Title
Authorization to Restate and Amend Lease Agreement 35179 with Friendly House at 723 S. 1st. Ave. (Ordinance S-50708)
Description
Request to authorize the City Manager, or his designee, to restate and amend Lease Agreement 35179 with Friendly House to extend the term for 40 years, allow for tenant improvements and co-location of partner nonprofits, and to provide an option to purchase. Further request authorization for the City Treasurer to accept all funds related to this item.
Report
Summary
The City acquired and leased land to Friendly House (Tenant) through a development agreement to construct, operate, and maintain the Youth and Americanization Center at 723 S. 1st Ave. The ground lease, effective June 21, 1984, for approximately 18,170 square feet of land provided for a 40-year term, expires June 20, 2024.
The term will be extended 40 years (Extended Term) to allow for continued operations by Friendly House. The lease will be amended to allow for tenant improvements, with written approval from the City to support modern programs and community needs, at Tenant's sole expense. With the goal of better serving the community, Tenant will be allowed to co-locate partner nonprofits who share the same mission and similarly contribute to the community. The amendment will include an option to purchase the property at the beginning of the fifth and 10th anniversary of the Extended Term, subject to applicable Community Development Block Grant requirements. The purchase price, exclusive of tenant improvements, will be based on the then-appraised value, as procured, reviewed, and approved by the Finance Department's Real Estate Division,
Rent will be $135,000, plus applicable taxes, for the first five years of the Extended Term. Rent will be abated for the first year, then adjusted to $33,750 per year, plus applicable taxes, each year thereafter. Beginning year five, rent will be adjusted every five years to the then-market rent throughout the Extended Term. Rent is within the range of market rents as determined by the Finance Department's Real Estate Division. Tenant may receive a rent credit equal to an amount not to exceed the annual rent for non-monetary contributions and services provided to the community, to be quantified in terms of dollars.
Contract Term
The Extended Term is 40 years from June 21, 2024, through June 20, 2064.
Financial Impact
Contract rent during the first five years of the lease is $135,000, plus applicable taxes, which may be offset by non-monetary contributions and services, to be quantified in terms of dollars.
Concurrence/Previous Council Action
Lease Agreement 35179 (Ordinance S-14965) was adopted on June 6, 1984.
Location
723 S. 1st Ave.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Gina Montes and the Human Services and Finance departments.