REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF THE COUNTY OF SAN BERNARDINO
AND RECORD OF ACTION
October 8, 2019
FROM
TERRY W. THOMPSON, Director, Real Estate Services Department
VERONICA KELLY, Director, Department of Behavioral Health
SUBJECT
Title
Amendment No. 1 to Lease Agreement with San Bernardino Community College District for Office Space for the Department of Behavioral Health in San Bernardino
End
RECOMMENDATION(S)
Recommendation
1. Approve Amendment No. 1 to Lease Agreement No. 18-709 with San Bernardino Community College District, to reflect a change of ownership of the premises from Tri City North Owner, LLC, modify the scope of the tenant improvements based on approved change orders, reducing the costs from $80,040 to $52,408, reduce the monthly amount payable for the amortized tenant improvement rent for the period May 1, 2019 through April 30, 2029 to reflect a total credit of $27,632, and update standard lease agreement language for 24,789 square feet of office space at 658 East Brier Drive, Suites 200 and 250 in San Bernardino for the Department of Behavioral Health.
2. Rescind the authorization for the Purchasing Department to issue purchase orders to San Bernardino Community College District and its predecessor-in-interest Tri City North Owner, LLC for a total amount not to exceed $45,000 for any contingencies and/or minor change orders that may arise in order to complete the tenant improvements set forth in the lease for 24,789 square feet of office space at 658 East Brier Drive, Suites 200 and 250 in San Bernardino for the Department of Behavioral Health approved by the Board of Supervisors on September 25, 2018 (Item No. 40) (Four votes required).
(Presenter: Terry W. Thompson, Director, 387-5252)
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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 Discretionary General Funding (Net County Cost). There is no cost associated with the change in ownership of the premises or to update the standard lease agreement language. The net effect of this amendment is a reduction of $27,632 in total rent costs for this lease from $80,040 to $52,408 as result of modifications to the original scope of tenant improvements, which were amortized into the rental rate pursuant to Lease Agreement No. 18-709 that was approved by the Board of Supervisors (Board) on September 25, 2018 (Item No. 40).
BACKGROUND INFORMATION
The recommended action will amend the existing lease to reflect a change of ownership of the premises from Tri City North Owner, LLC to the San Bernardino Community College District, modify the scope of the tenant improvements based on approved change orders, reduce the monthly amount payable for the amortized tenant improvement rent for the period of May 1, 2019 through April 30, 2029 for a total credit of $27,632, and update standard lease agreement language for office space for The Department of Behavioral Health (DBH) in San Bernardino.
On September 25, 2018 (Item No. 40), the Board approved a 10-year lease agreement, No. 18-709, with two five-year options to extend the term of the Lease with Tri City North Owner, LLC for approximately 24,789 square feet of office space for DBH at 658 East Brier Drive, Suites 200 and 250 in San Bernardino. The initial term of the lease was projected for the period from May 1, 2019 through April 30, 2029.
Pursuant to Lease Agreement No. 18-709, the Landlord was required to complete certain tenant improvements by May 1, 2019, the cost of those improvements were amortized into the monthly rent for the 10-year period from May 1, 2019 through April 30, 2029. During construction, the DBH Facilities and Project Management (DBH FPM), on behalf of DBH, requested multiple change orders to the original scope of the tenant improvements set forth in the Lease. The original scope of work included several sound proofing items, including double drywall, sound boots on all air conditioning returns and additional insulation. The actual material and labor cost for these items were less than originally anticipated. The department also eliminated sidelight frames from each office, water dispensers in the breakrooms, and a pass-through glass in the waiting room, which reduced the tenant improvement costs.
On March 6, 2019, the Real Estate Services Department (RESD) received all back-up documents to support all costs related to the modified tenant improvement work. As a result of all the change orders, the tenant improvement costs were reduced from $80,040 to $52,408.
Amendment No. 1 reduces the monthly amount payable for the amortized tenant improvement rent for the period May 1, 2019 through April 30, 2029 to reflect a total credit of $27,632. Since the change orders have been incorporated into this Amendment No. 1, RESD, on behalf of DBH, requests the Board rescind the authorization for the Purchasing Department to issue separate purchase orders to the Landlord for contingencies and/or minor change orders which may arise in order to complete the tenant improvement set forth in the lease that was previously approved by the Board on September 25, 2018 (Item No. 40).
Amendment No. 1 to Lease Agreement No. 18-709 provides for a negotiated amendment to the lease at the rate of $2.22 per square foot ($660,378 annually), a decrease of $0.01 from the prior rate of $2.23 per square foot, reflects a change of ownership of the premises from Tri City North Owner, LLC to San Bernardino Community College District, modifies the scope of the tenant improvements due to approved change orders, reduces the monthly amount payable for the amortized tenant improvement rent for the period May 1, 2019 through April 30, 2029 to reflect a total credit of $27,632, and updates standard lease agreement language. All other terms and conditions of the lease remain unchanged.
Staff has reviewed the recommended action pursuant to the California Environmental Quality Act (CEQA) and has determined that it does not constitute a project. Accordingly, no further action is required under CEQA.
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Summary of Lease Terms |
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Lessor: |
San Bernardino Community College District (Steven Sutorus, Business Manager) |
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Location: |
658 East Brier Drive, Suites 200 and 250, San Bernardino |
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Size: |
24,789 square feet |
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Term: |
10 years, which commenced on May 1, 2019 and ends April 30, 2029 |
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Options: |
Two five-year options |
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Rent: |
Approximate Cost per sq. ft. per month: $2.22* full service gross |
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Monthly: $55,032 |
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Annual: $660,378** |
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*The base rate of $2.20 per square foot is in the mid-range for comparable facilities in the San Bernardino area per the competitive set analysis on file with RESD. Adding the amortized tenant improvement costs increases the rate to $2.22. **The annual rent includes $72,315 in rent credits applied in the first three months of the term. |
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Annual Increases: |
Approximately 2.5% |
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Improvement Costs: |
$52,408 provided by Lessor amortized over the 10-year term |
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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 that County will pay for after-hours Heating, Ventilation, and Air Conditioning at a rate of $65 per hour |
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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: |
The County does not have the right to terminate for convenience during the initial 10-year term. In the event that the initial term of the lease is extended by the parties, the County shall have the right to terminate the lease at any time during any extended term by providing 90 days’ prior written notice. |
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Parking: |
Four reserved and 123 unreserved parking spaces |
PROCUREMENT
On September 25, 2018 (Item No. 40) the Board approved Lease Agreement No. 18-709, which was procured according to County Policy 12-02 - Leasing Privately Owned Real Property for County Use (Policy), via the use of an alternative procedure in lieu of a Formal Request for Proposals (RFP) to enter into a 10-year lease with two five-year options to extend the term without the requirement for a RFP process as provided in the Policy. The Policy provides that 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, the Board may approve an alternative procedure in lieu of a Formal RFP.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Agnes Cheng, Deputy County Counsel and Dawn Martin, Deputy County Counsel, 387-5455) on September 10, 2019; DBH (Michael Knight, Assistant Director, 388-0808 and Georgina Yoshioka, Deputy Director, 388-0804) on September 9, 2019; Purchasing (Michelle Churchill, Buyer III, 387-2070) on September 6, 2019; Finance (Wen Mai, Principal Administrative Analyst, 387-4020 and Chris Lange, Administrative Analyst, 386-8393) on September 19, 2019; and County Finance and Administration (Matthew Erickson, County Chief Financial Officer, 387-5423) on September 24, 2019.
(JAG: 677-8210)