City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: OCTOBER 18, 2022 FROM: PUBLIC UTILITIES DEPARTMENT WARD: 1
SUBJECT: FIRST AMENDMENT TO LEASE AGREEMENT WITH DAVID L. HORTON, ESQ. AND ASSOCIATES – MISSION SQUARE OFFICE BUILDING, 3750 UNIVERSITY AVENUE, SUITE 560 – THREE-YEAR TERM FOR $163,346.40 IN REVENUE ISSUE:
Approve a First Amendment to Lease Agreement to extend the lease for an additional three-year term between David L. Horton, Esq. and Associates and the City of Riverside for approximately 1,521 square feet of rentable space in the Mission Square Office Building located at 3750 University Avenue, Suite 560.
RECOMMENDATIONS:
That the City Council:
Approve a First Amendment to the Lease Agreement with David L. Horton, Esq. and Associates to extend the Lease Agreement for an additional three-year term from October 1, 2022 to September 30, 2025; and Authorize the City Manager, or designee, to execute the First Lease Amendment, including making minor, non-substantive changes, and to sign all documents and instruments necessary to complete the transaction.
BOARD RECOMMENDATION:
On September 26, 2022, the Board of Public Utilities with all members present, unanimously voted to recommend that the City Council approve the First Amendment to extend the Lease Agreement for an additional term of three years for the Mission Square Office Building located at 3750 University Avenue.
BACKGROUND:
On October 13, 2015, the City acquired the Mission Square Building at 3750 University Avenue (Property), which was funded by Riverside Public Utilities (RPU). As such, RPU is now the Landlord of the Property and proposes the continued lease of office space not being used by RPU. The Property consists of approximately 127,533 square feet of rentable office and retail space in a six-story building, plus a basement level and a 490-parking stall garage situated on approximately 2.5 acres of land.
On January 26, 2016, the City Council approved an Exclusive Authorization of Lease Agreement with Newmark of Southern California, Inc. dba Newmark Knight Frank (NKF) for a five-year term to provide broker leasing services for the Property. On January 5, 2021, the City Council approved a First Amendment to California Exclusive Authorization of Lease Agreement with Newmark of Southern California, Inc., dba Newmark Knight Frank (NKF) which extended the Agreement through December 31, 2025. RPU staff has been coordinating the leasing process for the Property with the Real Property Services Division of the Community & Economic Development Department and NKF as the broker for the Property.
On October 1, 2019, the City Council approved a Lease Agreement with David L. Horton Esq. and Associates, for 1,521 square feet of rentable space in the Mission Square Building located at 3750 University Avenue, Suite 560 with an additional three-year term which expires on September 30, 2022.
DISCUSSION:
David L. Horton has been a tenant in the Property since 2019 and the existing Lease Agreement expires on September 30, 2022. Under the terms of the lease agreement, David L. Horton has one remaining three-year option to renew through September 30, 2025.
Staff has reviewed the proposed First Amendment to Lease Agreement and recommends renewal under the terms summarized below:
Term: October 1, 2022 through September 30, 2025.
Premises: Approximately 1,521 rentable square feet of space located at 3750 University Avenue, Suite 560.
Base Rent Schedule (Modified Gross Lease):
Months
Monthly Base Rental Rate/Sq. Ft.
Monthly Base Rent
Annual Base Rent
10/1/2022 – 9/30/2023
$2.90
$4,404.00
$52,848.00
10/1/2023 – 9/30/2024
$2.98
$4,536.00
$54,432.00
10/1/2024 – 9/30/2025
$3.07
$4,672.20
$56,066.40
Tenant Improvements: None.
Options to Renew: None.
Broker: Pursuant to the existing Exclusive Authorization to Lease Agreement with NKF, City to pay NKF a leasing commission equal to 2.5% of the lease consideration in the amount of $4,083.66.
Other: All other terms of the original lease shall remain unmodified and in full force.
The Acting Community and Economic Development Director concurs with the recommendations in this report.
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 3 – Economic Opportunity and Goal 3.3 – Cultivate a business climate that welcomes innovation, entrepreneurship, and investment.
The item aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – The City conducted business with transparency and good faith. By bringing the Agreement before the Board of Public Utilities, the City is providing a space for open dialogue between the Board and community stakeholders regarding all lease terms.
Equity – The City acted with inclusion and is adhering to lease terms for renewal options. Additionally, the City is ensuring that business conducted by David L. Horton provides equal access and benefits that all members of the community can utilize.
Fiscal Responsibility – The City being a prudent steward of public funds, negotiated in good faith and the lease rates are consistent with the current fair market value for comparable commercial space.
Innovation – The City recognizes the need for accessible small businesses to community stakeholders. This City will continue to be cognizant of the community’s changing needs and will continue to be adaptive to the future by engaging in collaborative partnerships.
Sustainability & Resiliency – Committed to the needs of community stakeholders, the City is devoted to identifying, attracting, and retaining businesses that assist the community to preserve, adapt, and grow during a diverse array of economic cycles.
FISCAL IMPACT:
The total fiscal impact over the three-year term will generate an estimated $163,346.40. All revenue will be deposited into the Mission Square Building Property Management Trust Account controlled by RPU and used to pay operating expenses for the Property, including the lease commission of $4,083.66 to NKF.
Prepared by: Todd M. Corbin, Utilities General Manager
Certifies availability
of funds: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/City Treasurer Approved by: Kris Martinez, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:
First Amendment to Lease Agreement – David L. Horton Esq. and Associates Presentation
Mission Square Office Building – David L. Hortonh Lease AmendmenthPage 1