HomeMy WebLinkAbout1995-03-28 - AGENDA REPORTS - TENANT EXPENDITURES NEW LEASES (2)AGENDA REPORT
City Manager
Item to be me
CONSENT CALENDAR
DATE: March 28, 1995
SUBJECT: Tenant Improvement Expenditures to Secure New Leases
DEPARTMENT: Public Works
BACKGROUND:
General Services staff recently finalized negotiations and signed leases with two new tenants. These
two leases will require substantial modifications to the existing floor plans in order to accommodate
the new tenants. The current square footage of space requiring modification totals almost 3,000, and
the City, as Landlord, is obligated to provide a total of $82,562 in payment toward the total
construction costs. While estimated total costs are expected to exceed $50 per square foot, or
$150,000, each lease contains clauses limiting the City's contribution, with the tenants paying any and
all costs over the obligated $82,562, It is common practice in the building industry to modify and/or
improve existing office space for new tenants and the total amount requested herein is considered
moderate and often exceeded by other buildings in their efforts to attract and retain quality, long-term
tenants.
During the budget preparation process for this fiscal year, such expenditures were anticipated and
included in the General Services Capital Improvement line item request. The total funds allocated to
this line item, however, were reduced by $30,000 at mid -year since the funds had not yet been
expended, reducing the total allocation to $69,200. Although the total allocation for capital
improvements falls short of the total expenditures needed for these projects, staff is prepared to make
up the difference through cost savings realized by reducing projected expenditures from various line
item accounts in the General Services budget.
Each of the two tenants have obtained their own architects and will be selecting their own contractors
utilizing a Request for Proposal process. The decision to allow the tenants to coordinate all
contractor selection and project management efforts will better ensure tenant commitment and
satisfaction regarding the work performed. Staff will thoroughly review all work and verify all
charges assessed prior to authorizing payment for each invoice.
Securing these two leases provides a combined income of $450,000, payable over the next ten years,
in addition to putting the City Hall Building in a very good vacancy ratio position when compared to
other office buildings. The City Hall Building's current percentage of vacant space is only 8%, while
the local average is 14%, and the regional average is much higher at 19%. At this time, General
Services staff is requesting Council authorize the expenditure of $82,562 from the Capital Outlay -
Building Improvement Account, 01-6700-415.
RECOMMENDATION:
Authorize the expenditure of $82,562 from account number 01-6700-415 to complete tenant
improvement work and authorize the City Manager to approve all contract documents and potential
change orders associated with this work.
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