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Type:
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Consent
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Status:
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Passed
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On agenda:
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3/25/2025
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Final action:
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3/25/2025
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Subject:
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Amendments to Lease Agreements with SEC Euclid and Holt Avenue Property, LP for Lab, Medical and Office Space in Ontario
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REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
March 25, 2025
FROM
TERRY W. THOMPSON, Director, Real Estate Services Department
JOSHUA DUGAS, Director, Department of Public Health
SUBJECT
Title
Amendments to Lease Agreements with SEC Euclid and Holt Avenue Property, LP for Lab, Medical and Office Space in Ontario
End
RECOMMENDATION(S)
Recommendation
1. Find that approval of Amendment No. 2 to Lease Agreement No. 13-67, Lease Agreement No. 13-68, Lease Agreement No.13-69 and Lease Agreement No.13-70 with SEC Euclid and Holt Avenue Property LP for lab and office space, is an exempt project under the California Environmental Quality Act Guidelines, Section 15301 - Class 1 Existing Facilities.
2. Approve Amendment No. 2 to Lease Agreement No. 13-67, with SEC Euclid and Holt Avenue Property LP through the use of an alternative procedure as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, extend the term ten years for the period of April 1, 2025, through March 31, 2035, following a permitted hold over for the period of August 1, 2024, through March 31, 2025, adjust the rental rate schedule, and update standard lease agreement language, for 12,867 square feet of lab and office space, located at 150 E. Holt Boulevard in Ontario for the Department of Public Health, in the amount of $4,599,776, for a new total amount of $8,578,796.
3. Approve Amendment No. 2 to Lease Agreement No. 13-68, with SEC Euclid and Holt Avenue Property LP through the use of an alternative procedure as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, extend the term ten years for the period of April 1, 2025, through March 31, 2035, following a permitted hold over for the period of August 1, 2024, through March 31, 2025, adjust the rental rate schedule, and update standard lease agreement language, for 4,828 square feet of office space, located at 150 E. Holt Boulevard in Ontario for the Department of Public Health, in the amount of $1,695,424, for a new total amount of $2,746,360.
4. Approve Amendment No. 2 to Lease Agreement No. 13-69, with SEC Euclid and Holt Avenue Property LP through the use of an alternative procedure as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, extend the term ten years for the period of April 1, 2025, through March 31, 2035, following a permitted hold over for the period of August 1, 2024, through March 31, 2025, adjust the rental rate schedule, and update standard lease agreement language, for 20,925 square feet of medical and office space, located at 150 E. Holt Boulevard in Ontario for the Department of Public Health, in the amount of $7,374,956, for a new total amount of $12,301,532.
5. Approve Amendment No. 2 to Lease Agreement No. 13-70, with SEC Euclid and Holt Avenue Property LP through the use of an alternative procedure as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, extend the term ten years for the period of April 1, 2025, through March 31, 2035, following a permitted hold over for the period of August 1, 2024, through March 31, 2025, adjust the rental rate schedule, and update standard lease agreement language, for 19,310 square feet of office space, located at 150 E. Holt Boulevard in Ontario for the Department of Public Health, in the amount of $6,774,868, for a new total amount of $10,899,484.
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
Department of Public Health (Laboratory): Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The total cost of Amendment No. 2 to Lease Agreement No. 13-67 (Lease 13-67) with SEC Euclid and Holt Avenue Property LP (SEC) is $4,599,776. Lease payments will be made from the Real Estate Services (RESD) Rents budget (7810001000) and reimbursed from the Department of Public Health (DPH) budget (AAA PHL). Reimbursement to RESD is funded by the collection of lab fees through Medi-Cal, Medicare, MOUs with partnered cities and hospitals, private insurance, Private Pay and 1991 Health Realignment. Other costs associated with Lease 13-67 include utility expenses, which will be paid from the DPH budget. Sufficient appropriation is included in the 2024-25 budget and will be included in future recommended budgets. Annual lease costs are as follows:
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Year |
Lease Cost |
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August 1, 2024 - March 31, 2025 |
$277,928* |
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April 1, 2025 - March 31, 2026 |
$381,372 |
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April 1, 2026 - March 31, 2027 |
$389,004 |
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April 1, 2027 - March 31, 2028 |
$396,780 |
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April 1, 2028 - March 31, 2029 |
$408,684 |
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April 1, 2029 - March 31, 2030 |
$420,948 |
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April 1, 2030 - March 31, 2031 |
$433,584 |
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April 1, 2031 - March 31, 2032 |
$448,752 |
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April 1, 2032 - March 31, 2033 |
$464,460 |
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April 1, 2033 - March 31, 2034 |
$480,720 |
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April 1, 2034 - March 31, 2035 |
$497,544 |
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Total Cost |
$4,599,776 |
*Permitted holdover period
Department of Public Health (Woman, Infant and Children Program): Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The total cost of the Amendment No. 2 to Lease Agreement 13-68 (Lease 13-68) with SEC is $1,695,424. Lease payments will be made from the RESD Rents budget (7810001000) and reimbursed from the DPH budget (AAA PHL). Reimbursement to RESD will be funded fully by the Federal Women, Infant and Children Supplemental Nutrition Program grant. Other costs associated with Lease 13-68 include utility expenses, which will be paid from the DPH budget. Sufficient appropriation is included in the 2024-25 budget and will be included in future recommended budgets. Annual lease costs are as follows:
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YearLease Cost |
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August 1, 2024 - March 31, 2025 |
$73,768* |
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April 1, 2025 - March 31, 2026 |
$143,100 |
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April 1, 2026 - March 31, 2027 |
$145,968 |
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April 1, 2027 - March 31, 2028 |
$148,884 |
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April 1, 2028 - March 31, 2029 |
$153,348 |
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April 1, 2029 - March 31, 2030 |
$157,956 |
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April 1, 2030 - March 31, 2031 |
$162,684 |
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April 1, 2031 - March 31, 2032 |
$168,384 |
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April 1, 2032 - March 31, 2033 |
$174,276 |
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April 1, 2033 - March 31, 2034 |
$180,372 |
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April 1, 2034 - March 31, 2035 |
$186,684 |
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Total Cost |
$1,695,424 |
*Permitted holdover period
Department of Public Health (Medical Clinic): Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The total cost of Amendment No. 2 to Lease Agreement 13-69 (Lease 13-69) with SEC is $7,374,956. Lease payments will be made from the RESD Rents budget (7810001000) and reimbursed from DPH budget (AAA PHL). Reimbursement to RESD will be funded by a combination of Medi-Cal, Medicare, Private Insurance, Private Pay, the Consolidated Health Centers HRSA Federal grant and 1991 Health Realignment. Other costs associated with Lease 13-69 include utility expenses, which will be paid from the DPH budget. Sufficient appropriation is included in the 2024-25 budget and will be included in future recommended budgets. Annual lease costs are as follows:
|
Year |
Lease Cost |
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August 1, 2024 - March 31, 2025 |
$346,520* |
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April 1, 2025 - March 31, 2026 |
$620,220 |
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April 1, 2026 - March 31, 2027 |
$632,616 |
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April 1, 2027 - March 31, 2028 |
$645,276 |
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April 1, 2028 - March 31, 2029 |
$664,632 |
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April 1, 2029 - March 31, 2030 |
$684,576 |
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April 1, 2030 - March 31, 2031 |
$705,108 |
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April 1, 2031 - March 31, 2032 |
$729,792 |
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April 1, 2032 - March 31, 2033 |
$755,328 |
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April 1, 2033 - March 31, 2034 |
$781,764 |
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April 1, 2034 - March 31, 2035 |
$809,124 |
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Total Cost |
$7,374,956 |
*Permitted holdover period
Department of Public Health (California Children Services): Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The total cost of this 10-year Amendment No. 2 to Lease Agreement 13-70 (Lease) with SEC is $6,774,868. Lease payments will be made from the RESD Rents budget (7810001000) and reimbursed from the Department of Public Health (DPH) budget (AAA PHL). Reimbursement to RESD will be primarily funded by a combination of the Children’s Health Insurance Program Title XXI grant, Medical Assistance Program Title XIX grant, DTT and Admin State funding, Medi-Cal, and State Realignment. Other costs associated with this lease include utility expenses, which will be paid from the DPH budget. Sufficient appropriation is included in the 2024-25 budget and will be included in future recommended budgets. Annual lease costs are as follows
|
Year |
Lease Cost |
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August 1, 2024 - March 31, 2025* |
$288,880.00* |
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April 1, 2025 - March 31, 2026 |
$572,352 |
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April 1, 2026 - March 31, 2027 |
$583,800 |
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April 1, 2027 - March 31, 2028 |
$595,476 |
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April 1, 2028 - March 31, 2029 |
$613,332 |
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April 1, 2029 - March 31, 2030 |
$631,740 |
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April 1, 2030 - March 31, 2031 |
$650,688 |
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April 1, 2031 - March 31, 2032 |
$673,464 |
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April 1, 2032 - March 31, 2033 |
$697,032 |
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April 1, 2033 - March 31, 2034 |
$721,428 |
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April 1, 2034 - March 31, 2035 |
$746,676 |
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Total Cost |
$6,774,868 |
BACKGROUND INFORMATION
On February 26, 2013 (Item No. 46), the Board of Supervisors (Board) approved four 10-year lease agreements, Lease Agreement Nos. 13-67, 13-68, 13-69 and 13-70 with SEC, each with two five-year options to extend, for a total of 57,930 square feet of laboratory, clinic and office space located at 150 E. Holt Boulevard in Ontario. The original term of each of the Leases was from June 1, 2017, through May 31, 2024, with the total cost in the amount of $14,081,145.
On June 24, 2014 (Item No. 76), the Board approved Amendment No. 1 to Lease Agreement Nos. 13-67, 13-68, 13-69, and 13-70 to change the commencement date from June 1, 2014, to August 1, 2014; the end date from May 31, 2024, to July 31, 2024; the date the County can terminate the lease from May 31, 2024, to July 31, 2024; and adjust the rent payment schedule on each respective lease agreement due to delays caused by other government entities in approving plans, issuing permits and completing inspections, which were beyond the landlord’s control.
The project to approve Amendment No. 2 to Lease Agreements Nos. 13-67,13-68, 13-69, and 13-70 was reviewed pursuant to the California Environmental Quality Act (CEQA) and determined to be categorically exempt under CEQA Guidelines Section 15301 - Class 1 Existing Facilities because Amendment No. 2 is to secure property to operate within the existing structure with no expansion of the existing Leases.
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Summary of Lease Terms |
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Lessor: |
SEC Euclid and Holt Avenue Property, LP |
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Location: |
150 E. Holt Boulevard in Ontario |
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Size: |
57,930 total square feet occupied by the following DPH programs and services: Lab: 12,867 square feet WIC: 4,828 square feet Clinic: 20,925 square feet CCS: 19,310 square feet |
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Term: |
10 years commencing April 1, 2024 |
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Options: |
Two five-year options remain |
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Rent: |
Lab: Cost per square foot per month: $2.47 |
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Monthly: $31,781 |
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Annual: $381,372 |
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Mid-range for comparable facilities in the Ontario area per the competitive set analysis on file with RESD WIC: Cost per square foot per month: $2.47 Monthly: $11,925 Annual: $143,100 *Mid-range for comparable facilities in the Ontario area per the competitive set analysis on the file with RESD Clinic: Cost per square foot per month: $2.47 Monthly: $51,685 Annual: $620,220 *Mid-range for comparable facilities in the Ontario area per the competitive set analysis on the file with RESD CCS: Cost per square foot per month: $2.47 Monthly: $47,696 Annual: $572,352 *Mid-range for comparable facilities in the Ontario area per the competitive set analysis on the file with RESD |
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Annual Increases: |
Years 1 - 3: 2% Years 4 - 6: 3% Years 7 - 10: 3.5% |
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Improvement Costs: |
N/A |
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Custodial: |
To be provided by Lessor |
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Maintenance: |
To be provided by Lessor |
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Utilities: |
To be provided by County |
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Insurance: |
The Certificate of Liability Insurance, as required by the Leases, is on file with the Real Estate Services Department |
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Holdover: |
County has the right to Holdover |
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Right to Terminate: |
County has the right to terminate with 90 days’ notice |
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Parking: |
Sufficient for County needs |
PROCUREMENT
Policy 12-02 requires a thorough and detailed review by the County Administrative Office (CAO) or designee to validate the need for and provide a competitive analysis of any lease with a term of more than 20 years. Approval of the Amendment will yield an aggregate term of 20 years, and a potential aggregate term of 30 years, if both the extension options are exercised.
RESD, acting in its approved capacity as the CAO designee to review proposed real property leases under Policy 12-02, completed a market analysis of comparable properties and found the current rental rate, including annual increases during the ten-year extended term, to be competitive. Policy 12-02 provides that the Board may approve the use of an alternative procedure to the use of a Formal RFP process 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 interest of the County. The site best meets the needs of DPH for laboratory, medical clinic and office space in Ontario, which would minimize disruption to DPH operations and save on moving costs.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (John Tubbs II, and Adam Ebright, Deputies County Counsel, 387-5455) on February 25, 2025; Public Health (Jennifer Osorio, Assistant Director, 387-9146) on February 25, 2025; Purchasing (Ariel Gill, Supervising Buyer, 387-2070) on February 26, 2025; Finance (Iliana Rodriguez, 387-4205, and Eduardo Mora, 387-4376, Administrative Analysts) on March 13, 2025; and County Finance and Administration (Paloma Hernandez-Barker, Deputy Executive Officer, 387-5423) on March13, 2025.
(DM: 677-8388)
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