COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

DATE:

January 28, 2010

BOARD MEETING DATE:

February 9, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Steve Alms, Manager, Real Property Division

SUBJECT:

First Amendment to Lease Agreement with HM Shoreline Venture, LP, a California Limited Partnership, of the entire two story office building located at 225 Cabrillo Highway, Building A, Half Moon Bay (Lease No. 1287)

RECOMMENDATION:

Adopt a resolution:

1. Authorizing the President of the Board to execute a First Amendment to Lease Agreement with HM Shoreline Venture, LP, a California Limited Partnership, of the office building located at 225 Cabrillo Highway, Building A, Half Moon Bay, extending the Term through June 30, 2020, replacing Exhibit H (Space Plan), eliminating the Landlord’s obligation to provide an Improvement Allowance, and obligating the Landlord to execute documentation related to a Grant, and

2. Authorizing the County Manager or his designee to execute notices, options and documents associated with the First Amendment and Lease including, but not limited to, extension or termination of the Lease under the terms set forth therein.

BACKGROUND:

Since 1997, the County has occupied a portion of the building at 225 Cabrillo Highway, Building A (the “Building), providing behavior health services and medical services to Coastside residents. On July 1, 2008, the County and HM Shoreline Venture, LP (the “Landlord”) entered into a 10 year master-lease for the entire Building (the “Lease”). The County simultaneously entered into a sublease with the Coastside Family Medical Center (“CFMC”) for their use of the first floor, which they had occupied since 1985. On May 1, 2009, CFMC filed for bankruptcy, and on May 8, 2009, the sublease with the County was rejected and terminated by the bankruptcy trustee, and the County took possesion of the entire building.

The Lease obligates the Landlord to provide an Improvement Allowance for the County to construct improvements to the Premises, which would be repaid by the County over the Term of the Lease, together with interest at the rate of 9.5% per annum.

On December 9, 2009, the County was awarded a $1.7 million grant from the Department of Health Resources and Services Administration for the alteration, repair and renovation of the first floor of the building for use as a County Health Clinic (the “Grant”). Conditions of the Grant require the County to have a Leasehold interest in the Premises for a period of ten years, and require the property owner to execute a Statement of Agreement.

DISCUSSION:

Real Property Services has prepared a First Amendment to Lease Agreement which extends the expiration date of the Lease to June 30, 2020, replaces Exhibit H (Space Plan), eliminates the Landlord’s obligation to provide an Improvement Allowance, and obligates the Landlord to execute documentation related to the Grant, but otherwise under the terms and conditions set forth in the Lease

County Counsel has reviewed and approved the First Amendment and Resolution as to form. The Chief of the Health System concurs in this recommendation.

Approval of this Amendment contributes to the Shared Vision 2025 outcome of a Healthy Community by satisfying requirements to receive Grant funds to renovate the Coastside Health Clinic, ensuring that adequate facilities are available to maintain the current level of medical services on the coast.

FISCAL IMPACT:

Execution of the Amendment eliminates the Landlord’s obligation to provide an Improvement Allowance to be repaid by the County and assists the County in satisfying requirements related to the receipt of Grant funds of $1.7 million.