REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF THE COUNTY OF SAN BERNARDINO
AND RECORD OF ACTION
February 9, 2021
FROM
TERRY W. THOMPSON, Director, Real Estate Services Department
WILLIAM L. GILBERT, Director, Arrowhead Regional Medical Center
SUBJECT
Title
Amendment No. 13 to Lease Agreement with Rose Hut, LLC for Medical Clinic Space for Arrowhead Regional Medical Center in Fontana
End
RECOMMENDATION(S)
Recommendation
1. Approve the Real Estate Services Department’s use of an alternative procedure in lieu of a Formal Request for Proposals as allowed per County Policy 12-02 - Leasing Privately Owned Real Property for County Use, to extend the term of Lease Agreement No. 87-1047 with Rose Hut, LLC for an additional two years, for the period of March 4, 2021 through March 3, 2023, following a permitted month-to-month holdover for the period of December 4, 2020 through March 3, 2021, (for an aggregate term of 34.75 years) for the continued use of 6,800 square feet of medical clinic space for Arrowhead Regional Medical Center in Fontana.
2. Approve Amendment No. 13 to Lease Agreement No. 87-1047 with Rose Hut, LLC, to extend the term of the lease for an additional two years, for the period of March 4, 2021 through March 3, 2023 following a permitted month-to-month holdover for the period of December 4, 2020 through March 3, 2021, and adjust the rental rate schedule for 6,800 square feet of medical clinic space at 16854 Ivy Avenue in Fontana, for Arrowhead Regional Medical Center in the amount of $435,504.
(Presenter: Terry W. Thompson, Director, 387-5252)
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 use of Discretionary General Funding (Net County Cost). The total cost of this amendment, including the permitted holdover, is $435,504. Lease payments will be made from the Real Estate Services Department (RESD) Rents budget (7810001000) and reimbursed from the Arrowhead Regional Medical Center (ARMC) budget (9110004200). Sufficient appropriation is included in the 2020-21 budget and will be included in future recommended budgets. Annual lease costs are as follows.
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Period |
Annual Lease Cost |
|
December 4, 2020 thru March 3, 2021 |
$ 47,124 |
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March 4, 2021 thru March 3, 2022 |
$192,264 |
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March 4, 2022 thru March 3, 2023 |
$196,116 |
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Total Cost |
$435,504 |
BACKGROUND INFORMATION
The recommended action will amend an existing lease with Rose Hut, LLC, to extend the term of the lease for the period of March 4, 2021 through March 3, 2023, following a permitted month-to-month holdover for the period of December 4, 2020 through March 3, 2021, (for an aggregate term of 34.75 years) for 6,800 square feet of medical clinic space to allow ARMC to continue to provide services to County residents in the Fontana area.
On December 7, 1987 (Item No. 12), the Board of Supervisors (Board) approved a seven-year lease agreement, No. 87-1047 (Ivy Lease) for 5,800 square feet of clinic space at 16854 Ivy Avenue in Fontana (Ivy Premises). The original term of the Ivy Lease was for the period of July 1, 1988 through June 30, 1995. In the 32.6 years since the Ivy Lease was originally approved, the Board has approved 12 amendments to extend the term through December 3, 2020, add 1,000 square feet of additional space, reflect a change in property ownership and update standard lease agreement language.
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Amendment No. |
Approval Date |
Item No. |
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1 |
June 27, 1988 |
28 |
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2 |
January 23, 1989 |
16 |
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3 |
October 3, 1995 |
25 |
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4 |
August 19, 1997 |
16 |
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5 |
July 25, 2000 |
40 |
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6 |
December 17, 2002 |
77 |
|
7 |
April 10, 2007 |
26 |
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8 |
November 18 2008 |
53 |
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9 |
November 16, 2010 |
40 |
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10 |
March 3, 2015 |
48 |
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11 |
March 7, 2017 |
47 |
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12 |
December 4, 2018 |
58 |
On March 19, 2019 (Item No. 62), the Board approved a 15-year lease agreement, No. 19-193, with Baseline Sierra ARMC, LLC (Baseline Lease) for the construction of a 25,000 square feet clinic and office space for an ARMC family health center at the northwest corner of Baseline Avenue and Sierra Avenue in Fontana (Baseline Premises) to replace the Ivy Premises.
The Baseline Lease landlord experienced delays during the entitlement process for the Baseline Premises. Subsequently, on September 29, 2020 (Item No. 54), the Board approved Amendment No. 1 to the Baseline Lease to extend the projected improvement completion date from April 1, 2021 to July 15, 2021.
Because the Ivy Lease was scheduled to expire on December 3, 2020, RESD contacted the Ivy Lease landlord and negotiated a two year extension for the period of March 4, 2021 through March 3, 2023, following a three month permitted holdover with landlord consent, for the period of December 4, 2020 through March 3, 2021. Extending the term of the Ivy Lease will provide adequate time for ARMC to relocate into the Baseline Premises as well as vacate the Ivy Premises and return possession to the Ivy Lease landlord on or before March 3, 2023. The County has the right to terminate the Ivy Lease with 90-days’ notice during the extended term.
Amendment No. 13 to the Ivy Lease extends the term of the lease for the period of March 4, 2021 through March 3, 2023, following a permitted month-to-month holdover, and adjusts the rental rate schedule. All other terms and conditions of the Ivy Lease remain unchanged.
Staff has reviewed the recommended action for the Ivy Lease 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: |
Rose Hut, LLC (Stephen Claro, Managing Member) |
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Location: |
16854 Ivy Avenue, Fontana |
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Size: |
6,800 square feet of clinic space |
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Term: |
Two years, commencing on March 4, 2021 |
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Options: |
None |
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Rent: |
Cost per sq. ft. per month: Approximately $2.36 modified gross* |
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Monthly: $16,022 |
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Annual: $192,264 |
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*Mid-range for comparable clinic facilities in the Fontana area as supported by a market survey on file with RESD |
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Annual Increases: |
2% |
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Improvement Costs: |
None |
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Custodial |
Provided by County |
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Maintenance: |
Provided by County |
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Utilities |
Provided by Lessor |
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Insurance: |
The Certificate of Liability Insurance, as required by the lease, is on file with the Real Estate Services Department |
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Right to Terminate: |
The County has the right to terminate with 90-days’ notice |
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Parking: |
Sufficient for County needs |
PROCUREMENT
On December 7, 1987 (Item No. 12), the Board approved the Ivy Lease, which was procured according to County Policy 12-02 - Leasing Privately Owned Real Property for County Use (Policy), using a Formal Request for Proposals (RFP). The Policy provides that the Board may approve the use of an alternative procedure to the use of a Formal RFP to procure leased space 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 interests of the County.
The Policy also requires a thorough and detailed review by the County Administrative Office or designee to validate the need for and provide a competitive analysis of any lease with a term of more than 20 years. Extending the term of the lease for the two-year period of March 4, 2021 through March 3, 2023, following a permitted month-to-month holdover for the period of December 4, 2020 through March 3, 2021, will provide for an aggregate term of 34.75 years.
RESD completed a competitive analysis of the market and found the rental rate for the extended term of the Ivy Lease to be competitive, the Ivy Premises best meets the requirements of the department until it can relocate to the Baseline Premises, minimizes disruption to the program activities, and will allow ARMC to continue to serve the residents in the Fontana area. RESD requests the Board’s approval to extend the Ivy Lease two years.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Agnes Cheng, Deputy County Counsel and Charles Phan, Deputy County Counsel,387-5455) on January 12, 2021; ARMC (Staci McClane, Associate Hospital Administrator, 580-6145) on January 8, 2021; Purchasing (Bruce Cole, Supervising Buyer, 387-2148) on January 8, 2021; Finance (Yael Verduzco, Administrative Analyst III, 387-5285 and Carl Lofton, Administrative Analyst, 387-5404) on January 25, 2021; and County Finance and Administration (Matthew Erickson, County Chief Financial Officer, 387-5423) on January 25, 2021.
(JAG: 677-8210)