REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
December 5, 2023
FROM
TERRY W. THOMPSON, Director, Real Estate Services Department
JEANY ZEPEDA, Director, Children and Family Services
SUBJECT
Title
Lease Agreement with AIAT, LLC, for Office Space in San Bernardino
End
RECOMMENDATION(S)
Recommendation
1. Find that approval of this Lease Agreement with AIAT, LLC 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 33,278 square feet within three buildings located at 2145-2185 East Highland Avenue in San Bernardino, projected to begin May 1, 2024 through April 30, 2039, in the amount of $23,060,517, with two five-year options to extend for Children and Family Services.
3. Approve a 15-year Modified Gross Lease Agreement with AIAT, LLC, for Children and Family Services office space and welcoming center, including exclusive parking lot usage, of approximately 33,278 square feet located at 2145-2185 East Highland Avenue in San Bernardino, projected to begin May 1, 2024 through April 30, 2039, in the amount of $23,060,517, with two five-year options to extend the term.
4. Authorize the Auditor-Controller/Treasurer/Tax Collector to post budget adjustments for the 2023-24 Rents budget, as detailed in the Financial Impact section (Four votes required).
5. Authorize the Purchasing Agent to issue purchase orders, as necessary, for a total amount not to exceed $100,000, for any unforeseen contingencies and/or change orders that may arise during construction in order to complete the tenant improvements set forth in the Lease Agreement with AIAT, LLC (Four votes required).
6. 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.
Provide for the Safety, Health, and Social Service Needs of County Residents.
FINANCIAL IMPACT
Approval of this item will not result in the need for additional Discretionary General Funding (Net County Cost). The total cost of this 15-year Modified Gross Lease Agreement (Lease) is $23,060,517, with 3.5% annual compound increases beginning the second year of the term, and County termination rights available at the beginning of year 10 with 90 days’ notice. Lease payments will be made from the Real Estate Services Department (RESD) Rents budget (7810001000) and reimbursed from the Human Services (HS) budget (5015011000). Sufficient appropriation has been included in the HS Administration 2023-24 Claim budget and will be included in future recommended budgets.
RESD requests the Auditor-Controller/Treasurer/Tax Collector to post the following adjustments to the 2023-24 Rents budget needed to pay the lease and improvement costs for the first two months of the Lease:
|
Cost Center |
GL Account |
Description |
Action |
Amount |
|
7810001000 |
52002905 |
Rents & Leases |
Increase |
$202,478 |
|
7810001000 |
55415013 |
Services & Supplies Transfer In |
Increase |
$202,478 |
Annual lease costs are as follows:
|
Year |
Annual Lease Cost |
Annual Amortization of Improvements Cost |
|
May 1, 2024 - April 30, 2025 May 1, 2025 - April 30, 2026 May 1, 2026 - April 30, 2027 May 1, 2027 - April 30, 2028 May 1, 2028 - April 30, 2029 May 1, 2029 - April 30, 2030 May 1, 2030 - April 30, 2031 May 1, 2031 - April 30, 2032 May 1, 2032 - April 30, 2033 May 1, 2033 - April 30, 2034 May 1, 2034 - April 30, 2035 May 1, 2035 - April 30, 2036 May 1, 2036 - April 30, 2037 May 1, 2037 - April 30, 2038 May 1, 2038 - April 30, 2039 |
$1,126,128 $1,165,542 $1,206,336 $1,248,558 $1,292,257 $1,337,486 $1,384,298 $1,432,749 $1,482,895 $1,534,796 $1,588,514 $1,644,112 $1,701,656 $1,761,214 $1,822,856 |
$88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 $88,741 |
|
Total Cost |
$21,729,397 |
*$1,331,120 |
*Amount is rounded up by five dollars due to the dropping of the cents in each year.
BACKGROUND INFORMATION
The recommended action will provide for a new 15-year Lease with AIAT, LLC (Landlord) for the projected period of May 1, 2024, through April 30, 2039. Subsequent to approval and execution of the Lease, the turnkey tenant improvements shall be performed and completed by the Landlord. The Lease will provide approximately 33,278 square feet of office space located at 2145-2185 East Highland Avenue in San Bernardino (Center) for Children and Family Services (CFS). This new Lease will allow CFS, in response to Assembly Bill (AB) 403 Continuum of Care Reform, to continue to broaden services by providing a larger, more secure, and structured temporary sanctuary for at-risk youth in the county.
CFS provides protection services for endangered children, preserves, and strengthens families, and develops alternative family settings. Services as mandated by law and regulation, are provided in the least intrusive manner with a family-centered focus. CFS objectives are accomplished in collaboration with the family, a wide variety of public and private agencies, and members of the community.
The additional space is needed to meet the demand for the provision of services as a consequence of AB 403 Continuum of Care Reform that addresses lack of suitable Short-Term Residential Therapeutic Programs (STRTP), small family home placement, and treatment settings for our highest needs children and youth. This Center effectively responds to the Continuum of Care Reform by offering office space and private areas that ensure support services are delivered to children and youth in a centralized location, with additional office space for Child Placement Services administration.
This new Lease provides for 33,278 square feet of office space to be occupied by CFS for a commencement date contingent upon the Landlord’s completion of turnkey tenant improvements, for the projected period of May 1, 2024, through April 30, 2039, for the space located at the Center. The Lease also provides CFS with a fixed improvement cost allowance of $1,331,120 for tenant improvements, and any cost exceeding the fixed improvements cost shall be amortized monthly over the initial term of this Lease at an estimated $7,395 per month and payable by the County.
Turnkey improvements, that consist of private intake rooms, showering capabilities, quiet spaces for schoolwork and downtime, both indoor and outdoor recreational spaces, private offices to meet with Social Workers and other County support services, and additional office space for Child Placement Services administration, are included in the proposed monthly payments. RESD requests, on behalf of CFS, 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 turnkey tenant improvements set forth in the Lease. All change orders and/or contingencies will be approved by CFS prior to authorizing any work or payment to the Landlord, which 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 the Lease was reviewed pursuant to the California Environmental Quality Act and determined to be categorically exempt under Guidelines Section 15301 - Existing Facilities (Class1) because the proposed Lease 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: |
AIAT, LLC. |
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Location: |
2145-2185 East Highland Avenue in San Bernardino |
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Size: |
33,278 square feet |
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Term: |
15-year Lease projected to begin May 1, 2024, and expiring on April 30, 2039 |
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Options: |
Two five-year options to extend |
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Rent: |
Cost per square foot per month: $2.82* |
|
|
Monthly: $93,844 |
|
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Annual: $1,126,128 |
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*High-range for comparable facilities in the San Bernardino area per the competitive set analysis on file with RESD |
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Annual Increases: |
3.5% annually beginning in the second year |
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Improvement Costs: |
Landlord total fixed cost for the improvements is $1,331,120 ($40 per square foot) any cost exceeding the fixed improvement cost shall be amortized monthly over the initial 15-year term of the Lease at an estimated $7,395 per month and payable by County, and an allocation of up to $100,000 for approved unforeseen contingencies and/or approved change orders to the tenant improvements to be authorized and paid by purchase orders as needed |
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Custodial: |
County responsibility |
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Maintenance: |
Landlord responsibility except County furniture, fixture and equipment |
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Utilities: |
Provided by Lessor, subject to an electrical cap rate of $0.32 per square foot subject to 3% annual increases |
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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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Holdover: |
Month-to-month basis upon the same provisions of the Lease |
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Right to Terminate: |
Available to the County at beginning of year 10 with 90 days’ notice |
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Parking: |
Exclusive parking lot and spaces sufficient for County needs |
PROCUREMENT
The procurement process was held in accordance with County Policy 12-02 - Leasing Privately Owned Real Property for County Use (Policy), using Board approval of an alternative procedure to lease approximately 33,278 square feet of office space in San Bernardino for CFS, for 15 years for the projected period of May 1, 2024, through April 30, 2039, subject to Landlord’s completion of certain turnkey tenant improvements, with two five-year options to extend the term of the Lease.
In cases where a formal Request For Proposal (RFP) would be required under this Policy, the Board may approve an alternative procedure to the use of an RFP 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 interests of the County.
RESD, acting in its approved capacity as the County Administrative Office designee to review proposed real property leases under the Policy, completed a competitive analysis of the area. The analysis found the lease rate is high range for a 15-year term, but the premises best meets the requirements of CFS due to its close proximity to the CFS demographic and specific program use, and requests the Board approve the Lease as this location best meets the needs and requirements of CFS.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (John Tubbs II, Deputy County Counsel, and Kaleigh Ragon, Deputy County Counsel, 387-5455) on October 23, 2023; Human Services (Allen Simmons, Administrative Supervisor, 388-0367) on October 24, 2023; Purchasing (Ariel Gill, Supervising Buyer, 386-8046) on October 23, 2023; Auditor-Controller/Treasurer/Tax Collector (Charlene Huang, Auditor-Controller Manager, 382-7022) on November 6, 2023; Finance (John Hallen, Administrative Analyst, 388-0208, and Yael Verduzco, Principal Administrative Analyst, 387-5285) on November 22 2023; and County Finance and Administration (Valerie Clay, Deputy Executive Officer, 387-5423) on November 22, 2023.
(DM: 387-2039)