March 31, 2032 |
$1,345,816 |
$1,666,816 |
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April 1, 2032 - March 31, 2033 |
$1,386,191 |
$1,707,191 |
|
April 1, 2033 - March 31, 2034 |
$1,427,777 |
$1,748,777 |
|
April 1, 2034 - March 31, 2035 |
$1,470,610 |
$1,791,610 |
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Total Cost |
$12,920,938 |
$16,130,938 |
BACKGROUND INFORMATION
The recommended action will provide for a new 10-year lease agreement with WM Inland Investors IV, LP (WM) projected to commence for the period of April 1, 2025 through March 31, 2035, subject to landlord’s completion of tenant improvements, for approximately 37,570 square feet of office space located at 500 Inland Center Drive, Suite 301L in San Bernardino (Property). Approval will allow for the Human Services - Program Integrity Division (PID) to continue to provide investigative and administrative support services for the Transitional Assistance Department, Children and Family Services and Department of Aging and Adult services. PID is committed to ensuring welfare programs are administered fairly, equally and without system abuse.
PID currently occupies approximately 26,747 square feet of office space at 1111 East Mill Street in San Bernardino (Former Premises) under the provisions of Lease Agreement No.10-861 A-2. PID has continuously leased the current building since 2010. However, the lobby required construction to enhance safety various safety measures, which could not be completed in the current floor plan which prompted the need for relocation.
On November 21, 2022, the County Administrative Office (CAO) approved Capital Improvement Program Request No. 23-078 submitted by PID for approximately 34,298 square feet of office space in the San Bernardino area. Which prompted RESD to enter into a negotiation with WM for the Property due to limited availability in the San Bernardino Area.
This new lease provides for 37,570 square feet of office space to be occupied by PID for a projected commencement date contingent upon the landlord’s completion of tenant improvements by WM with a fixed improvement cost allowance of $3,210,000 ($0.71/per square foot per month) for tenant improvements and any cost exceeding the fixed improvements cost shall be amortized monthly over the initial term of the Lease at an estimated $26,750 per month and payable by the County.
RESD requests, on behalf of PID, that the Board of Supervisors (Board) authorize the Purchasing Department to issue purchase orders, as necessary, for a total amount not to exceed $100,000, for any contingencies and/or minor change orders that may arise in order to complete the tenant improvements set forth in the Lease. All change orders and/or contingencies will be approved by PID prior to authorizing any work or payment to the Landlord. Authorizing change orders or contingencies requires four votes from the Board, pursuant to Section 14.0114 Informal Bidding Procedures of the California Uniform Public Construction Code Accounting Act.
The project to approve a New Lease Agreement was reviewed pursuant to the California Environmental Quality Act (CEQA) and determined to be categorically exempt under Guidelines Section 15301 - Existing Facilities (Class 1) because it consists of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use. The proposed lease agreement is to secure property to operate within the existing structure with negligible or no expansion of existing use.
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Summary of Lease Terms |
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Lessor: |
WM Inland Investors IV, LP |
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Location: |
500 Inland Center Drive, Suite 301L, San Bernardino |
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Size: |
Approximately 37,570 square feet of office space |
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Term: |
10 years projected to commence April 1, 2025, contingent upon landlord’s completion of tenant improvements |
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Options |
Two five-year options by providing notice 365 days prior to the expiration of the then current term |
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Rent: |
Cost per square foot per month: $2.50 |
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Monthly: $ 93,925 |
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Annual: $1,127,100 |
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*Mid-range for comparable facilities in the San Bernardino area per the competitive set analysis on file with RESD |
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Annual Increases: |
3% |
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Improvement Costs: |
Lessor at its sole cost and expense provide tenant improvements and shall be responsible for any tenant improvement costs that exceed $3,210,000; any amounts that are within the $3,210,000 will be the responsibility of County and amortized throughout the initial term of the lease; County will be responsible for its Furniture Fixtures and Equipment (FF&E) |
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Custodial |
Provided by Lessor |
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Maintenance: |
Provided by Lessor |
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Utilities: |
Provided by Lessor; except County to pay electrical costs in excess of $112,000 per year or approximately $0.24 per square foot per month (electric utility expense cap), which cap is increased 3% annually |
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Insurance: |
The Certificate of Liability Insurance as required by the Lease will be obtained by RESD prior to occupancy |
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Right to Terminate: |
None during the initial 10-year term except due to default; County has the right to terminate with 18 months written notice during any extended terms |
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Parking: |
Sufficient for County needs |
PROCUREMENT
RESD is requesting that the Board approve the use of an alternative procedure in lieu of a formal Request For Proposals (RFP) as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, to lease approximately 37,570 square feet of office space at the Property, for 10 years for the projected period of April 1, 2025 through March 31, 2035, subject to the landlord’s completion of certain tenant improvements, with two five-year options to extend the term of the lease. Policy 12-02 provides that the Board may approve the use of an alternative procedure to the use of a RFP process whenever the Board determines that compliance with the RFP requirements would unreasonably interfere with the financial or programmatic needs of the County, or when the use of an alternative procedure would otherwise be in the best interest of the County.
RESD, acting in its approved capacity as the County Administrative Office designee to review proposed real property leases under Policy 12-02, of which a competitive analysis of the area was completed and found that the lease rate is competitive for a 10-year term and that the Property best meets the requirements of the department due to its proximity to the Former Premises and the ability to serve the same community from the Property.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (John Tubbs II, Deputy County Counsel, and Adam Ebright, Deputy County Counsel, 387-5455) on November 8, 2023; Human Services Department (Allen Simmons, Administrative Supervisor, 388-0367) on November 20, 2023; Purchasing (Ariel Gill, Supervising Buyer, 386-8046) on November 17, 2023; Finance (John Hallen, Administrative Analyst, 388-0208, and Garrett Baker, Administrative Analyst, 387-3077) on November 30, 2023; and County Finance and Administration (Valerie Clay, Deputy Executive Officer, 387-5423) on December 1, 2023.
(AR: 893.0002)