CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 10 Section Name: {{section.name}} Account Number: 10-4651 File ID: {{item.tracking_number}} TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Public Works Department
MEETING DATE: November 18, 2024
SUBJECT:
1900 O’Farrell Street Office Space Lease — Amendment
RECOMMENDATION:
Approve the third amendment to the office lease agreement with Woodstock Development, Inc. for office space in Suites 320 and 325 at 1900 O’Farrell Street, extending the term for an additional five years with two optional five-year extensions at a base rent amount of $1,938,237.96 for the initial five-year term; and authorize the City Manager to execute the amendment in substantially the form presented.
BACKGROUND:
In May 2014, City Council authorized a 60-month lease agreement with Woodstock Development, Inc. (Attachment 2) for office space at 1900 O’Farrell Street to provide space to accommodate multiple divisions within the Public Works Department. The City leased a total of 6,975 square feet (sf) of space in this building: Suite 320 (5,460 sf) and Suite 380 (1,515 sf). Both suites were located on the third floor but were disconnected and situated at opposite ends of the building.
In February 2015, City Council authorized the first amendment (Attachment 3) to the original lease to extend the term through March 31, 2020, and allow the Public Works Department to expand and create a cohesive, fully integrated and connected space. This amendment allowed the department to continue to lease Suite 320 (5,460 sf), expand into adjacent Suite 325 (4,400 sf) and vacate Suite 380 (1,515 sf). This resulted in a total of 9,860 sf of space, a net increase of 2,885 sf from the original lease. This created a single, centralized location and has provided improved efficiency and functionality within the department.
Under the second amendment (Attachment 4), the term of the lease agreement was extended for sixty (60) months, commencing on April 1, 2020, and ending on March 31, 2025. Per the building’s 2018 Building Owners and Managers Association (BOMA) re-measurement, it was determined that Suites 320 and 325 contain approximately 10,141 sf of rentable area on the third floor, with the entire building consisting of approximately 61,443 square feet of rentable area.
Therefore, the two suites occupied by Public Works comprise 16.5 percent of the building’s rentable space. This is 281 square feet more than initially calculated at the start of the original lease.
Under this proposed third amendment (Attachment 1), the term of the lease agreement will be extended for sixty (60) months, commencing on April 1, 2025. Also included are two optional five-year extensions. Finally, the base rental rate was negotiated lower, which starts at $3.00/sf (vs. $4.80/sf in the existing lease) with 3 percent annual increases. The detail is provided in the schedule of payments shown below:
Period Monthly Base Rent
Rate
Monthly Base Rent for
10,141 sf Yearly Base Rent
April 1, 2025 – March 31, 2026 $3.0000 $30,423.00 $365,076.00 April 1, 2026 – March 31, 2027 $3.0900 $31,335.69 $376,028.28
CITY OF SAN MATEO
CITY OF SAN MATEO
April 1, 2027 – March 31, 2028 $3.1827 $32,275.76 $387,309.12 April 1, 2028 – March 31, 2029 $3.2782 $33,244.03 $398,928.36 April 1, 2029 – March 31, 2030 $3.3765 $34,241.35 $410,896.20 BUDGET IMPACT:
The renegotiated lease reduces the current monthly base rent from $48,508.59 to $30,423.00, lowering the total annual rent from $582,103.08 to $365,076.00, which represents a 37.3 percent cost reduction. This change results in a projected cost savings of $54,881.70 for the remainder of Fiscal Year 2024-25 (April-June), currently allocated with 55 percent to the General Fund and 45 percent to the Sewer Fund. These savings will be incorporated into the mid-year budget adjustments for 2024-25, and the revised lease terms will be factored into future budget planning.
ENVIRONMENTAL DETERMINATION:
This lease amendment is not a project subject to CEQA, because it can be seen with certainty that it will not cause a physical change in the environment. (Public Resources Code Section 21065.)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – Third Amendment to Lease Agreement
Att 2 – Original Lease Agreement
Att 3 – First Amendment to Lease Agreement
Att 4 – Second Amendment to Lease Agreement
STAFF CONTACT
Matt Fabry, Public Works Director
[email protected]
650 522 7309