Item 214/2024
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
To:
Lisa L. Kim From: Ursula Luna-Reynosa
Dept:
City Manager Dept: Economic Development and
Housing
Date: 5/14/2024
Subject: Approval of Lease Agreement with Toscano Financial Services, Inc. for office space located at 12966 Euclid Street, Suite No. 500, Garden Grove. (Action Item)
OBJECTIVE
For City Council to consider the lease of office space located at 12966 Euclid Street, Garden Grove to Toscano Financial Services, Inc.
BACKGROUND
On November 30, 2023, the City acquired the office building located at 12966 Euclid Street (Property) from LT Properties Company. The Property is a five-story office building containing 64,402 square feet. The office building was originally constructed in 1985, with an onsite surface parking lot. Upon acquisition , the building was configured with 25 tenant suites of which eight (8) are unoccupied suites for a total vacancy rate of 32% (total unoccupied square footage).
DISCUSSION
Toscano Financial Services, Inc. (Toscano) is considering leasing Suite No. 500, approximately 3,337 square feet, for a term of five (5) years and two (2) months scheduled to expire on July31, 2029. The rental rate will be $1.95 per square foot with fixed annual rental adjustments of 3%. The lease will decrease the total vacancy from 33% to 28%.
Lease Details:
• The lease follows a modified gross lease structure, with the tenant responsible for operational costs such as electricity, gas, water, and building maintenance. • The lease term will commence on the first business day after both parties sign the lease and the lessee fulfills all lease requirements, and will end on the last day of the sixty-second full calendar month following the commencement date. • The monthly base rent is $6,507.15 for the 3,337 square feet of Suite No. 500 , with fixed annual rental adjustments of 3% until expiration date.
Item 214/2024
• The lease includes two (2) rent abatement months, covering the second and third months, with a total value of $13,014.30.
• Lease addresses property taxes and brokerage representation - CBRE represents the City, and Kidder Matthews represents the Tenant (Toscano).
FINANCIAL IMPACT
The City will receive lease revenues of $6,507.15 monthly or $78,085.8 0 annually for the first year and will increase by three (3) percent every year until the agreement’s expiration.
Toscano’s annual proportionate share of the building’s operating expense will be 5.18 percent.
City staff anticipate one-year expenses for Suite No. 500 to be approximately $5,069.00.
RECOMMENDATION
It is recommended that the City Council:
• Approve the Toscano Financial Services, Inc. Lease; and
• Authorize the City Manager to execute the Lease, including any minor modifications or amendments as appropriate, and any other pertinent documents necessary to effectuate and/or implement the Lease, on behalf of the City.
By: Paul Guerrero, Senior Real Property Agent
ATTACHMENT
Toscano Financial Services, Inc. Lease Agreement