Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  24-000193

 

MEETING DATE:

06/25/24

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

2

SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Thomas A. Miller (714) 834-6019 

 

 

Dr. Veronica Kelley (714) 834-7024

 

 

Subject:  Health Care Agency Second Amendment to Lease at 750 The City Drive in Orange

 

      ceo CONCUR

County Counsel Review

Clerk of the Board

          Concur

Approved Agreement to Form

Discussion

 

 

3 Votes Board Majority

 

 

 

    Budgeted: Yes

Current Year Cost:   N/A

Annual Cost: See Financial Impact Section

 

 

 

    Staffing Impact:

No

# of Positions:            

Sole Source:   N/A

    Current Fiscal Year Revenue: N/A

   Funding Source:     State: 100% (Mental Health Services Act/Prop 63)

County Audit in last 3 years: N/A

   Levine Act Review Completed: Yes

 

    Prior Board Action:         1/29/2019 #32

 

RECOMMENDED ACTION(S):

 

 

1.

Find the project is categorically exempt from the California Environmental Quality Act (CEQA), Class 1 (Existing Facilities) pursuant to CEQA Guidelines, Section 15301.

 

2.

Approve and execute the second amendment to lease agreement with GPI-OCS LLC, a Delaware limited liability company, for approximately 10,239 rentable square feet of office space and 3,909 rentable space feet of expansion space located at 750 The City Drive, Suite 100, 210 and 225, in the city of Orange, for Health Care Agency use, for a term of 10 years, commencing on or about the first full calendar month following the completion of work on Suites 210 and 225, in an amount not to exceed $1,899,227, with two five-year options to extend the term.

 

3.

Authorize the Chief Real Estate Officer or designee to exercise option terms and execute subsequent documents and amendments that make non-monetary and/or monetary changes that do not increase County costs by more than $75,000 per year, as approved by County Counsel.

 

 

 

 

 

 

 

 

SUMMARY:

 

Approval of the Second Amendment to Lease Agreement with GPI-OCS LLC, a Delaware limited liability company, will provide 6,020 rentable square feet in Suite 210, 4,219 rentable square feet in Suite 225 on the second floor of the building of office space as well as 3,909 rentable square feet in Suite 100 of additional space necessary for the Health Care Agency to expand its staff and services to 750 The City Drive in Orange for its Mental Health Services Act Program.

 

 

 

BACKGROUND INFORMATION:

 

In November 2004, California voters passed Proposition 63, also known as the Mental Health Services Act (MHSA). The MHSA implements a 1 percent state tax on personal income over $1 million and emphasizes transforming the mental health system to improve the quality of life for individuals and their families living with a serious behavioral health condition. The MHSA ensures that key community stakeholders have the opportunity to provide input into program development, implementation, evaluation, finance and policy resulting in public behavioral health programs that have been tailored to meet the needs of diverse individuals, families, and communities across California. As a result, local communities and their residents are experiencing the benefits of expanded and improved mental health services. Since the approval of the MHSA, Health Care Agency’s (HCA) Behavioral Health Services (BHS) has used a comprehensive stakeholder engagement process to develop local MHSA programs that range from prevention and crisis services, through an expanded continuum of outpatient services, to crisis residential care. Central to the development and implementation of all programs is the focus on community collaboration; cultural competence; consumer and family-driven services; service integration for consumers and families; prioritization of serving the unserved and underserved; and a focus on the importance of mental wellness, recovery and resilience. The current array of services was developed incrementally, starting with the planning efforts of stakeholders in 2005 and continuing to present day.

 

On January 29, 2019, the Board of Supervisors (Board) approved a 10-year lease agreement (Lease), with GPI-OCS, LLC, a Delaware limited liability company (Lessor), for HCA’s BHS use, of approximately 7,383 rentable square feet (RSF) of office space in the building located at 750 The City Drive in Orange (Building), to provide on-site trainings for its workforce to educate staff in mental health and substance use issues as well as support clinical licensure requirements in continuing education.  Through the Behavioral Health Training Services Department (BHTS) within BHS, these workforce trainings have been made available to over 1,500 BHS employees and contractors with topics including: clinical provider trainings, cultural competence, trauma-informed care, substance use disorder treatment, veteran mental health and many others.  Lessor and County amended the Lease via delegated authority on January 28, 2020, to extend the term of the lease by one month and revise the rent schedule to include the repayment of the amortized costs.

 

With the passage of Proposition 1, the name of the MHSA (Mental Health Services Act) is updated to the Behavioral Health Services Act (BHSA) and the categorical uses for programmatic funding changes. As for the transition from MHSA to BHSA, it will be a seamless transition and will not affect the funding or business operation. HCA will continue to receive BHSA funds that can and will continue to be used for BHSA administration and implementation. The BHSA Program Planning and Administration area will be located in the space which includes the current MHSA Administrative offices, Behavioral Health Training, Suicide Prevention, Early Intervention contract monitoring, Innovation/Internship program, and the Office of Equity and Inclusion.  

 

CEO Real Estate negotiated a favorable new 10-year second amendment to lease (Proposed Second Amendment) for HCA to relocate the existing MHSA programs that are currently located at 600 W. Santa Ana Blvd., Suite 510 and 405 W. Santa Ana Blvd. in Santa Ana into additional office space in the Building as well as exercise County’s rights to expansion space as provided for in the Lease. The Proposed Second Amendment includes leasing a total of 14,148 RSF consisting of approximately 3,909 in Suite 100 (Expansion Space), and net new 6,020 RSF in Suite 210 and 4,219 RSF in Suite 225 of the Building (collectively, the Proposed Expansion Premises).  Under the terms of the Proposed Second Amendment, the first year’s rental rate will be $3.25 per RSF, full-service gross, with no pass through for building operating expenses (Base Rent).  This Base Rent, which is at current market for the central Orange County area, will increase annually at a fixed three and one-half percent. The Proposed Second Amendment includes continued use of the existing 88 parking stalls under the Lease for daily services.  With parking at such a premium in Orange County, the parking provided under the Proposed Second Amendment is a significant benefit and cost savings to HCA.

 

The Proposed Expansion Premises will be delivered to HCA by the Lessor in “turn-key” condition according to a mutually agreed upon plan and finish schedule. Lessor has agreed to use its commercially reasonable efforts to complete, at Lessor’s expense, the alterations, repairs, and other work in accordance with the plans and specifications (the Work) and based upon a budget of $1,899,227.

 

County may elect to have Lessor grant County an additional allowance, as necessary, up to an amount not to exceed $20 per RSF located for Suites 100, 210 and 225, which equates to $282,960, based upon 14,148 RSF (Additional Allowance). Such Additional Allowance may be used, at County’s sole discretion, towards County’s out-of-pocket costs of Furniture, Fixtures & Equipment (FF&E), relocation costs, and cabling and telecommunications costs. Furthermore, the Additional Allowance shall be amortized over the last 120 months of the term on a straight-line basis and with interest at eight percent per annum and paid by County to Lessor as additional monthly Rent not subject to abatement for any reason.

 

The Lessor will also pay a moving allowance of $10 per RSF, which equates to $141,480, in total based on 14,148 RSF in Suites 100, 210 and 225.

 

The Base Rent for the Proposed Expansion Premises will commence on the first day of the first full calendar month following substantial completion of the Work in the Proposed Expansion Premises, estimated to occur approximately six (6) months after April 1, 2025.

 

The Proposed Second Amendment is consistent with HCA’s program goals and allows flexibility for future program needs, and therefore CEO Real Estate and HCA recommend approval

 

Compliance with CEQA: The proposed project is Categorically Exempt (Class 1) from the provisions of CEQA pursuant to Section 15301, because it involves the lease of an existing office facility by a governmental agency involving negligible or no expansion of an existing use.

 

General Plan: The Proposed Second Amendment and uses thereunder were previously found to conform to the General Plan of the City of Orange pursuant to a letter dated January 7, 2019. The square footage under the Proposed Second Amendment and County’s use of the Proposed Expansion Premises has remained consistent since that letter.

 

 

 

 

FINANCIAL IMPACT:

 

Appropriations for this Proposed Lease will be included in HCAs Budget Control 042 FY 2024-25 Budget and will be included in the budgeting process for future years.

 

The Agreement is funded 100% by State (Mental Health Services Act/Prop 63 and Behavioral Health Services/Prop 1).

 

The below table of the fiscal-year cost is based upon an April 1, 2025, commencement date.

 

Suites 130, 140:

 

FY 2024-25

$ 71,984

FY 2030-31

$ 344,971

FY 2025-26

$ 290,456

FY 2031-32

$ 357,045

FY 2026-27

$ 300,622

FY 2032-33

$ 369,542

FY 2027-28

$ 311,144

FY 2033-34

$ 382,475

FY 2028-29

$ 322,034

FY 2034-35

$ 294,321

FY 2029-30

$ 333,305

 

 

 

Suites 210, 225:

 

FY 2024-25

$ 99,828

FY 2030-31

$ 478,418

FY 2025-26

$ 402,818

FY 2031-32

$ 495,163

FY 2026-27

$ 416,914

FY 2032-33

$ 512,493

FY 2027-28

$ 431,506

FY 2033-34

$ 530,431

FY 2028-29

$ 446,608

FY 2034-35

$ 408,175

FY 2029-30    

$ 462,240

 

 

 

Suite 100:

 

FY 2024-25

$ 0

FY 2030-31

$ 193,960

FY 2025-26

$ 118,340

FY 2031-32

$ 200,749

FY 2026-27

$ 169,025

FY 2032-33

$ 207,775

FY 2027-28

$ 174,941

FY 2033-34

$ 215,047

FY 2028-29

$ 181,064

FY 2034-35

$ 155,831

FY 2029-30    

$ 187,401

 

 

 

 

STAFFING IMPACT:

 

N/A

 

REVIEWING AGENCIES:

 

Health Care Agency

 

ATTACHMENT(S):

 

Attachment A - Second Amendment to Lease
Attachment B - Lease Summary
Attachment C - Acquisition Questionnaire
Attachment D – Original Lease