COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

DATE:

December 2, 2010

BOARD MEETING DATE:

December 14, 2010

TO:

Honorable Board of Supervisors

FROM:

Steve Alms, Real Property Manager

SUBJECT:

EXECUTIVE SUMMARY:
Lease with 2700 Middlefield LLC, a California limited liability company, of the entire three-story, medical office building of approximately 36,000 square feet to be constructed by the Landlord at 2700 Middlefield Road in Unincorporated Redwood City, (“Building”), for the consolidation of three health clinics in southern San Mateo County. (Lease No. 1292)

RECOMMENDATION:

Adopt a Resolution authorizing the County Manager, or the Manager’s designee, to do the following, on behalf of the County of San Mateo:

1) Negotiate the terms of, and execute a Lease with 2700 Middlefield LLC, a California limited liability company, for the County to lease the entire three story, medical office building of approximately 36,000 square feet to be constructed by Landlord at 2700 Middlefield Road in Unincorporated Redwood City, at an initial annual rent of $1,175,000, for a term of thirty years, with two options to extend for an additional five years each, and

2) Negotiate an offset against such rent in the annual amount of $215,000 in consideration of the payment to Landlord of $4,300,000 in funds granted to the County by the Sequoia Healthcare District as a contribution toward the cost of leasehold improvements made to the Building by Landlord on behalf of the County, and

3) Execute notices, options and documents associated with the Lease including, but not limited to, construction and maintenance agreements, and extension or termination of the agreements under the terms set forth therein.

BACKGROUND:

The Health System’s South County clinics are critical components of the County’s system of care for uninsured and low-income patients. Nearly one-third of all the Medical Center’s outpatient visits each year occur at Willow, Fair Oaks and Fair Oaks Children Clinics. As clinic volumes continue to increase, the facilities will be inadequate to meet growing demand, and the aging infrastructure will render these facilities unfit for safe and effective medical care.

Consolidation of the three clinics and the Women, Infants and Children office (WIC) of Redwood City at a single facility provides an opportunity to modernize operations, increase efficiency and reduce overall operating costs. The four sites currently occupy a combined area of approximately 29,500 square feet. The Health System indicates that there is significant demand that cannot be met in the existing facilities. The expansion to 36,000 square feet can facilitate an increase from a total of 39 exam rooms in the three clinics to 52 in the new facility.

DISCUSSION:

The Health System has recommended the construction of a new South County medical facility to integrate the three clinics. This will eliminate increasingly costly repairs and provide an opportunity to add additional exam rooms and improve patient access. A new structure will also provide a higher quality of care while improving the patient experience. Expansion of dental clinic facilities is also recommended. The consolidation will eliminate redundancies in staffing, allow reductions in inventory and facilitate streamlined clinic operations. Building access and parking will also be greatly enhanced.

Real Property is in the process of negotiating a long-term lease for a medical office building that is to be constructed and owned by the Landlord at 2700 Middlefield Road.

The Lease will include an option for the County to purchase the facility in the sixth year and thereafter for fair market value. The Sequoia Healthcare District grant of $4,300,000 will be credited toward the purchase price in escrow.

FISCAL IMPACT:

There is no fiscal impact in the current fiscal year. The rent for the ongoing use of the existing facility on Middlefield Road is included in the Health System 2010/11 budget. The adjusted annual rent for the new facility of $960,000 is expected to commence in the 2012/13 Fiscal Year, and will be incorporated in the Health System proposed budget at that time.