HomeMy WebLinkAbout08/18/1998, C4 - LEASE OF 879 MORRO STREET counciL August 18,1998
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CITY OF SAN LUIS OBISPO
FROM: John E.Moss,Utilities Directof*-
SUBJECT: Lease of 879 Morro Street
CAO RECOMMENDATION
Approve the lease of certain City owned real property located at 879 Morro Street to GST
Call America. Terms of the Lease are month to month and rent to be set at $4,000 per
month.
DISCUSSION
On June 16, 1998 Council authorized staff to purchase the building located at 879 Morro Street for
the purpose of developing additional office space for Utilities Administration and Conservation
staff. The acquisition is currently in escrow with escrow proposed to close on August 21, 1998.
One of the conditions of escrow closure is that the current lease between Copeland's Properties and
GST Call America, the current tenant, be terminated and a new lease be established between the
City,the new owner of the building,and GST Call America.
The City's proposed use of the building will require six to nine months to complete consultant
selection,architectural design,construction bidding and construction contractor selection. It would
be advantageous for the City to have a tenant in the building, paying rent and responsible for
security during this time. GST Call America,the current tenant of the building,is in the process of
relocating their facilities to a new location off of Broad Street, however has had some technical
difficulties with certain components of their communications systems that has necessitated their
continued occupancy of the building located at 879 Morro. Discussions with GST Call America
representatives have identified that they will indeed be able to complete their relocation within the
next six to nine months. It is therefore in the mutual best interest of both GST Call America and
the City to enter into this short-term lease,on a month-to-month basis,while the City is completing
the activities necessary to begin the remodel of the building and while GST Call America
completes their relocation.
Since the City is a government entity and is seeking to purchase and use the subject property for
government purposes,there could be some liability to the City for relocation costs of the existing
tenant. In order to eliminate this potential liability, staff has placed as a condition of escrow, a
requirement that the.current lease between Copeland's Properties and GST Call America be
terminated,and a new lease between the City and GST Call America be executed. The new lease
will be on a month-to-month basis and contains specific language to protect the City from any
liability for relocation costs. This new lease will become effective at the close of escrow when the
City takes ownership of the building.
Council Agenda Report-Lease of Real Property,45 Prado Road
Page 2
FISCAL IMPACT
The current and proposed rent for the building is $4,000 per month. This revenue will be returned
to the Water Fund and will help off-set some of the cost associated with purchase and remodel of
the building.
ALTERNATIVES
Deny the Lease and direct staff to require complete vacancy of the building prior to City ownership.
This alternative is not recommended as it would necessitate the delay of close of escrow since GST
Call America is at least a couple of months from completing their move,and would leave the City,
after escrow,with an empty building and no income while plans for the remodel are being prepared.
On File in the Council Office:
Proposed Lease Agreement