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SR-900-002 (17)~~~ . . ~ ~;tYaf City Council Report Santa Monica City Council Meeting; February 13, 2Q07 Agenda Item: ~ ~ To: Mayor and City Council From: Andy Agle, Director of Resource Management Subject: Authorization to Negotiate and Execute a Lease at 1433 4th Street from Folke Investments, LLC Recommended Action Staff recommends that the Council authorize the City Manager to negotiate and execute a lease of 1,351 sq. ft. on the third floor of 1433 4t" Street, from Folke Investments, LLC, for use as office space for the Cultural Affairs Division. Executive Summary Due to the lack of space, some of the City's functions need to be located outside of City Hall. A management goal is to consolidate within City Hall those operations which clearly are interdependent in their customer service operations and to locate those operations that are more independent outside City Hall, but within close proximity to the Civic Center. The Cultural Affairs Office, now located in City Hall, can be relocated outside City Hall without adversely affecting its mission. A 1,351 sq. ft. space, located in a building at 1433 4th Street, is available for lease. The property owner, Folke Investments, LLC, will rent the space to the City for $3.30 per sq. ft. increased 5% per year for a five-year lease with one five-year option. The property owner is represented by Metropolitan Pacific Capital, LLC, who is a{so the building's property manager. Staff 1 is recommending that the Council direct staff to negotiate and the City Manager to execute a lease in accordance with the terms outlined in this report. Discussion Background City Hall was dedicated in November 1939. At that time, the original 40,000 square foot building served a population of about 53,000. Over the last forty years, various efforts were made to expand City Hall to serve a growing City. The most recent alteration was the addition of the mezzanine level in 1991 which is currently occupied by staff from Planning and Community Development and Community and Cultural Services. Space continues to be a pressing issue for City Hall, with the City leasing approximately 46,000 square feet of office space throughout the City. Studies prepared by Ruth and Going, Inc. (1996) and Sares Regis-Group (2002) identified space needs to effectively support City work efforts, according to current industry standards. Despite recent efforts to identify additional space, staff in City Hall remains compacted with two or more people sharing offices that were originally designed to hold one person and staff working in areas that were once used for storage or hallways. Although a longer-term goal is to bring employees back to the Civic Center to improve customer service and create operational efficiencies, in the short term, it is necessary to lease space at various locations in order to accommodate immediate space needs. 2 Lease Discussion On September 26, 2006, Council authorized preparation of a lease of 7,751 sq. ft. on the third floor of a building located at 1433 4t" Street. The lease was executed and the Civil Engineering and Architecture Division is expected to move in mid-March. The remainder of the third floor is available and is suitable for the Culturaf Affairs Office. The rentable area is 1,351 sq. ft. The proposed lease is for five years, with one five-year option, at a rent of $3.30 per sq. ft., increased annually by 5°!0. The City will be responsible for the cost of janitorial services and utilities. The target commencement date is March 1, 2007, with rent commencing 30 days thereafter. The landlord will provide a tenant improvement allowance of $38 per sq. ft. and will construct the improvements based on approved plans provided by the City. These are the same terms and conditions of the lease recently executed for the Civil Engineering and Architecture Division's operations. Previous Council Actions On September 26, 2006, the Council authorized preparation and execution of a lease 1433 4th Street, third floor for the Engineering Division. With the proposed lease for Cultural Affairs, City offices will occupy the entire third floor of this building. 3 Budget/Financial Impact Lease payments will be charged to account 01560.522620. Sufficient funds in the department's budget will cover this expenditure for the remainder of the year, and on- going costs will be refiected in next year's budget. Prepared by: Miriam Mack, Economic Development Manager roved: Forwarded to Council: fi / Andy Agle C.~-~ `~`~ Lamont Ewel Director, Resource Management ~fy Manager 4 e erence on rac o. .