REPORT TO THE CITY COUNCIL
FROM: BRIAN BARR, Director
General Services Department
BY: DESIREE NARANJO, Property Specialist II
General Services Department
SUBJECT
Title
Approve the third amendment to the lease agreement between the City of Fresno and Tutelian Holdings I, LLC, for office space at 2440 Tulare Street, Suite 430, Civic Center Square, extending the lease term for an additional six months through February 28, 2026, in the amount of $47,243 for rent plus the proportionate share of building operating costs estimated with this extension is $27,201 for the Planning and Development Department, Housing Production, Housing Finance, and Community Development Divisions (District 3)
Body
RECOMMENDATION
Staff recommends Council approve the third amendment to the lease agreement between the City of Fresno and Tutelian Holdings I, LLC, a California limited liability company for office space at 2440 Tulare Street, Suite 430, Civic Center Square for an additional six months through February 28, 2026, in the amount of $47,243 for rent plus the proportionate share of building operating costs estimated with this extension is $27,201.
EXECUTIVE SUMMARY
The Planning and Development, Housing Production, Housing Finance, and Community Development Divisions plan to move to City-owned property located at 1255 Van Ness Avenue, upon completion of tenant improvements. Tenant improvements were initially estimated to be completed in the summer of 2025, but now delayed until winter of 2025. This is due to the need to reject the initial construction bid as it exceeded the project budget. The current lease agreement expires August 31, 2025, and therefore needs to be extended six-months to allow for the re-bidding process and completion of tenant improvements. The proposed rent for the extension is $7,873.80 per month ($1.65 per square foot) for the six-month extension ending February 28, 2026. In addition to the monthly rent due, the City shall also pay their proportionate share of building operating costs at $0.95 per square foot, estimated with this extension is $27,201.
BACKGROUND
As part of the Fiscal Year 2023 budget adopted by the City Council, the Planning and Development Department created two new Divisions and added 12 new staff members to handle numerous transactions related to the acquisition and rehabilitation of emergency homeless shelters, the development of tiny home projects, and expedited construction of permanent affordable housing units.
As a result, the Housing Production, Finance, and Community Development Divisions outgrew the available space at City Hall and temporality relocated to office space at 2440 Tulare Street. The City entered into a lease agreement for 4,772 square feet of office space with Tutelian Holdings I, LLC through February 28, 2024. The term was initially extended by a Second Amendment through August 31, 2025. The current monthly rent is $7,635.20 ($1.60 per square foot) plus the proportionate share of monthly building operating costs. The proposed Third Amendment, effective September 1, 2024, will increase rent 3% to $7,873.80 per month ($1.65 per square foot) for the six-month extension ending February 28, 2026. In addition to the monthly rent due, the City shall also pay its proportionate share of building operating costs estimated at $0.95 per square foot. The proportionate share of building operating costs estimated with this extension is $27,201.
Building operating costs are defined as expenses incurred by the Landlord in maintaining, repairing, and operating the building. This can include utilities, maintenance, janitorial, landscaping, repairs, and similar. The City’s proportionate share of building operating costs is based upon the square feet leased proportioned to the total rentable square feet of the building. Therefore, the City is responsible for 5.48% of the annual building operating costs during the term. Building costs are estimated by the Landlord each year based upon prior year actual building costs. These can increase or decrease each year.
The City Attorney has approved this Amendment as to form.
ENVIRONMENTAL FINDINGS
This agreement falls within the Class 1 Categorical Exemption for Existing Facilities set forth in the CEQA Guidelines, Section 15301 for existing facilities, as a lease of an existing structure involving no expansion of use and will not result in any significant negative effects relating to traffic, noise, air quality or water quality. Furthermore, none of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2, apply to this project.
LOCAL PREFERENCE
Local Preference does not apply because this amendment to an existing agreement is not a bid or award of a construction or services contract.
FISCAL IMPACT
Lease payments for the current term have been included in the adopted FY2024 General Fund under the Planning and Development Department. Appropriations for the remainder of the lease term are subject to Council approval during the annual budget cycle.
Attachments:
Lease Agreement
First Amendment
Second Amendment
Third Amendment