Subject: APPROVAL OF A LEASE 4 NORTH SECOND STREET #1225

COUNCIL DISTRICT: Citywide

SNI Area: NA

RECOMMENDATION

Approval of a four-year lease agreement with Cornerstone Properties, LLC for 4,212 square feet of office space on the twelfth floor of their building located at 4 North Second Street for the Department of Transportation at a rental rate of $14,742 per month for the first year of the lease.

BACKGROUND

In fiscal year 2001-2002, the Transportation Department will be adding approximately 26 new positions to its staff at 4 North Second Street. In order to provide adequate work space for this new staff, the Department has requested an additional 4,212 square feet of space in the building at 4 North Second Street.

ANALYSIS

At the request of the City Manager, Public Works Real Estate staff negotiated a new four-year lease for the 4,212 square feet of office space on the twelfth floor of 4 North Second Street at a rental rate of $14,742 per month for the first year on a full service basis. The rent increases by approximately 3 percent per year throughout the term of the lease to a maximum of $16,089.84 per month during the fourth and final year of the lease.

The Horizon Center was selected because it already houses the other administrative functions of the Transportation Department. The rent charged for this location is comparable to other office rents in the downtown area.

The lease contains wording that will allow the City to cancel the agreement after the first year by giving the landlord not less than 90-days written notice and paying a cancellation fee. The cancellation fee during the second year of the lease is $100,000 decreasing to $75,000 and $50,000 during the third and fourth years of the lease respectively.

PUBLIC OUTREACH

Not applicable.

COORDINATION

This item has been coordinated with the Office of the City Manager and the Transportation Department. The City Attorney’s Office has reviewed the agreement and approved it as to form.

COST IMPLICATION

Rent for this agreement is $176,904 for the first year of the lease, increasing to $181,958.40 for the second year of the lease, then $187,518.24 for the third year, and 193,078.08 for the fourth and final year of the lease, bringing the total rent over the entire four-year term to $739,458.72.

BUDGET REFERENCE

Fund: 001 - General Fund

Amount: $32,694,508

Budget Document: 2001-02 Proposed Operating Budget, Page 530, as amended and approved by Council on June 12, 2001.

Fund: 533 - General Purpose Parking Fund

Amount: $6,932,757

Budget Document: 2001-02 Proposed Operating Budget, Page 530, as amended and approved by Council on June 12, 2001.

Fund: 429 - Building and Structure Tax Fund

Amount: $459,000

Budget Document: 2001-02 Proposed Capital Budget, Page 660, as approved by Council on June 12, 2001.

RAJEEV BATRA

Acting Director, Public Works Department