San Bernardino County - File #: 11086

Date	Action By	Action	Result	Action Details	Agenda Documents	Video
11/5/2024	Board of Supervisors Regular Meeting	APPROVED (CONSENT CALENDAR)	Pass	Action details	Agenda Documents	Not available

REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS

OF SAN BERNARDINO COUNTY

AND RECORD OF ACTION

November 5, 2024

FROM

TERRY W. THOMPSON, Director, Real Estate Services Department

JAMES LOCURTO, Director, Transitional Assistance Department

SUBJECT

Title

Amendment to Lease Agreement with 265 East 4^th, LLC for Office Space in San Bernardino

End

RECOMMENDATION(S)

Recommendation

1. Find that approval of Amendment No. 7 to Lease Agreement No. 07-247 with 265 East 4^th, LLC, for Office Space is an exempt project under the California Environmental Quality Act Guidelines, Section 15301 (Class 1).

2. Approve the Real Estate Services Department’s use of an alternative procedure in lieu of a formal Request for Proposals as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, to extend the second extended term of Lease Agreement No. 07-247 with 265 East 4^th, LLC by two additional years from June 1, 2034, through May 31, 2036, for approximately 50,082 square feet of office space located at 265 East 4^th Street in San Bernardino for the Transitional Assistance Department.

3. Approve Amendment No. 7 to Lease Agreement No. 07-247 with 265 East 4^th, LLC to extend the second extended term of the Lease Agreement No. 07-247 with 265 East 4^th, LLC by two- additional years, from June 1, 2034, through May 31, 2036, provide for turnkey tenant improvements to be performed by the landlord; adjust the rental rate schedule; add day porter services and update standard lease agreement language for approximately 50,082 square feet of office space at 265 East 4^th Street in San Bernardino for the Transitional Assistance Department, increasing the amount by $23,220,564, for a new total amount of $44,782,165.

4. 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 turnkey tenant improvements set forth in Amendment No. 7 to Lease Agreement No. 07-247 (Four votes required).

5. Authorize the Auditor-Controller/Treasurer/Tax Collector to post the necessary adjustments to the Real Estate Services Department 2024-25 budget, as detailed in the Financial Impact section (Four votes required).

6. Direct the Real Estate Services Department to file the Notice of Exemption in accordance with 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.

Provide for the Safety, Health and Social Service Needs of County Residents.

FINANCIAL IMPACT

Approval of this item will not result in the use of additional Discretionary General Funding (Net County Cost). The total cost of Lease Agreement No. 07-247 A7 (Lease), including turnkey tenant improvements amortized monthly for the first 10 years over the extended term of the lease with amortization amended amount retroactive to June 1, 2024, and through May 31, 2036, is $23,220,564. Lease payments will be made from the Real Estate Services Department (RESD) Rents budget (7810001000) and reimbursed from the Human Services (HS) Administrative Claim budget (5015011000). Sufficient appropriation is included in the HS 2024-25 budget and will be included in HS and RESD future recommended budgets.

RESD requests the Auditor-Controller/Treasurer/Tax Collector to post the following adjustments to the 2024-25 Rents budget:

Cost Center	GL Account	Description	Action	Amount
7810001000	52002905	Rents & Leases-Structures Improvement & Grounds	Increase	$101,316
7810001000	55415013	Services & Supplies Transfer In	Increase	$101,316

Lease cost are as follows:

Year	Annual Lease Cost	Amortized Tenant Improvements	Total Cost
June 1, 2024 thru May 31, 2025	$1,586,532	$70,452	$1,656,984
June 1, 2025 thru May 31, 2026	$1,634,124	$70,452	$1,704,576
June 1, 2026 thru May 31, 2027	$1,683,144	$70,452	$1,753,596
June 1, 2027 thru May 31, 2028	$1,733,640	$70,452	$1,804,092
June 1, 2028 thru May 31, 2029	$1,785,648	$70,452	$1,856,100
June 1, 2029 thru May 31, 2030	$1,839,216	$70,452	$1,909,668
June 1, 2030 thru May 31, 2031	$1,894,392	$70,452	$1,964,844
June 1, 2031 thru May 31, 2032	$1,951,224	$70,452	$2,021,676
June 1, 2032 thru May 31, 2033	$2,009,772	$70,452	$2,080,224
June 1, 2033 thru May 31, 2034	$2,070,060	$70,452	$2,140,512
June 1, 2034 thru May 31, 2035	$2,132,160	$ 0	$2,132,160
June 1, 2035 thru May 31, 2036	$2,196,132	$ 0	$2,196,132
Total Cost	$22,516,044	$704,520	$23,220,564

BACKGROUND INFORMATION

On April 10, 2007 (Item No. 25), the Board of Supervisors (Board) approved the 10-year Lease, with two five-year options to extend the term for 48,846 square feet of build-to-suit office space at the property for the Transitional Assistance Department (TAD). The original term of the Lease was from October 1, 2008, through September 30, 2018. In the 15 years since the Lease was originally approved, the Board has approved six amendments to correct the address to 265 E. 4^th Street, amend the rent schedule, change the commencement and termination dates that extend the term of the lease through May 31, 2034, provide for tenant improvements to expand the lobby by 870 square feet, increase the leased area from 49,212 to 50,082 square feet, reflect a change of property ownership, and update standard lease agreement language. All other terms and conditions of the lease remain unchanged.

Amendment No.	Approval Date	Item No.
1	January 6, 2009	23
2	June 16, 2009	34
3	September 24, 2013	57
4	July 8, 2014	46
5	September 29, 2020	58
6	September 12, 2023	58

Amendment No. 6 to the Lease extended the term by 10 years beginning June 1, 2024, through May 31, 2034. TAD requested that RESD process an amendment to the Lease to extend the term by an additional two years, for a total of 12 years through May 31, 2036, so that the department can continue providing necessary services to the community by administering support programs to people in need of financial, nutritional and/or medical assistance, while working with families and individuals to attain self-sufficiency. Amendment No. 7 (Amendment) will provide for the landlord’s completion of certain tenant improvements totaling $1,435,990, an increase from the original estimated project cost of $1,051,423. The increase in project costs were due to changes in the scope of work and construction cost increases since the original project budget was developed. The County shall reimburse the landlord for a portion of the total cost of the improvements in the amount of $704,520, which will be amortized monthly over 10-years of the 12-year extended term, retroactively commencing on June 1, 2024. The improvements will allow TAD to upgrade the interior finishes, remodel and secure the main customer lobby, and make significant upgrades to secure the exterior area around the building with perimeter fencing and secure employee parking.

RESD, on behalf of HS, requests that the Board authorize Purchasing 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 turnkey tenant improvements, which requires four votes, pursuant to Public Contracts Code § 22032. All change orders will be approved by HS and TAD prior to authorizing any work.

The procurement process required by County Policy 12-02 - Procuring Privately Owned Real Property for County Use (Policy) does not apply to amendments of existing leases, provided the amendment does not exceed the maximum term (including options) of the Lease. The Policy provides that the Board may approve the use of an alternative procedure to the use of a formal Request For Proposal (RFP) to extend the lease whenever the Board determines that compliance with the formal 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 interests of the County. Approval of this Amendment will result in an aggregate term of 28 years and a potential aggregate term of 38 years, if all three option periods to extend the term are exercised. RESD completed a market analysis of comparable sites and found the rental rate for the 10-year extended term to be competitive. This site best meets the requirements of TAD in the San Bernardino area and TAD will save on relocation costs if it remains at this site.

The project to approve the Lease was reviewed pursuant to the California Environmental Quality Act Guidelines and determined to be categorically exempt under Section 15301 (Class 1) because there is no possibility that the leasing of the subject property will have a significant effect on the environment.

Summary of Lease Terms
Lessor:	265 East 4^th, LLC
	F. Ron Krausz, President

Location:	265 East 4^th Street, San Bernardino

Size:	50,082 square feet of office space

Term:	12 years, commencing retroactively on June 1, 2024

Options:	Three option periods of one two-year, one three-year, and one five-year terms

Rent:	Cost per square foot per month: $2.76*
	Monthly: $138,082
	Annual: $1,656,984
	*High-range for comparable facilities in the San Bernardino area per the competitive set analysis on file with RESD; included in the rent is $0.12 of amortized tenant improvement costs

Annual Increases:	3%

Improvement Costs:	Provided by Lessor at a cost of $1,435,990, of which $704,520 will be amortized and reimbursed to landlord over 10-years of the 12-year extended term, and an allocation up to $100,000 for any contingencies and/or change order work for the turnkey tenant improvements set forth in this Amendment, to be authorized by HS and TAD representatives and paid by purchase orders, as needed

Custodial:	Provided by Lessor

Maintenance:	Provided by Lessor

Utilities:	Provided by Lessor; County to pay electric cost in excess of $170,744 per year or $0.28 per square foot per month (electrical utility expense cap) subject to 3% annual increases every June 1

Insurance:	The Certificate of Liability Insurance, as required by the Lease, is on file with RESD

Right to Terminate:	Neither party has the right to terminate for convenience

Holdover:	County shall have the right to holdover in the premises on a month-to-month basis following the expiration of the Lease with either party having the right to terminate the holdover on not less than 90 days’ notice
Parking:	Sufficient for County needs

PROCUREMENT

Not applicable.

REVIEW BY OTHERS

This item has been reviewed by County Counsel (John Tubbs II, and Adam Ebright, Deputies County Counsel, 387-5455) on September 24, 2024; Auditor-Controller/Treasurer/Tax Collector (Charlene Huang, Auditor-Controller Manager, 382-7022) on September 25, 2024; Human Services (James Locurto, Director, 388-0245, and Christopher Lange, Deputy Director, 386-8393) on September 18, 2024; Purchasing (Ariel Gill, Supervising Buyer, 387-2070) on September 20, 2024; Finance (John Hallen, 388-0208, and Garrett Baker, 387-3077, Administrative Analysts) on October 16, 2024; and County Finance and Administration (Valerie Clay, Deputy Executive Officer, 387-5423) on October 16, 2024.

(BR: 531-2674)