On November 30, 2023, the City acquired the office building located at 12966 Euclid Street (the “Property”) from LT Properties Company (the “Original Lessor”). The Property is improved with a five-story office building containing 64,402 rental square feet. The office building was originally constructed in 1985, with an onsite surface parking lot.  Upon acquisition the building was configured with 25 tenant suites of which 8 are unoccupied suites for a total vacancy rate of 32% (total unoccupied square footage).

Strive Health is located on the first (ground) floor in suite 110 and utilizes the space for administrative functions.  Strive Health entered into their original lease agreement with the Original Lessor on December 8, 2022 to lease Suite 110 (1,035 square feet) (See Original Lease).  The term of the original lease expired on December 31, 2023 and they are now in a holding over period.

Strive Health desires to amend their lease (the “First Amendment”) to relocate from Suite 110 to Suite 525 (554 square feet) (See Office Stacking Chart) for a one year term scheduled to expire on February 28, 2025.  The rental rate will be $2.25 per square foot which is the same rate for Suite 110; however, ground floor space is more valuable than upper floor space.  Suite 525 is smaller than Suite 110 so this move results in an increase of total vacancy from 32% to 37%; however, the entire first floor will be available for lease which could provide flexibility for prospective tenants.

LEASE AMENDMENT DETAILS

• The lease follows a modified Gross Lease structure, with the tenant responsible for operational costs such as electricity, gas, water, and building maintenance.
• Effective February 27, 2024.
• Lease term extended to February 28, 2025.
• Monthly base rent set at $2.25 Per Square Foot or  $1,246.50 from March 1, 2024, until the expiration date.
• Agreed Use modified, designating Suite 525 on the 5th floor, comprising approximately 554 rentable square feet, as the new premises.
• Lessee gains access to Suite 525 on February 28, 2024, for installation purposes and must vacate Suite 110 by March 15, 2024, leaving it in "broom clean" condition.
• The amendment addresses property taxes and brokerage representation by CBRE for the Landlord and Cresa Global, Inc. for the Tenant, with mutual consent.

The City will receive lease revenues of $1,246.50 monthly or annual revenue of $14,985.00.  Based on the proportionate share of the building's 10-year average of expenses, the City anticipates one-year expenses for Suite 525 to be around $5,069.00.

It is recommended that the City Council:

• Approve the First Amendment to the Strive Health Lease; and

• Authorize the City Manager to execute the First Amendment, including any minor modifications as appropriate, and any other pertinent documents necessary to effectuate and/or implement the First Amendment, on behalf of the City.