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Approve the Second Amendment to Lease Agreement with the Judicial Council of California for approximately 11,460 square feet of County-owned office space located on the First Floor of the Hall of Justice at 550-600 Union Avenue in Fairfield, for a four-year term commencing June 1, 2023, at an initial rate of $26,009 per month; and Authorize the County Administrator or designee to execute the amendment and any necessary, 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 the Second Amendment to Lease Agreement with the Judicial Council of California (JCC) for approximately 11,460 square feet of County-owned office space located on the First Floor of the Hall of Justice (HOJ) at 550-600 Union Avenue in Fairfield, for a four-year term commencing June 1, 2023, at an initial rate of $26,009 per month; and
2. Authorize the County Administrator or designee to execute the amendment and any necessary, subsequent modifications or amendments.
SUMMARY:
The proposed Second Amendment to Lease Agreement (Attachment A) extends the lease term for four years, commencing on June 1, 2023 and expiring on May 31, 2027. During the first year of the extended term, monthly rent payments are $26,009 (a 3% increase over the prior year), then increases 3% annually thereafter. The monthly rent payment of $26,009 equates to $2.27 per square foot, which is within the fair market rent range for comparable office space in Fairfield. The 3% increase is a widely accepted predicted average of CPI (Consumer Price Index) over a long-term lease. The proposed Lease Amendment contains no other changes from the original Lease Agreement and First Amendment (Attachment B).
FINANCIAL IMPACT:
Approval of the amendment will generate total lease revenue of $332,898 in FY2024/25, including $29,885 in unanticipated revenue from the 3% annual increase retroactive to June 1, 2023. Total revenue of $1,305,721 will be generated over the four-year lease term. Responsibilities for costs associated with the space will remain unchanged in accordance with the Joint Occupancy Agreement between the JCC and the County.
The costs associated with preparing the agenda item are nominal and absorbed by the department’s FY2024/25 Working Budget.
DISCUSSION:
In June 2007, the County entered into Transfer Agreements and Joint Occupancy Agreements with the JCC for the HOJ and Law & Justice Facility in Fairfield, and the Solano Justice Center in Vallejo. The County’s equity interest in the HOJ building is 25,472 square feet of exclusive space and the JCC’s equity interest is 65,932 square feet of exclusive space. There is also 19,744 square feet of Common Area space. In accordance with the Transfer Agreements, the JCC became the managing party of the HOJ in July 2009, thus transferring responsibility for the overall well-being of the HOJ from the County to the JCC.
The JCC has leased approximately 11,460 square feet of the County’s 27.18% interest since June 2008. This area is located on the first floor of the HOJ. The current lease extension expired on May 31, 2023; however, the JCC has continued to lease the space on a month-to-month basis as negotiations and approvals are being finalized. In addition to this lease, the JCC also leases 4,437 square feet of County-exclusive space on the third floor of the HOJ for the Court Executive Office.
The non-profit organization Court Appointed Special Advocates (CASA) occupies 1,560 square feet of County-exclusive space and the Law Library occupies another 2,544 square feet. Apart from the Law Library, which is staffed by County employees under a separate legal agreement, there are no longer any County programs located in the building and there is no identified County use for the space occupied by the JCC. The JCC is the most compatible tenant for the space and no additional tenant improvement modifications are necessary. The Second Amendment does allow for early termination if the JCC purchases the property prior to the expiration of the Lease.
ALTERNATIVES:
1. The Board could require modifications to the Second Amendment to Lease Agreement. This is not recommended as fair lease terms have been successfully negotiated and any changes will be subject to further consideration and approval by the JCC.
2. The Board could choose not to approve the Second Amendment to Lease Agreement. This is not recommended as approval of the amendment provides a revenue stream to the County for the next four years for County-owned space.
OTHER AGENCY INVOLVEMENT:
County Counsel has reviewed the Second Amendment to Lease Agreement as to form.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION