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Approve Lease Amendment #4 for 10 Sage St., Vallejo with 10 Sage St. Vallejo, LLC through February 29, 2052; and Authorize the County Administrator or designee to execute the document and any subsequent modifications or amendments
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Department of General Services recommends that the Board of Supervisors:
1. Approve Lease Amendment #4 for 10 Sage St., Vallejo with 10 Sage St. Vallejo, LLC (Attachment A) through February 29, 2052; and
2. Authorize the County Administrator or designee to execute the document and any subsequent modifications or amendments.
SUMMARY:
The County owns the real property located at 10 Sage St. Vallejo which is leased by 10 Sage St. Vallejo, LLC that is set to expire on March 31, 2033. Prior sublessee space was vacated during the COVID 19 pandemic shutdown. Negotiations with a potential new national brand sublessee are ongoing and the existing tenant has requested a lease extension to aid in those negotiations. Concurrently, Pacific Gas and Electric Company (PG&E) has requested to use a portion of the ground lease site area for the construction of an underground gas vault that will be subject to a yet to be negotiated agreement that would grant PG&E a temporary construction easement and a permanent utility easement. The lease extension is being brought forward for the Board’s approval at this time to allow the tenant to finalize negotiations with the sublessee. Staff will return at a later date for an approval of an agreement with PG&E once negotiations are concluded.
FINANCIAL IMPACT:
Ground lease rent is proposed to remain as-is. Current rent is $5,790 per month or $69,480 per fiscal year. Rent is adjusted every five years based on Bay Area CPI. The next increase is scheduled for January 2, 2024. Revenue for the ground lease is accounted for in the General Services Department’s budget. There is no further financial impact to the County General Fund.
The costs associated with preparing the agenda item are nominal and absorbed by the department ’s FY2021/22 Adopted Budget.
DISCUSSION:
The County of Solano has leased space at 10 Sage St., Vallejo to a tenant since 2000 at which time construction improvements were made. A notice of completion was filed in 2003 for the Chevron Service Station by the City of Vallejo. The lease has survived one property owner change and been maintained in good condition with improvements.
The tenant has requested a ground lease extension to negotiate a sublease for a new national brand tenant. The requested lease extension would extend the term through February 29, 2052. Per the terms of the existing lease, the tenant is also requesting County consent to sublease a portion of the space to a national brand tenant.
Concurrently, PG&E has requested a permanent easement on a currently unused portion of the parcel, per Attachment A - Exhibit F, to install an underground gas vault. Staff has negotiated with current tenant to accept the permanent PG&E easement in exchange for the requested lease extension and sublease consent.
The tenant has agreed to allow PG&E to temporarily stage construction materials and vehicles on a portion of the parcel during installment of the underground gas vault, per Attachment A - Exhibit G, for a duration of four months. As an offset for any business interruption caused during the construction and impact to the parking on the site, the County will provide the tenant with one half of the proceeds received from PG&E for the temporary construction easement.
Once an agreement with PG&E is reached, staff will return to the Board of Supervisors for approval of the grant of both a permanent and a temporary construction easement contract with PG&E.
ALTERNATIVES:
1. Choose not to approve the proposed Lease Amendment. This is not recommended as the proposed Lease Amendment provides a suitable and cost-effective exchange of property for both the tenant and County; or
2. Choose to delay the Lease Amendment and propose other terms and conditions. This action is not recommended because the proposed Lease Amendment provides a suitable and cost-effective exchange of property for both the tenant and County. Additionally, alternative terms and conditions will require tenant consent and delay could result in a loss of the sublease tenant.
OTHER AGENCY INVOLVEMENT:
County Counsel has reviewed draft Amendment #4 as to form. No other agency involvement will be utilized for this lease.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION