Legislation Details

File #: 9363   
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 Lugunia Offices, LLC, for Office Space in Redlands
Attachments: 1. R1-CON-RESD-TAD-01092024-Lease Amd w Lugunia Offices LLC-12-167 A5, 2. Item #45 Executed BAI, 3. 12-167 A5 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

GILBERT RAMOS, Director, Transitional Assistance Department

         

SUBJECT                      

Title                     

Amendment to Lease Agreement with Lugunia Offices, LLC, for Office Space in Redlands

End

 

RECOMMENDATION(S)

Recommendation

1.                     Find that approval of Amendment No. 5 to Lease Agreement No. 12-167 with Lugunia Offices, 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. 5 to Lease Agreement No. 12-167 with Lugunia Offices, LLC, to extend the term of the lease 10 years for the period of January 9, 2024 through January 8, 2034, following a permitted 51-day holdover for the period of November 19, 2023 through January 8, 2024, adjust the rental rate schedule, preserve the two five-year options to extend, change the County’s Termination Rights to reflect a 180-Day Notice option beginning in the seventh year, January 9, 2030, increase square footage from 26,969 to 27,709, and update standard lease agreement language for office space for the Transitional Assistance Department located at 1811 West Lugonia Avenue in Redlands for a total contract amount of $10,794,166, which includes the 51-day holdover costs.

3.                     Authorize the Auditor/Controller/Treasurer/Tax Collector to post the necessary 2023-24 budget adjustments as detailed in the Financial Impact section (Four votes required).

4.                     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 is $10,794,166, which includes 51 days of holdover costs.  Lease payments will be made from the Real Estate Services Department (RESD) Rents budget (7810001000) and reimbursed from the Human Services (HS) budget (5015011000). The 2023-24 budget included $896,376 to cover this lease, but the cost of the new annual lease is $931,023 for 2023-24, a $34,647 annual increase.  In order to cover the increase for the remaining six months of the 2023-24 (January 2024 through June 2024), RESD requests the Auditor-Controller/Treasurer/Tax Collector to post the following adjustments to the 2023-24 budget:

 

Cost Center

GL Account

Description

Action

Amount

7810001000

52002905

Rents & Leases-Structures Improvement & Grounds

Increase

$17,324

7810001000

55415013

Services & Supplies Transfer In

Increase

$17,324

 

Sufficient appropriation will be included in future recommended budgets. Annual lease costs are as follows:

 

Year

Monthly Rent

Monthly Supplemental Maintenance

Total Monthly Rent

*November 19, 2023 - December 18, 2023 *December 19, 2023 - January 8, 2024

$ 68,501 $ 47,951

$ 2,697 $ 1,888

$71,198 $49,839

January 9, 2024 - January 8, 2025

$ 897,772

$33,251

$931,023

January 9, 2025 - January 8, 2026

$ 924,705

$34,249

$958,954

January 9, 2026 - January 8, 2027

$ 952,446

$35,276

$987,722

January 9, 2027 - January 8, 2028

$981,019

$36,334

$1,017,353

January 9, 2028 - January 8, 2029

$1,010,450

$37,424

$1,047,874

January 9, 2029 - January 8, 2030

$1,040,763

$38,547

$1,079,310

January 9, 2030 - January 8, 2031

$1,071,986

$39,703

$1,111,689

January 9, 2031 - January 8, 2032

$1,104,146

$40,894

$1,145,040

January 9, 2032 - January 8, 2033

$1,137,270

$42,121

$1,179,391

January 9, 2033 - January 8, 2034

$1,171,388

$43,385

$1,214,773

Total Cost

$10,408,397

385,769

$10,794,166

*51-day Holdover Period

 

BACKGROUND INFORMATION

The recommended action will amend Lease Agreement No. 12-167 (Lease) with Lugunia Offices, LLC, to extend the term of the lease for the period of January 9, 2024 through January 8, 2034, following a permitted 51-day holdover period from November 19, 2023 through January 8, 2024, adjust the rental rate, preserve the two five-year options to extend, change the County’s Termination Rights to reflect a 180-Day Notice option beginning in the seventh year, January 9, 2030, increase the square footage from 26,969 to 27,709, and update standard lease agreement language for office space for the Transitional Assistance Department (TAD) due to the continuing need for services located at 1811 West Lugonia Avenue in Redlands (Premises).

 

On April 21, 2020 (Item No. 53), the Board of Supervisors (Board) approved the Lease for the addition of a fixed supplemental maintenance fee in addition to the rent, due to high maintenance costs.  The original term of the Lease was for the period of May 1, 2013, through April 30, 2023.  In the 10 years since the lease was originally approved, the Board has approved the following four amendments to extend the lease commencement date, reflect a change in ownership, adjust the rental rate schedule, add square footage, and update standard lease language.

 

Amendment No.

Approval Date

Item No.

Initial

March 27, 2012

56

1

March 12, 2013

36

2

April 23, 2013

42

3

February 11, 2014

26

4

April 21, 2020

53

 

TAD has requested RESD to extend the term of the Lease 10 years for the period of January 9, 2024 through January 8, 2034, and negotiate TAD’s Right to Terminate to 180 Days’ Notice at the beginning of year seven, January 9, 2030.  Negotiations with Lugunia Offices, LLC regarding the lease term and termination rights have delayed the renewal process.  On November 18, 2023, the Lease began a holdover period for 51 days.  The County has continued to occupy the premises abiding by all current Lease terms.  Amendment No. 5 to the Lease extends the term for 10 years, adjusts the rental and maintenance rate schedules, adds square footage to include employee breakroom patio, changes the County’s right to terminate to 180 Days’ Notice at the beginning of the seventh year, and updates standard lease agreement language.  All other terms and conditions of the Lease remain unchanged.

 

All change orders and/or contingencies will be approved by TAD 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 Amendment No. 5 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 the proposed lease amendment is to secure property to operate within the existing structure with negligible or no expansion of existing use, and there is no possibility that the leasing of the subject property will have a significant effect on the environment.

 

Summary of Lease Terms

Lessor: 

Lugunia Offices, LLC

 

 

Location:

1811 West Lugonia Avenue, Redlands

 

 

Size:

27,709 square feet

 

 

Term:

10 years, January 9, 2024 through January 8, 2034

 

 

Options:

Two five-year options to extend

 

 

Rent:

Cost per square foot per month:  $2.70* full-service gross

 

Monthly:  $74,814

 

Annual:   $897,772

 

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

 

 

Annual Increases:

3% for both the rent and maintenance fee

 

 

Improvement Costs:

None

 

 

Custodial:

Provided by Lessor

 

 

Maintenance:

Provided by Lessor

 

 

Utilities:

Provided by Lessor, an electrical cap of $0.22 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 9, 2030, the County has the right to terminate with 180-Days’ Notice

 

 

Parking:

Sufficient for County needs

 

PROCUREMENT

On March 27, 2012 (Item No. 56), 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.  Under the exception to policy, the Board may approve an alternative procedure to amend this Lease when compliance with formal RFP requirements would unreasonably interfere with the financial or programmatic needs of the County and the alternative procedure is in the best interest of the County.

 

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. 5 to the Lease will result in an aggregate term of 21 years plus options.  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 Redlands area. 

 

REVIEW BY OTHERS

This item has been reviewed by County Counsel (John Tubbs II, and Adam Ebright, Deputies County Counsel, 387-5455) on December 6, 2023; Auditor-Controller/Treasurer/Tax Collector (Charlene Huang, Auditor-Controller Manager, 382-7022) on December 7, 2023; Transitional Assistance Department (Gilbert Ramos, Director, 388-0245) on November 30, 2023; Purchasing (Ariel Gill, Supervising Buyer, 387-2070) on November 22, 2023; Finance (John Hallen, 388-0208, and Garrett Baker, 387-3077, Administrative Analysts) on December 13, 2023; and County Finance and Administration (Valerie Clay, Deputy Executive Officer, 387-5423) on December 14, 2023.

 

(JF:  269-1984)