Randy Mabson Program Coordinator July 17, 2017 Master Lease and Property Management/Operator Agreements with Neighborhood Housing Services of LA County (NHS) Randy Mabson Program Coordinator July 17, 2017

Recommendation It is recommended that the City Council take the following actions: Find that the recommended action is exempt from the California Environmental Quality Act ("CEQA") pursuant to State CEQA Guidelines per Section 15061 (b) (3), the General Rule that CEQA only applies to projects that may have an effect on the environment; Authorize staff to enter into a Master Lease Agreement and a Property Management/Operator Agreement with Neighborhood Housing Services of Los Angeles County (“NHSLAC”) for the operation of commercial property located at 1015 N. Lake Avenue; and Authorize the City Manager to execute, and the City Clerk to attest, the Master Lease Agreement, the Property Management/Operator Agreement, and other related documents.

Year built: 1961, addition in 1988 Land: 30,440 S.F. (two parcels) Building: 14,650 S.F. (two stories) Offices: 33 spaces Parking: 51 covered & uncovered surface parking spaces

Background In 1992, LA County sold 1015 N. Lake to the Pasadena Community Development Commission (PCDC) for $700K Property conveyed from PCDC to Pasadena Enterprise Center (PEC) and obligations related to the transaction assigned to PEC Over the years, the combination of losing tenants in a weak economy coupled with increased costs of maintaining the property have resulted in PEC’s inability to meets its financial obligations.

Background Outstanding Debt on the Property (all figures are approx.) Loan from County of Los Angeles County - $690K Loan from Community Development Commission of the County of Los Angeles - $112K Loans from Pasadena Development Corp - $706K 3 CDBG deferred loans from City of Pasadena

Background 6/3/13: City Council in closed session approved staff recommendation to negotiate acquisition of the property, conduct due diligence, and seek a non-profit organization to manage and operate property. 1/27/14: City Council appropriated $167,000 in General Funds for due diligence costs and repayment of the County CDC loan (approx. $112K). 7/28/14: City Council in closed session received staff presentation on due diligence studies, and directed staff to continue purchase negotiations, execute acquisition-related documents, and perform related activities to conclude the transaction.

Background Summary of Key Due Diligence Findings in 2014 Property taxes are current Asbestos materials observed were non-friable or in good condition. Abatement to be done prior to any renovation activities. Some lead-based paint detected at exterior but intact. Building systems upgrade, roof repair, and general maintenance/repairs recommended at $95K - $125K Structural: No structural damaged observed, recommend seismic work totals $148K Property FMV appraised at $2.9M

Key Terms of Transaction Background 9/15/15: LA County Board of Supervisors approved to forgive $690k loan if the property is transferred from PEC to the City Key Terms of Transaction PEC deeds property to City County forgives loan ($690K approx) 10-year use restriction: New tenants must be nonprofit or governmental agencies Existing tenants allowed to stay City pays off LACDC loan ($112K approx) City forgives PDC loans ($706K approx)

Background 1/4/17: Staff issued a RFP to identify a qualified nonprofit w/ experience operating commercial rental property and facilitating non-profit collaboration. The selected non-profit would serve as master lessee and property manager/operator responsible for: Day-to-day management and operation of the property Marketing building to nonprofit tenants In conjunction with the City, create and fund a multi-year building rehab plan Create plan to foster collaboration among nonprofit tenants

Neighborhood Housing Services of Los Angeles County (NHSLAC) Background Neighborhood Housing Services of Los Angeles County (NHSLAC)

Master Lease Business Terms   Master Lease Agreement Term Five (5) year term with City option for two five (5) year renewals. Assignment and Subleasing Office space to be subleased to tenants, but no single tenant shall be permitted to lease entire building. City retains veto power over any tenants. All new subtenants will be non-profit organizations. Rent NHS will not occupy the building at this time, other than the manger’s office for $1 annual rent. Operating Costs Operating costs will be paid by NHS from a gross rent operating account including but not limited to: interior and exterior property maintenance and repairs, utilities, janitorial, security, and insurance.

Property Mgmt Business Terms   Property Management/ Operator Agreement Scope Services will include the operation, marketing, and rehabilitation of the property. A plan to rehabilitate the property and foster collaboration between non-profit organizations will be developed and implemented. Term Five (5) year term with City option for two five (5) year renewals. Fee The gross management fee to NHS will be three (3%) percent of gross rents collected; this fee will include all leasing activities, regular and after hours management duties, and all project/construction management supervision. The NHS will receive as additional compensation fifty (50%) percent of the net cash flow. Operating Account NHS will open a trust operating checking account with the City as additional signatory, and with the power to terminate NHS’s access without notice. All rents collected and expenses paid will be through the operating account. Reporting Standard financial reports will be provided to the City on a monthly and annual basis. Non-Cause Termination Mutual non-cause termination right at the 13th month of the agreement term.