Item 73/2025
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: 4/22/2025
Subject: Approval of a Lease Agreement between the City of Garden Grove and the Garden Grove Housing Authority for office space located at 11277 Garden Grove Boulevard. (Joint Action Item with Housing Authority)
OBJECTIVE
For City Council to approve the Lease Agreement between the City of Garden Grove and the Garden Grove Housing Authority for office space located at 11277 Garden Grove Boulevard (“Property”).
BACKGROUND
The City owns the Property, a two -story office building with approximately 32,000 square feet. In 2023, the Garden Grove Housing Authority relocated from the office building located at 12966 Euclid Street to Suite 100 of the Property to operate and provide housing assistance through HUD programs and affordable housing opportuniti es to low-income residents. The office space meets key operational requirements, including its accessibility for residents and proximity to essential City services. A lease agreement between the City and Housing Authority is required to effectuate a landlord/ tenant relationship including the payment of rent from the Housing Authority to the City.
DISCUSSION
The lease agreement is structured to ensure compliance with HUD Cost Principles under 2 CFR Part 200 and HUD’s guidance on cost allocation and reasonableness. The lease expenses are designed to be reasonable, necessary, and allocable in accordance with federal regulations. The City has drafted a lease agreement with the Housing Authority for Suite 100, which includes the following key terms:
The office space, approximately 8,888 square feet, will be leased at a rate of $1.95 per square foot.
The initial term of the agreement is for ten (10) years.
Item 73/2025
The agreement includes an option to extend the lease for up to two (2) additional five-year terms, potentially extending the total lease duration to twenty (20) years.
The monthly base rent will be determined according to the rent schedule in the lease agreement, with fixed annual rental adjustments of three (3) percent commencing July 1, 2026, and continuing until the lease expires.
FINANCIAL IMPACT
The City will receive monthly lease payments of $17,331.60 starting on the effective date, January 1, 2025. Beginning July 1, 2026, rent will increase by three (3) percent annually until the expiration of the contract term.
RECOMMENDATION
It is recommended that the City Council and Housing Authority:
Approve the Lease Agreement between the City of Garden Grove and the Garden Grove Housing Authority; and
Authorize the City Manager , or designee, to execute the Lease Agreement, including minor modifications or amendments as appropriate, and any other pertinent documents necessary to effectuate and/or implement the Lease Agreement, on behalf of the City.
By: Eric S. Hong, Administrative Analyst
ATTACHMENT(S)
1. Lease Agreement