Agenda Item   



                                                                                                                        ASR Control  19-000808




legal entity taking action:

Board of Supervisors

board of supervisors district(s):


SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Thomas A. Miller (714) 834-6019 



Richard Sanchez (714) 834-2830



Subject:  Health Care Agency Lease at 2801 Bristol Street in Costa Mesa


      ceo CONCUR

County Counsel Review

Clerk of the Board


Approved Agreement to Form




3 Votes Board Majority




    Budgeted: Yes

Current Year Cost: $40,346.80

Annual Cost: See Financial Impact Section




    Staffing Impact:


# of Positions:

Sole Source: N/A

    Current Fiscal Year Revenue: N/A

  Funding Source: See Financial Impact Section

County Audit in last 3 years: No



    Prior Board Action: N/A






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



Approve and execute the Lease Agreement with Headway Properties, LLC, a California limited liability company, which will provide 15,518 rentable square feet of office space for the Health Care Agency located at 2801 Bristol Street in the City of Costa Mesa, for a term of 15 years commencing on or about May 1, 2020, through April 30, 2035, with three five-year option periods. 



Authorize the Chief Real Estate Officer or designee to execute subsequent lease amendments and option terms that make non-monetary and/or monetary changes which do not increase County costs by more than $50,000 per year. 






Approval of the Lease Agreement with Headway Properties, LLC, a California limited liability company, will provide 15,518 rentable square feet of office space necessary for the Health Care Agency to relocate its staff and services to 2801 Bristol Street in the City of Costa Mesa, for its Children and Youth Behavioral Health outpatient clinic and adult behavioral health clients.




On March 7, 2006, the Board of Supervisors (Board) approved a ten-year lease, commencing on April 1, 2006, for Health Care Agency (HCA) occupancy of 12,093 rentable square feet (RSF) of office space at 3115 Red Hill, in the City of Costa Mesa (Existing Lease), to provide Children and Youth Behavioral Health (CYBH) services, Adult and Older Adult Behavioral Health (AOABH) services and Adult Program for Assertive Community Treatment (PACT) services to Orange County clients. Subsequently, the Board approved a First Amendment to the Lease on October 4, 2011, to extend the term of the lease for five years through March 30, 2021.

HCA through CYBH provides a broad range of services for behaviorally, emotionally or mentally disordered children and adolescents, which include evaluation, individual and family therapy, medication monitoring, crisis intervention, peer mentoring, case management and collateral services to parents and families. CYBH provides information for hospitalization, consults with local education agencies and other community programs, coordinates with private and public services, and provides case management for Medi-Cal beneficiaries placed in psychiatric hospitals or other 24-hour settings. PACT is an outpatient program that serves adults 18 years of age and older who are living with a chronic and persistent mental illness. PACT provides assessment, linkage, individual and group therapy, extensive case management, advocacy, medication support and a variety of recovery services for adults.

In an effort to improve staffing efficiencies, optimization of space and best account for program growth, HCA sought to find a relocation site for its CYBH and PACT programs. The Existing Lease expires March 30, 2021, and includes the right to terminate at any time with at least 240 days’ prior written notice.

A thorough search by CEO Real Estate, on behalf of HCA, resulted in the discovery of an optimal relocation opportunity for HCA to expand and relocate its existing facility into a 15,518 RSF single-tenant freestanding building at 2801 Bristol in the City of Costa Mesa (Proposed Premises). The Proposed Premises is centrally located in the Costa Mesa Service Area for clients commuting from surrounding Costa Mesa, Corona Del Mar, Irvine and Newport Beach cities. The Proposed Premises also has excellent visibility and accessibility along the major north-south arterial of Bristol Street with various public transportation routes and close proximity to SR 55 and SR 73 on/off ramps, which will enhance client convenience and decrease barriers to services. Staff and clients will have ample use of the onsite parking lot, with approximately 58 parking stalls, at no additional cost. The County will have the right to top building signage as well as standard identification outside of the building including lobby, directory and a dual-sided monument sign visible along Bristol Street.

CEO Real Estate negotiated a favorable 15-year lease term with three, five-year options to extend the term with advanced written notice of at least nine months (Proposed Lease). Under the terms of the Proposed Lease, the first year’s starting rental rate will be $2.60 per RSF (Rent) full-service gross lease, with no pass-throughs for the building operating expenses, with the first 12 months at one-half rental rate. This rate is at current market for the Orange County area and will increase annually at a fixed three and a half percent. The Rent during the extension term(s) will be Fair Market Rental Value, but no less than three and a half percent and no more than five percent increase of the immediately preceding Rent paid by County.

Headway Properties, LLC, (Lessor), will deliver the Proposed Premises in “turn-key” condition with a tenant improvement allowance not to exceed $15 per RSF, which equates to $232,770, to be utilized for a mutually agreed upon space plan and scope of work including furniture, fixtures and equipment. Lessor will provide an additional improvement allowance of up to $5 per RSF, or $77,590, to be straight-line amortized over the term of the Proposed Lease and carry an interest rate of six percent per year to be used at HCA’s sole discretion towards furniture, fixtures, equipment, relocation costs, telecommunications and/or converted to cash to help reduce any additional HCA out of pocket expenses. The Lessor is responsible for all utilities supplied to the Proposed Premises, except for internet and telephone service.

The Proposed Lease allows a one-time termination option at the end of the 144th month of the term upon giving Lessor at least nine months’ notice of said termination date.

The Proposed Lease is consistent with HCA’s program goals and allows flexibility for future program requirement needs. The term of the Proposed Lease commences on May 1, 2020.

Legal Requirements:

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 existing office facility involving negligible or no expansion of an existing use.


General Plan: The project conforms to the General Plan of the City of Costa Mesa.




Appropriations for this Proposed Lease are included in HCA’s FY 2019-20 Budget and will be included in the budgeting process for future years.


75% (Mental Health Service Act/Prop 63, Mental Health Realignment, 2011 Realignment, and Proposition 47)


3% (Substance Abuse Prevention and Treatment Block Grant, and Community Mental Health Services Block Grant)


20% (Federal Financial Participation Medi-Cal, Tobacco Settlement Revenue, and Federal Drug Med-Cal)




The below table of fiscal-year cost is based upon a May 1, 2020, commencement date.

FY 2019-20

$   40,346.80


FY 2027-28

$ 619,582.06

FY 2020-21

$ 285,251.88


FY 2028-29

$ 641,267.40

FY 2021-22

$ 504,030.40


FY 2029-30

$ 663,711.80

FY 2022-23

$ 521,671.44


FY 2030-31

$ 686,941.72

FY 2023-24

$ 539,929.96


FY 2031-32

$ 710,984.66

FY 2024-25

$ 558,827.48


FY 2032-33

$ 735,869.04

FY 2025-26

$ 578,386.44


FY 2033-34

$ 761,624.48

FY 2026-27

$ 598,630.00


FY 3034-35

$ 653,091.40










Health Care Agency




Attachment A - Lease
Attachment B - Acquisition Questionnaire
Attachment C - Lease Summary