City Council Meeting: January 9, 2007

Agenda Item: 1-I  

To: Mayor and City Council

From: Craig Perkins, Director – Environmental and Public Works Management

Subject: Approval of Additional Funds for Tenant Improvements at 1433 Fourth Street

Recommended Action

Staff recommends that the City Council authorize the City Manager to amend the lease agreement with Metropolitan Pacific Capital, LLC to reflect payments in an amount not to exceed $170,000 for the completion of tenant improvements for the Civil Engineering and Architecture Division at 1433 Fourth Street.

Executive Summary

On September 26, 2006, the City Council authorized the City Manager to negotiate and execute a five year lease at 1433 Fourth Street, with Metropolitan Pacific Capital, LLC, for the Civil Engineering and Architecture Division with an annual rent of $380,000. The lease provides a tenant improvement allowance of approximately $38 per square foot. The estimates to implement the build-out exceed the allowance by $170,000. The build-out includes, electrical wiring and fixtures, fire alarms, plumbing, HVAC, ceiling, computer wiring, flooring, partitions, walls, doors and painting.

Discussion

Staff within the Civil Engineering and Architecture Division prepared plans for the tenant improvements at 1433 Fourth Street. The plan includes reuse of existing furnishings, partition systems, and materials from current lease space. Every effort has been made to minimize the cost of the build-out by specifying inexpensive, readily available materials. Value engineering exercises have resulted in cost reductions of over $30,000. In spite of these efforts, an additional $170,000 is required to implement the necessary tenant improvements.

As a part of the lease agreement, the building owner provided a tenant improvement allowance of $38 per square foot. The actual estimates for the build-out of tenant improvements are closer to $65 per square foot. Research into the cost of similar types of tenant improvement work in this area reflects an average per square foot cost of about $85. The $38 per square foot allowance was the highest amount that could be negotiated with the property owner and was not intended to cover all of the tenant improvement costs. City staff could not determine what the actual tenant improvement cost would be, however, until a more detailed design for the space had been completed.

Under the lease agreement, the building owner assumes responsibility for all of the tenant improvement construction that has been negotiated in the lease agreement.

Budget/Financial Impact

Funds for the tenant improvement work are available in account M010085.589000, “City Facility Maintenance.”

Prepared by: Tony Antich, City Engineer

Approved:	Forwarded to Council:
Craig Perkins Director – Environmental and Public Works Management Department	P. Lamont Ewell City Manager