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HomeMy WebLinkAboutItem 4a: First Lease Amendment with Los Angeles Cellular Co. for the Arcadia Self Storage Building�F. IFOR ��4ryjty °f� °� STAFF REPORT Development Services Department DATE: May 21, 2013 TO: Honorable Mayor and City Council, Acting as the Successor Agency to the Arcadia Redevelopment Agency FROM: Jason Kruckeberg, Assistant City Manager /Development Services Director By: Jerry Schwartz, Economic Development Manager SUBJECT: CONSIDERATION OF FIRST AMENDMENT TO BUILDING AND ROOF SPACE LEASE WITH LOS ANGELES CELLULAR COMPANY (AT &T) FOR THE ARCADIA SELF STORAGE BUILDING AT 35 WEST HUNTINGTON DRIVE Recommended Action: Approve SUMMARY The Arcadia Redevelopment Agency purchased the Arcadia Self Storage Building in 2006. It was purchased subject to a Lease with LA Cellular (now AT &T) for wireless antennas and equipment. Staff and representatives of AT &T negotiated the terms of a new lease in 2011, but the freeze put on new redevelopment agreements by the State Supreme Court, and then the dissolution of redevelopment, kept the lease from being considered by the City Council for almost two years. With the approval of the Long Range Property Management Plan, the lease amendment can be considered. The 15 year lease amendment of three five year terms raises the rent to $2,000 per month immediately with 3% annual increases thereafter. If approved, the lease would be presented to the Oversight Board and the Department of Finance (DOF) before it could take effect. BACKGROUND The original lease between the owner of Arcadia Self Storage and LA Cellular began on May 1, 1993, and, with extensions, had a 20 year term. The Arcadia Redevelopment Agency (Agency) assumed the lease when it purchased the self- storage building in 2006. The purchase was part of the expected implementation of the 2004 Land Assembly and Development Agreement (LADA) with Rusnak Mercedes Benz that would have led to expansion of the dealership along Huntington Drive. As the Agency was not able to acquire the other properties, the LADA was never fully implemented. Amendment to Lease — Los Angeles Cellular (AT &T) May 21, 2013 Page 2 In 2011, with about two years left on the existing lease, a consultant representing AT &T contacted staff about negotiating a lease extension. An important provision for the City was the financial terms, including base rent, and built in increases during the term of the extension. It was important for AT &T, which had invested significantly in this site, to have location certainty, and cost certainty for the long term. AT &T provided a draft lease that included the terms. However, before the lease could be brought to the City Council for consideration, the process that would lead to the unwinding of redevelopment had already started. The elimination of redevelopment put the lease amendment on hold, stalling the execution of an amendment for nearly two years. The Successor Agency's Long Range Property Management Plan included the proposed lease amendment with AT &T. When the Long Range Plan was approved by the DOF on April 5, 2013, it put the lease amendment back on the table. The parties reviewed the lease, made some slight adjustments, and it was signed by AT &T. DISCUSSION The First Amendment to the Building and Roof Space Lease would start with a base rent of $2,000 per month. Currently, AT &T pays $1,590.88 in monthly rent. Rent increases would be 3% per year over the 15 year term. Leases at other City facilities for wireless antennas and related equipment include some that have similar terms and others that are structured differently. Many City wireless leases started at a rent level similar to the proposed rent for AT &T. With some leases, rent increases occur once at the end of each five year period, and others have annual increases of 3 -4 %. AT &T will have the ability to service or enhance its equipment, which is on the fourth floor of the building, and check the antennas, which are on the roof. Any modifications to the antennas must first have City approval, after reviewing plans from AT &T. Under the Long Range Property Management Plan, the Successor Agency will eventually sell the Arcadia Self Storage building. This lease amendment should not have any impact on the sale of the property beyond enhancing the capitalization rate of the property. The existing lease expired on May 1, but AT &T will continue to make payments on a month -to -month basis until the lease amendment is implemented. If approved, the First Amendment to the Building and Roof Lease will be presented to the Oversight Board, and then submitted to the DOF. Since the terms are the same as described in the Long Range Plan, the DOF review should be brief. FISCAL IMPACT The lease income of $2,000 per month will accrue to the General Fund, similar to other proceeds from the operation of the Arcadia Self Storage building since it was acquired in 2006. Amendment to Lease — Los Angeles Cellular (AT &T) May 21, 2013 Page 3 RECOMMENDATION Approve the First Amendment to the Building and Roof Space Lease with Los Angeles Cellular Company (AT &T) for the Arcadia Self Storage building at 35 West Huntington Drive. Approved: Dominic Lazzare City Manager