Item 250/2024
Final
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
To:
Lisa L. Kim From: Ursula Luna-Reynosa
Dept:
City Manager Dept: Economic Development and
Housing
Date: June 11, 2024
Subject: Adoption of a Resolution authorizing the City Manager to approve and execute certain office leases within City-Owned buildings. (Action Item)
OBJECTIVE
For the City Council to consider a resolution authorizing the City Manager to approve and execute office leases within City-Owned office buildings.
BACKGROUND
Pursuant to City Council Resolution No. 9212-15, the City Manager has the authority to enter into agreements of $50,000 or less, however the City Council has not delegated any authority to let or encumber City-Owned real property other than to accept conveyances or property to the City (such as dedications or land easements). Thus, all property transactions, including leases, must be approved by the City Council.
The City has acquired various properties developed with office buildings with leasable space that will require regular leasing activity, including the property located at 12966 Euclid Street and 11277 Garden Grove Boulevard. Currently, these buildings have approximately 18-20 leases with most lease spaces under 5,000 square feet.
It is anticipated that over the next five years , a total of over 50 lease agreements will need to be renegotiated and approved.
DISCUSSION
The proposed Resolution will grant the authority to the City Manager to approve and execute market rate leases within City-owned office buildings with lease terms of five years or less and result in broker commissions of $100,000 or less per lease agreement. Any leases not meeting these criteria will require approval from the City Council.
For illustrative purposes, staff has outlined two different broker commission scenarios each based on a 5,000 square foot office lease with a 5-year term. Scenario A, features a lease rate of $2.50 per square foot and a 3% CPI rent escalation. The resulting commissions are Item 250/2024
approximately $3 2,000 without tenant representation and $4 8,000 with tenant representation. Scenario B, features a lease rate of $5.00 per square foot and the same rent escalation. In this scenario, commissions are $6 4,000 without tenant representation and $96,000 with tenant representation. In summary, under both scenarios, maximum broker commissions are less than $100,000 per lease agreement.
The proposed resolution will allow the City Manager to execute market rate leases for space within City-owned buildings more efficiently and respond to proposed tenants’ needs in a similar fashion to the private sector . Tenants that are considering multiple spaces may be inclined to move forward with other properties if the City cannot respond as swiftly as other owners.
FINANCIAL IMPACT
There is no financial impact to adopt the resolution granting authority to the City Manager to approve and execute market rate leases within City-owned office buildings with lease terms of five years or less and result in broker commissions of $100,000 or less per lease agreement.
RECOMMENDATION
It is recommended that the City Council:
• Adopt the attached Resolution authorizing the City Manager to approve and execute certain office leases within City-Owned buildings.
By: Paul Guerrero, Sr. Real Property Agent
ATTACHMENT
1. Resolution