City Council Report
City Council Meeting: January 11, 2022
Agenda Item: 3.A
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To: Mayor and City Council
From: Rick Valte, Acting Public Works Director, Public Works, Airport Subject: Approval of First Modification to Agreement #10713 with Corporate Realty Group for Brokerage and Consulting Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and execute a first modification to agreement #10713 (CCS) in the amount of $295,681, including a 10% contingency, with Corporate Realty Group (CRG) for commercial real estate brokerage and related consulting services for the Public Works Department. This will result in a three-year amended agreement with two one-year options to renew with a new total amount not to exceed $1,440,720, including a 10% contingency, with future year funding contingent on Council budget approval.
Summary
The City currently contracts with commercial real estate firm Corporate Realty Group (CRG) to assist staff with commercial real estate brokerage and consulting services for City-owned facilities at the Santa Monica Airport. The commercial real estate services are necessary to ensure that the City receives no less than market rate leasing revenues for City-owned facilities at the Airport. CRG is paid by commission based on lease execution and the value of the initial term of a lease agreement that it procures and negotiates for the City. Staff anticipates Airport office and hangar leasing revenues will generate approximately $13 million in FY 2021-22.
The need to increase the contract authority is driven by two unanticipated trends:
1. Higher than anticipated turnover in leases following the COVID-19 pandemic; and
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2. An increase in real estate fair market value resulting in increased lease revenues.
Staff recommends an increase in contract authority to ensure continued real estate brokerage services at the Airport for the remainder of the contract term.
Discussion
The Airport comprises properties that, due to their size, complexity, and vacancies derived from the pandemic, require the expertise of a commercial real estate broker like CRG to assist staff in marketing and negotiations to yield maximum revenues for the City.
Within their scope of services, CRG provides brokerage services to lease vacant spaces and provides additional consulting services related to commercial real estate at the Airport. The Airport incurred several unanticipated vacancies in its real estate portfolio due to the pandemic and realized higher demand for those available spaces.
When lease values increase, the associated broker commission also increase.
CRG is compensated for commercial real estate brokerage services according to a commission-based fee structure outlined in the agreement. Consulting service fees are based on an hourly rate schedule. This first modification does not change the structure for compensation. The additional funds for continued CRG services requested under this agreement modification would be more than offset by increased lease revenues.
Past Council Actions
Meeting Date Description
07/24/2018
(Attachment A)
Original bid and award of agreement with vendor for
commercial real estate broker and related consultant
services.
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Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the Airport Fund to increase the amount of Agreement #10713 with Corporate Realty Group for commercial real estate broker services and related consultant services.
Agreement Modification Request
Agreement #
Current Authorized
Amount
FY 2021-22
Budget
Modified Request
Amount
Department Account # Total Revised
Contract Amount
10713 $1,145,039 $295,681 57500001.552010 $1,440,720
Prepared By: Kate Schlesinger, Senior Administrative Analyst Approved Forwarded to Council
Attachments:
A. July 24, 2018 City Council Staff Report
B. CRG Oaks Form