Legislation Details

File #: 9356   
Type: Consent Status: Passed
File created: 12/27/2023 Department: Real Estate Services
On agenda: 1/9/2024 Final action: 1/9/2024
Subject: Amendment to Lease Agreement with Palm Court Office Solutions 2, LLC for Office Space in Victorville
Attachments: 1. CON-RESD-CFS-010924-Lease Amd w Palm Court Office Solutions 2 LLC 12-761 A4, 2. Item #38 Executed BAI, 3. 12-761 A-4 Executed Contract

REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS

OF SAN BERNARDINO COUNTY

AND RECORD OF ACTION

 

January 9, 2024

 

FROM

TERRY W. THOMPSON, Director, Real Estate Services Department

JEANY ZEPEDA, Director, Children and Family Services

         

SUBJECT                      

Title                     

Amendment to Lease Agreement with Palm Court Office Solutions 2, LLC for Office Space in Victorville

End

 

RECOMMENDATION(S)

Recommendation

1.                     Find that approval of Amendment No. 4 to Lease Agreement No. 12-761 with Palm Court Office Solutions 2, LLC for office space is an exempt project under the California Environmental Quality Act Guidelines, Section 15301 - Existing Facilities (Class I). 

2.                     Approve Amendment No. 4 to Lease Agreement No. 12-761 with Palm Court Office Solutions 2, LLC to extend the term of the lease 10 years by exercising two remaining five-year options congruently beginning on January 10, 2024 through January 9, 2034, adjust the rental rate schedule, add two additional five-year options to extend, change the County’s Termination Rights to reflect a 180-Day Notice option beginning in the seventh year from January 10, 2030, increase the contract square footage from 37,000 to 38,360, add the parking lot premises, and update standard lease agreement language for office space for Children and Family Services located at 15020 Palmdale Road in Victorville for a total contract amendment amount of $15,567,306.

3.                     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 additional budgeted Discretionary General Funding (Net County Cost).  The total cost of this 10-year amendment to Lease Agreement No. 12-761 (Lease) is $15,567,306.  Lease payments will be made from the Real Estate Services Department (RESD) rent budget (7810001000) and reimbursed from the Human Services (HS) budget (5015011000).  Sufficient appropriation is included in the 2024-25 budgets and will be included in future recommended budgets.  Annual lease costs are as follows:

 

Year

Annual Lease Cost

Estimate of Other Costs

Total Annual Lease Cost

January 10, 2024 - January 9, 2025

    $   1,311,912

 $   46,032

$   1,357,944

January 10, 2025 - January 9, 2026

$   1,351,269

 $   47,413

$   1,398,682

January 10, 2026 - January 9, 2027

$   1,391,807

 $   48,835

*$   1,440,643

January 10, 2027 - January 9, 2028

$   1,433,562

$   50,300

$   1,483,862

January 10, 2028 - January 9, 2029

$   1,476,569

$   51,809

$   1,528,378

January 10, 2029 - January 9, 2030

$   1,520,866

$   53,364

*$   1,574,229

January 10, 2030 - January 9, 2031

$   1,566,492

$   54,965

*$   1,621,456

January 10, 2031 - January 9, 2032

$   1,613,486

$   56,614

$   1,670,100

January 10, 2032 - January 9, 2033

$   1,661,891

$   58,312

$   1,720,203

January 10, 2033 - January 9, 2034

$   1,711,748

$   60,061

$   1,771,809

Total Cost

*$   15,039,601

$   527,705

$   15,567,306

 

*Figures are rounded to the nearest whole number.

 

BACKGROUND INFORMATION

The recommended action will amend the Lease with Palm Court Office Solutions 2, LLC, to extend the term of the Lease for the period of January 10, 2024 through January 9, 2034, adjust the rental rate, add two five-year options to extend, change the County’s Termination Rights to reflect a 180-Day Notice option beginning in the seventh year of the extended term from January 10, 2030, increase the contract square footage from 37,000 to 38,360, add the parking lot premises, and update standard lease agreement language for office space for Children and Family Services (CFS) due to the continuing need for Services located at 15020 Palmdale Road in Victorville (Premises).

 

On October 2, 2012 (Item No. 31), the Board of Supervisors (Board) approved the original Lease for the period of September 1, 2013, through August 31, 2023.  In the 10 years since the Lease was originally approved, the Board has approved the following three amendments to extend the term of the Lease, adjust the rental rate schedule, approve a change of ownership, increase square footage, update standard lease language, and approve the addition of a fixed supplemental maintenance fee in addition to the rent, due to high maintenance costs.

 

Amendment No.

Approval Date

Item No.

1

May 21, 2013

53

2

March 11, 2014

26

3

April 21, 2020

50

 

CFS has requested RESD exercise both remaining five-year options to extend the term of the Lease congruently for the period of January 10, 2024, through January 9, 2034, and negotiate the Right to Terminate to 180 Days’ Notice at the beginning of year seven, from January 10, 2030.  Upon commencement, Amendment No. 4 to the Lease will add the parking lot premises, extend the Lease for an additional 10-year term, add two five-year options to extend, adjust the rental and maintenance fee rate schedules, add square footage to include employee breakroom patios from 37,000 to 38,360, change the County’s Right to Terminate to 180 Days’ Notice at the beginning of the seventh year (January 10, 2030), and update standard lease agreement language.  Exhibit “A” Premises Specifications to Amendment No. 4 adds into this Lease the parking lot premises that the County possessed under a separate Contract No. 16-839, which is expiring January 9, 2024.  All other terms and conditions of the Lease will remain unchanged.

 

The project to approve Amendment No. 4 to the Lease was reviewed pursuant to the California Environmental Quality Act (CEQA) and determined to be categorically exempt under CEQA Guidelines Section 15301 - Existing Facilities (Class I) 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: 

Palm Court Office Solutions 2, LLC

 

 

Location:

15020 Palmdale Road, Victorville

 

 

Size:

38,360 square feet

 

 

Term:

10 years, January 10, 2024 - January 9, 2034

 

 

Options:

Two five-year options to extend

 

 

Rent:

Cost per square foot per month:  2.85* full-service gross

 

Monthly:  $109,326

 

Annual:   $1,311,912

 

*Mid-range for comparable facilities in the Victorville area per the supporting competitive set analysis on file; plus a $0.10 per square foot per month supplemental maintenance fee

 

 

Annual Increases:

3% for both the rent and maintenance fee

 

 

Improvement Costs:

No County Improvement Costs

 

 

Custodial:

Provided by Lessor

 

 

Maintenance:

Provided by Lessor

 

 

Utilities:

Provided by Lessor, an electrical cap of $0.25 per square foot and subject to 3% annual increases for electric and gas paid by County; all other utilities are paid by Lessor

 

 

Insurance:

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

 

 

Holdover:

Month-to-month basis upon the same provisions of the Lease

 

 

Right to Terminate:

Beginning year seven, January 10, 2030, the County has the right to terminate with 180-Days’ Notice

 

 

Parking:

Sufficient for County needs - adds the parking lot premises

 

PROCUREMENT

On May 21, 2013 (Item No. 53), the Board approved the Lease which was procured according to County Policy 12-02 - Leasing Privately Owned Real Property for County Use (Policy) via an Alternative Procedure Exception to Policy.  The procurement process required by the 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 also requires a thorough and detailed review by the County Executive Officer 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 Amendment No. 4 to the Lease will result in an aggregate term of 20 years.  RESD completed a Market Analysis of comparable properties and found the current rental rate to be competitive.  The site best meets the needs of HS in the Victorville area. 

 

REVIEW BY OTHERS

This item has been reviewed by County Counsel (John Tubbs II, and Kaleigh Ragon, Deputies County Counsel, 387-5455) on November 27, 2023; Children and Family Services (Jeany Zepeda, Director, 387-2792) on December 6, 2023; Purchasing (Ariel Gill, Supervising Buyer, 387-2070) on November 28, 2023; Finance (John Hallen, Administrative Analyst, 388-0208, and Garrett Baker, Administrative Analyst, 387-3077) on December 13, 2023; and County Finance and Administration (Valerie Clay, Deputy Executive Officer, 387-5423) on December 14, 2023.

 

(JF:  269-1984)