ADMINISTRATIVE REPORT
MEETING DATE: March 11, 2026 AGENDA CATEGORY: New Business TO: Honorable Mayor and City Council
FROM: Christain Clegg, City Manager
DATE: March 5, 2026
SUBJECT: Consideration to Execute a Lease Agreement with an Option to Purchase Property located at 1430 & 1440 Truxtun Avenue with Erwin LLC a California Limited Liability Company and appropriation(Ward 2)
[Document Description]
1. Agreement with Erwin LLC. for the lease with option to purchase of office space located at 1430 and 1440 Truxtun Ave. The lease term is for five years with an initial monthly base lease rate at $34,600 per month plus utilities and CAM charges.
Included in the lease is an option to purchase the site with a sales price of $13,600,000 if we close by August 15, 2026 or $14,150,000, if we exercise the option by January 15, 2027.
2. Appropriate and transfer $400,000 from the Capital Facility Reserve for expenditure on the due diligence to effectuate the purchase of the building.
RECOMMENDATION:
Staff recommends Council approve the agreement
BACKGROUND:
On January 7, 2026, City Council provided direction to staff to facilitate the negotiation of the lease and option to purchase the Real Property located at 1430 and 1440 Truxtun Avenue. The property consists of a 10-story office building with approximately 127,504 sq feet with a parking garage located on 2.3 acres of land on a prime corner in downtown Bakersfield in near proximity to City Hall.
Agreement Points:
The City has negotiated an agreement to lease approximately 41,871 sq feet of office space in the building beginning October 1, 2026 for a five (5) year term. The lease allows the City to have first right of refusal to lease an additional 28,188 sq feet if needed in the future.
The lease has a built in option to purchase with two different price points depending on timing. If the City completes due diligence and exercises the first option to close escrow by August 15, 2026, the purchase price is $13,600,000. This sales price is only valid if we complete all due diligence and close escrow prior to August 15, 2026. Alternatively, if City needs additional time but still desires to purchase the property, and closes on or before January 15, 2027, the purchase price is $14,150,000. The agreement allows the City to cancel the agreement in its entirety if the building is not suitable for a purchase or any deficits can not be easible cured.
Building background:
The building is currently occupied by multiple tenants. City Staff intends to continue with the current tenancies to help offset the costs of the purchase and operations of the building. The building already has a long standing property management company employed who is willing to continue servicing the building as to not impact City staffing.
Staff analysis:
City Staff evaluated the potential lease of this location and other locations before determining that the property at 1430 and 1440 Truxtun Aven ue can best serve the needs of the City. The benefits are its proximity to other City offices, the Courthouse and other government agencies downtown, plus its built- in parking lot with access to additional spaces in downtown . Additionally, the City could choose to partner with the existing building property management company to assist the City with the move prior to the end of 2026 and before the end of our existing lease for office space on California Avenue.
City staff is proposing Council approve the agreement with an initial appropriation to initiate the due diligence period.
Staff also recommend City Council approve appropriation adjustments in the Capital Reserve fund which have available unallocated fund balances. The City would use those sourc es of funds to pay for costs to properly examine the building during due diligence.
FISCAL IMPACT:
The City already spends significant funds on an ongoing lease for office space. If the purchase option is not feasible, the City is also proposing a lease of a few floors in the building for $47,284 per year with a small increase over five year lase term.. The lease rate is lower than the current lease the City is charged at other facilities. Current estimates show that entering into this lease could generate over $900,000 in savings over the next five years comparing this current lease and future need to lease space .
The Purchase agreement is also structured so the City can pay off the purchase price of the building over a 20-year period. The payback rates would also be structured and sized not to exceed the current annual lease rate, versus the rate to pay back the internal loan of the funds borrowed at the time of the building purchase. The loan payback will be over a 20 -year period starting in 2026 and ending 2046. Due to the fact this is internal borrowing the City can payback the loan sooner if the Council directs staff to do so.
The impact to the General Fund is favorable in both a lease or purchase option to supply the needs for the long-term office space for the City and considering cost savings paid out over the next 20 year for the needed space.
The favorable side for the potential ownership of this building is other private tenants in the Truxtun Avenue facility pay rent and produce revenue to the City. The potential revenue from the lease payments from the tenants will help pay for the ongoing maintenance and property management of the building. Currently, it covers most of the cost to run the building, with the potential of vacant space in the building to produce net operating revenue that could result in a net gain for the City
COUNCIL GOAL:
Safety and Resilience
Innovative and Efficient City Government
ATTACHMENTS:
1. Agreements with Exhibits