AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 19-000584
MEETING DATE:	06/11/19
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	3
SUBMITTING Agency/Department:	County Executive Office (Approved)
Department contact person(s):	Thomas A. Miller (714) 834-6019
	Richard Sanchez (714) 834-2830

Subject: Ground Lease with Mind OC at 265 South Anita Drive, Orange, CA.

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement(s) and Resolution(s)

Discussion

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

Staffing Impact:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: N/A	County Audit in last 3 years: No

Prior Board Action: 01/29/2019, #S38B, 02/27/2018, #29, 12/05/2017, #49

RECOMMENDED ACTION(S):

1.	Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Class 32 (In-Fill Development Project) pursuant to CEQA Guidelines, Section 15332.
2.	Adopt the Resolution making certain findings pursuant to Government Code 26227 related to the approval of a Ground Lease with Mind OC for the construction, entitlement, operation, maintenance and management of the Be Well OC Behavioral Health Hub on County-owned property located at 265 S. Anita Drive, Orange.
3.	Approve the Ground Lease with Mind OC for a 60-year term, for the entitlement, construction, operation, maintenance and management of the Be Well OC Behavioral Health Hub on County-owned property located at 265 S. Anita Drive, Orange, and authorize the Chief Real Estate Officer or designee to execute the lease agreement in substantial conformance with the attached form, with approval of County Counsel.
4.	Authorize the Chief Real Estate Officer or designee to sign any and all necessary documents related to the entitlement, construction, maintenance and management of the Be Well OC Behavioral Health Hub, as set forth in the Ground Lease, including minor modifications and amendments to the Ground Lease that do not materially alter the terms or financial obligations to the County, and perform all activities specified under the terms of ground lease agreements.

SUMMARY:

Approval of the Ground Lease with Mind OC will result in the entitlement, construction, operation, maintenance and management of the Be Well OC Behavioral Health Hub designed to demonstrate the feasibility of a new public and private payment model will provide quality-driven, culturally responsive and inclusive behavioral health services from the Wellness Hub at 265 S. Anita Drive in Orange.

BACKGROUND INFORMATION:

A priority of the 2016 Strategic Financial Plan was the creation of a campus-like setting with co-located behavioral health services (Wellness Campus) that would include a crisis stabilization unit, substance use disorder treatment and crisis residential services. While many of these services exist throughout Orange County, the co-location of these services at a single site would address the need for urgent and emergent behavioral health care in Orange County.

Anita Acquisition

CEO Real Estate, on behalf of the Health Care Agency (HCA), identified the 2.10-acre property located at 265 S. Anita Drive, Orange (Property) as a viable site for the Wellness Campus. The Property contained an office building that was 84 percent occupied.

On December 5, 2017, the Board of Supervisors (Board) authorized the Chief Real Estate Officer (CREO) to execute a Purchase and Sale Agreement with the Fountain Valley School District for the acquisition of the Property. On February 27, 2018, your Board approved the purchase of the Property for $7,799,050 and authorized the relocation of all existing Property tenants. On March 15, 2018, the County of Orange (County) completed the purchase of the Property. CEO Real Estate, working with a relocation consultant, has relocated all Property tenants. While a location has been identified for the tenant Precision Discovery, and they have agreed to move from the Property, at this time they are still on premises while they await the completion of tenant improvements at their new lease premises. CEO Real Estate anticipates this tenant being off of the Property by the time the lease will be signed.

Public-Private Partnership

The HCA program planning process for the Wellness Campus evolved in conjunction with the creation of Be Well OC. Be Well OC is a coalition of behavioral health stakeholders, both in the private and public sectors, including CalOptima, hospitals (Hoag, Providence St. Joseph Health and Kaiser Permanente, collectively, Hospitals), non-profit, academic and faith-based organizations. The goal of Be Well OC is to establish a coordinated, Countywide behavioral health services system including the establishment of regional wellness hubs, such as the Wellness Campus envisioned for this Property. By collaborating with Be Well OC, an opportunity emerged for a public-private partnership between HCA and Mind OC. Mind OC is a community-owned, not-for-profit 501(c)(3) created to support the advancement of Be Well OC and strategically deliver more complete mental health care to the community. The Mind OC governance board is comprised of a cross-sector, multi-disciplinary team of Orange County leaders.

On June 5, 2018, your Board authorized County staff to work with Mind OC to design and develop a 60,000 square foot (SF) Be Well OC Behavioral Health Hub (Project) on the Property. HCA, along with OC Public Works and CEO Real Estate, met weekly with Mind OC to develop the programming and concept design for the Project. Programming and design development were completed in October 2018 and led to the commencement of work on the construction drawings, which was completed in December 2018.

The Project consists of a new three-story, approximately 59,421 gross SF, concrete tilt-up facade building to support mental health care services. The building is a Type II-A construction. It will be fully sprinklered and will support business, medical and residence occupancies. The building will replace the existing 42,000 SF two-story office building which will be demolished to allow for the construction of the new building. The new facility will sit in approximately the same location as the existing building. Existing parking lots to the north and south on the site will remain in place and will be upgraded to meet Americans with Disabilities Act accessible parking and other current code requirements.

Project Funding

The County, CalOptima, and Hospitals will fund the design and construction costs for the Project. Project design and construction costs total approximately $40 million including contingency (Project Costs). In addition to the County's land investment of $7.8 million, on January 29, 2019, your Board approved an Agreement with Mind OC for the funding, design and construction of the Project in the amount of $16.6 million. CalOptima's Board of Directors approved an allocation of $11.4 million, and Hospitals have committed to contribute $12 million collectively ($4 million individually). The financial commitments made by the County, CalOptima, and the Hospitals will fund the design and construction of the Project, as set forth below.

Stakeholder Contributions
· County Contribution	$16,600,000
· CalOptima	$11,400,000
· Hospital Systems (Hoag, Providence St. Joseph Health, and Kaiser)	$12,000,000
Total Stakeholder Contributions	$40,000,000

Ground Lease Terms

CEO Real Estate with support from County Counsel has worked closely with Mind OC to finalize the terms of the Ground Lease for the development, construction, operation, maintenance and management of the Project on the Property. The Ground Lease has a term of 60 years (Primary Term) and provides that as long as there is no uncured default Mind OC has the option to extend the Primary Term of the Lease for three additional, consecutive terms of 10 years each.

In consideration of the public benefit afforded by the Project, the multiple construction capital sources and Mind OC’s operation of the Project, the annual rent shall be $1. The Annual Rent for the Primary Term will be pre-paid to the County concurrent with the execution of this Lease. Rent paid to the County will be absolute net to the County, and Mind OC will pay all costs, charges, insurance premiums, taxes, utilities, expenses and assessments incurred for, against, or in connection with the Property.

Service providers will sub-lease space from Mind OC. Required services and uses include:

q Be Well OC Behavioral Health Services Campus;

q Wellness and Social Services;

q Crisis and Stabilization Unit;

q Substance Use Disorder Intake and Referral;

q Withdrawal Management;

q Crisis Residential; and

q Substance Use Disorder and Co-Occurring Residential Treatment.

Additional services and uses, which are ancillary and compatible with the required services and uses, may be added with the prior written approval of the CREO.

Construction

Prior to the commencement of construction, Mind OC must provide evidence to the County that funding, as set-forth in the Project Construction Budget, is available to pay for all Project Costs. In addition, if a Certificate of Occupancy (COO) has not been received one year prior to June 5, 2024 (Outside Date), then, as of the Outside Date, Mind OC shall place all construction funds into an account that the County can access. If a COO has not been received on the Outside Date, subject to force majeure delays, as defined in the lease, then the County shall have the right to assume sole and absolute control of the construction funds to complete construction of the Project.

Construction Schedule
Demolition and Site Prep	July 2019 – August 2019
Construction and Tenant Improvements	August 2019 – Fall 2020

Mind OC may not make any material changes to the Construction Drawings, Specifications, Construction Schedule, Construction Budget or the contracts with the Construction and Architect without the prior written approval of the CREO.

Maintenance

Throughout the term of the Lease, Mind OC will, at their sole cost and expense, keep and maintain the Property and all improvements constructed and installed on the Property in good order, condition and repair so the Property does not deteriorate more quickly than its age and reasonable wear and tear would dictate.

Compliance with CEQA: The proposed Project is Categorically Exempt (Class 32) from the provisions of CEQA pursuant to Section 15332, because it involves an infill development project located within city limits, on a site of less than 5 acres that is substantially surrounded by urban uses and can be adequately served by all required utilities and public services. The Project is consistent with all applicable General Plan and zoning regulations and would not result in any significant effects relating to traffic, noise, air quality, or water. In addition, the project site has no value as habitat for endangered, rare or threatened species.

FINANCIAL IMPACT:

N/A

Fiscal Year: 2019-2020

60-Year Ground Lease Rent Revenue: $60.00

The Annual Rent of $1 per year for the 60-year Lease term will be paid to the County concurrent with the execution of the lease.

STAFFING IMPACT:

N/A

REVIEWING AGENCIES:

Health Care Agency

ATTACHMENT(S):

Attachment A - Resolution
Attachment B - Ground Lease
Attachment C - Property Location