Item 348/2025
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: 10/14/2025
Subject: Approval of the Third Amendment to the Lease Agreement with Investel Development, LLC for office space located at 12966 Euclid Street, Garden Grove. (Action Item)
OBJECTIVE
For City Council to consider the Third Amendment to the Agreement by and between Investel Development LLC and the City for lease of office space in the Garden Office Plaza located at 12966 Euclid Street, Garden Grove.
BACKGROUND
On November 30, 2023, the City acquired the office building and surface parking lot located at 12966 Euclid Street (the “Property”) from LT Properties Company (the “Previous Owner”).
The Property is improved with a five-story office building containing 64,402 rentable square feet. The office building was constructed in 1985 and at the time of acquisition the building was configured with 25 tenant suites of which 8 suites were unoccupied for a vacancy rate of 32%. Since acquisition, the City , as successor in interest to the Previous Owner, (the “Lessor”) has renewed certain leases and found new te nants to occupy the Property. The current vacancy rate is 20% (see Attachment 1).
Investel Development LLC (the “Lessee”) entered into a lease agreement with the Previous Owner on February 15, 2017 (the “Agreement”) , to lease Suite s 300 and 320 (11,096 rentable square feet). An amendment to the Agreement was executed on February 2017 (the “First Amendment”), which addressed tenant improvements, signage rights, and tenant improvement allowances. A following amendment to the Agreement was executed on May 27, 2022 (the “Second Amendment”), which expanded the lease to include Suite 330, increasing the total leased space to 13,272 rentable square feet. Suite 330 was subsequently absorbed into Suites 300 and 320, consolidating the leased pr emises. The Second Amendment is scheduled to expire on November 30, 2025. The Lessee is the largest tenant, occupying 20% of the building.
Item 348/2025
DISCUSSION
The Lessee desires to enter into a Third Amendment to extend their lease term by thirty-nine (39) months beyond the existing expiration date of November 30, 2025, with a new expiration date of February 28, 2029. The starting base rent will be $2.00 per square foot per month, with a three percent (3%) annual increases during the new term. According to the City’s retained leasing agent, the proposed rental rate is consistent with current market rates. The Lessee will renew the lease as-is, with no Lessor or tenant improvement allowance provided.
As part of the Third Amendment, the Lessee will receive three (3) months of free/abated base rent, to be applied in months one (1), twelve (12), and twenty-four (24) of the new lease term.
Lease Amendment Details
Premises: Suite Nos. 300 and 320, 12966 Euclid Street, Garden Grove, CA 92840. Lease Term: Thirty nine (39) months, commencing on December 1, 2025 and expiring on February 28, 2029.
Base Rent: $2.00 per square foot per month, subject to three (3) percent annual increase.
Rent Abatement: Three (3) months taken in months one (1), twelve (12), and twenty-four (24).
Brokerage: CBRE (City’s agent) and Maxim Hotel Brokerage (Lessee’s agent); total leasing commissions are $59,369 per the fee schedule.
FINANCIAL IMPACT
The City will receive lease revenues of $26,500 monthly for the first year which will increase by three (3) percent every year until the agreement’s expiration. The annual proportionate share of the building’s operating expenses will be 20 percent.
RECOMMENDATION
It is recommended that the City Council:
Approve the Third Amendment to the Agreement with Investel Development LLC for office space located at 12966 Euclid Street, Garden Grove; and Authorize the City Manager, or designee, to execute the Third Amendment, including any minor modifications or amendments as appropriate, and any other pertinent documents necessary to effectuate and/or implement the Third Amendment on behalf of the City.
ATTACHMENT(S)
1. Leasing Chart
2.Third Amendment to the Agreement