City Council Meeting: January 8, 2008
Agenda Item: 1-I
To: Mayor and City Council
Chairperson
and Redevelopment Agency
From: Andy Agle, Director of Housing and
Economic Development
Subject: Authorization
to Negotiate and Execute a Lease with AMDA, LLC for Space at 1901 Main Street and Lease Renewal for
Space at 1212 5th
Street with Wilshire & 5th I &
II, LLC
Recommended
Action
It is recommended that the City Council:
1.
authorize
the City Manager to negotiate and execute a lease with AMDA, LLC for 13,386 rentable
sq. ft. at 1901 Main Street,
for a ten-year term beginning May 1, 2008, for City offices;
2.
authorize
the City Manager to negotiate and execute a lease renewal with Wilshire & 5th
I & II, LLC., for 5,959 rentable sq. ft. at 1212 5th Street, for
a four-year term beginning February 1, 2008, for City offices; and
3.
appropriate
for 1901 Main Street
an additional $98,200 through June 2008,
for increased occupancy costs; and
4.
authorize
the expenditure of $600,000 for tenant improvement costs to be constructed by
AMDA, LLC.
It is recommended that the City Council
and the Redevelopment Agency authorize the City Manager and the Executive
Director, respectively, to execute a Reimbursement Agreement between the City
and the Redevelopment Agency for the advancement of $360,000 for tenant
improvements at 1901 Main Street
for Housing and Economic Development Department (HED) offices.
At its retreat on October 13,
2007, the City Council identified a priority of bringing currently scattered
City offices back to the Civic
Center. Staff is currently assessing opportunities to
develop public facilities in the Civic
Center to address these
needs. During the planning and
development process for the permanent facilities, certain city offices will
need to remain in leased facilities.
Where appropriate during the interim period, staff also is exploring
opportunities to bring City services that are currently scattered into close
proximity to the Civic
Center.
Leases at 2121 Cloverfield Boulevard that serve the
Housing Division of the Housing and Economic Development Department expire in
the coming year. The currently available
space at 1901 Main Street,
at the southeast corner of Pico
Boulevard, would enable these public services to be
located in close proximity to the Civic
Center. It would also enable the various divisions of
the Housing and Economic Development Department that are currently scattered
across four sites, to be located in one facility. The rentable space at 1901 Main Street is 13,386 sq. ft. and is
situated on the first and second floors of the three-story office building. The
proposed term would commence May 1, 2008, and would continue for ten years,
with one five-year option. The rental rate is $3.50 per sq. ft. per month for
the first floor and $3.70 per sq. ft. per month for the second floor and would
increase 5 percent per year. Additional occupancy costs to the City would be
for janitorial, utilities and on-site parking spaces for clients and customers.
Total monthly occupancy costs during the first year are anticipated to be
$54,071. Engineering staff anticipates that the total cost for tenant
improvements will be about $832,000 of which the Lessor agrees to contribute a tenant
allowance of $181,975 (based on $25 per sq. ft. of first floor rentable space)
and to pay for painting and carpeting of the second floor, requiring a need for
City funding of $600,000.
Leases at 1212 5th Street that serve the
Water Resources Division and Energy and Green Programs are to expire January
31, 2008. The Water Resources Division
has occupied the 4,140 sq. ft. of the third floor at this location for 13 years
and the Energy/Green Building office has occupied the 1,819 sq. ft. of the
ground floor for over three years. Staff
is recommending a four-year lease extension with a four-year option. The rent
for the third floor is proposed to increase from $2.93 per sq. ft. to $3.32 per
sq. ft. and the rent for the ground floor is proposed to increase from $3.25
per sq. ft. to $3.90 per sq. ft. Annual lease payments will increase from $231,563.40
to $268,426.80.
Discussion
Currently, City offices are located in City Hall and various sites
throughout Santa Monica. This decentralized approach results in
operational inefficiencies as well as decreased levels of customer
service. As a result, creating
additional space for City services in the Civic Center
has been a long-standing City goal. The Civic Center Specific Plan provides for
the development of a new, permanent facility to meet some of these needs. On October 13, 2007, the City Council
reaffirmed its commitment to fully addressing these needs.
While planning for permanent City facilities continues, staff is
exploring opportunities to bring existing City services in off-site spaces in
closer proximity to the Civic
Center. Such an opportunity currently exists at 1901 Main Street, at
the southeast corner of Pico
Boulevard.
With two leases for the Housing Division at a private office building at
2121 Cloverfield Boulevard
expiring in 2008, the available space provides an opportunity to bring these
services in much closer proximity to the Civic Center. The largest lease at 2121 Cloverfield expires
March 31, 2008, while the smaller lease expires
December 31, 2008. The broker for
2121 Cloverfield Boulevard
expressed an interest in renewing the lease, but only for a short term, three
to five-year period, as the owner plans to redevelop the property in the near
term.
The two floors of available space at 1901 Main Street are of sufficient size to
co-locate all Housing and Economic Development staff operations in one facility. Currently, these operations are located in
four facilities. In addition to the
customer service, efficiency and management benefits of locating all department
operations in one facility, 1901
Main Street is also in close proximity to City
Hall and along a major bus route to serve HED’s customers.
The rentable space at 1901
Main Street is 13,386 sq. ft., with 7,279 sq. ft.
on the first floor rented at $3.50 per sq. ft. per month and 6,107 sq. ft. on
the second floor rented at $3.70 per sq. ft. per month. Office rental rates
have been increasing over the last several years and the proposed rental rates
are very competitive for Santa Monica.
The ten-year term would commence May 1, 2008, with one five-year option. Rent
would increase at a flat rate of 5% per year. The City would be responsible for
janitorial and utilities, estimated to cost $5,000 per month, plus $1,000 per
month for the cost of ten visitor parking spaces rented at $100 per month per
space, increasing at a rate of 4 percent per year. Staff would park in the Civic Center
public parking lot. If permanent City
facilities that could accommodate these public services are built within the Civic Center
during the ten-year term, the lease allows the City to sublease the space.
The Engineering and Architecture Division has estimated the cost
of tenant improvements at $832,000. The
first floor will need to be completely gutted, while some of the second floor
can be reused. The property owner has offered a tenant allowance of $25 per sq.
ft. for the rentable ground floor space and to repaint and carpet the second
floor. The total value of the property owner-funded improvements is estimated
to be $232,000, leaving the City to fund $600,000 for tenant improvements,
relocation and furnishings.
The Water Resources
Division’s administrative office has been located at 1212 5th Street on the third
floor for 13 years and the Energy and Green Program’s administrative office has
been located on the first floor for over three years. Both leases expire
January 31, 2008, with an option to renew for two two-year periods. The current rate is $2.93 per sq. ft. for the
4,140 sq. ft. on the third floor and $3.25 per sq. ft. for the 1,819 sq. ft. on
the ground floor. The proposed rate for the four-year renewal is $3.32 and
$3.90 respectively with a 5% increase per year with a four-year renewal
option. The monthly cost for 18 parking
spaces will increase from $1,255 to $1,530 per month. The property owner will
provide $10 per sq. ft. tenant improvement allowance. The ground floor space is more desirable and
thus commands a higher monthly rate.
Alternatives
If the proposed lease with AMDA, LLC for space at 1901 Main Street is
not authorized, staff can continue to look for suitable facilities or attempt
to renegotiate the lease at 2121
Cloverfield Avenue. If the proposed lease renewal for 1212 5th Street
is not approved, staff will seek a month-to-month extension and immediately
begin seeking other space.
Environmental Analysis
The recommended Council action is exempt from CEQA under Section
15301, Existing Facilities.
Financial Impacts &
Budget Actions
The current expenditure for rent and parking by HED for all
locations currently occupied by its staff that would be moved to the new
location is $248,956 per year. The proposed annual expenditure for rent and
parking at 1901 Main Street
in the first year will be $588,868, an increase of $339,912 per year. The increase will be funded with $240,116
from the Redevelopment Agency and $99,794 from the General Fund and will be
included in future annual budget requests. In addition, the City will need to
continue paying rent on one of the two leased spaces at Cloverfield Boulevard between May 1 and
December 31, 2008. If the City is unable to sub-lease the space, the cost of
this expenditure will be $56,680.
Staff is requesting a current year budget increase to Account No.
01264.522620.76027W of $98,200 for increased rent during May and June 2008. Funds
in the amount of $360,000 for the Redevelopment portion of the tenant
improvements should be appropriated from the Redevelopment Agency fund to
Account No. C170883.589000.The City’s General Fund will advance project funds
to the Redevelopment Agency, and the Redevelopment Agency will repay the City
from future tax increment revenues. A Reimbursement Agreement formalizing the
agreement between the City and the Agency for the advancement of these funds
will be required. In addition, funds in
the amount of $240,000 for the General Fund portion of tenant improvements are available
at Account No. C010361.589000.
Lease payments for the remainder of the fiscal year for 1212 5th Street
will increase by $15,359.75. Sufficient funds in the Divisions’ budgets will
cover this expenditure for the remainder of the year, and on-going costs will
be reflected in next year’s budget.
Prepared by:
Miriam Mack, Economic Development Manager
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Forwarded to Council:
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Andy
Agle, Director
Housing
and Economic Development
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P. Lamont
Ewell
City Manager
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