TO: Board of Supervisors
FROM: Steven Lederer, Director of Public Works
REPORT BY: Leigh Sharp, Deputy Director of Public Works
SUBJECT: Approve Lease Agreement No. 260113B with Gateway Partners 1, LLC at 555 Gateway Drive for use by the Probation Department and Child Support Services
RECOMMENDATION
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Approve and authorize Agreement No. 260113B with Gateway Partners 1, LLC to lease 40,000 square feet for a 10-year period with the option to extend the term for two consecutive five-year periods with an initial base rent of $86,000 per month and an escalation of 3% per year for use by the Probation Department and Child Support Services for office space and authorize the Chief Executive Officer to execute the Commencement Date Memorandum and any Subordination, Nondisturbance and Attornment Agreement required during the term. (Fiscal Impact: $516,000 Expense; General Fund; Budgeted; Discretionary).
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BACKGROUND
On June 3, 2025, the Board received an update on the Facilities Master Plan, made the strategic decision to indefinitely pause implementation of the plan, and directed instead to move forward with short-term improvements to address critical facility and department space needs. Among these short-term actions was an item to lease office space for the Probation Department and Child Support Services. Movement of Child Support Services to leased space opens needed space for the District Attorney in 1127 First Street and movement of the Probation Department opens the Reentry Facility for mandated Behavioral Health programs.
Staff from Probation, Child Support Services, and Public Works have utilized the services of the County’s contracted real estate agent to seek available office space for lease. Staff evaluated several properties and identified approximately 40,000 square feet of space in a single building located at 555 Gateway Drive as the most cost-effective available property to meet the space needs. With tenant improvements to be made by the Landlord, the space is suitable for the Probation Department, one of its program service providers (GEO, currently located at the Hall of Justice), and for Child Support Services. The space is anticipated to be available in March 2026 for the County to install furniture and security cameras with occupancy anticipated in May 2026. Timelines are subject to change for earlier occupancy should the Landlord’s current tenant vacate the space earlier than required.
Basic lease information is included in the first pages of the lease, attached, and summarized below. Key provisions include the following:
Premises: Approximately 40,000 square feet in a single building located at 555 Gateway Drive, Napa, CA.
Term: 10 years from the commencement date, which is the date when County receives the Premises from the Landlord (after tenant improvements are substantially complete).
Option Period: County shall have the option to extend the term for two consecutive five-year periods.
Base Rent: $2.15 per square foot per month and increases of 3% per year with the following rent schedule:
1st Year: $86,000.00 per month, $1,032,000 annual
2nd Year: $88,580.00 per month, $1,062,960 annual
3rd Year: $91,237.40 per month, $1,094,849 annual
4th Year: $93,974.52 per month, $1,127,694 annual
5th Year: $96,793.76 per month, $1,161,525 annual
6th Year: $99,697.57 per month, $1,196,371 annual
7th Year: $102,688.50 per month, $1,232,262 annual
8th Year: $105,769.16 per month, $1,269,230 annual
9th Year: $108,942.24 per month, $1,307,307 annual
10th Year: $112,210.51 per month, $1,346,526 annual
Option Period Base Rent: Base rent shall adjust to the fair market rental value for similar commercial property at the commencement of the Option Period.
Security Deposit: None
Permitted Use: Napa County Probation Department, Child Support Services, and other County Departments and Agencies for office space and all related administrative uses.
Parking Spaces: 160 spaces for County and clients.
Tenant Improvements: Landlord shall make building improvements to accommodate occupancy by Probation Department, GEO, and Child Support Services.
Operating Expenses and Additional Rent: Estimated operating expenses (e.g., all commercially reasonable expenses in connection with the ownership, operation, repair and/or maintenance of the premises) are included in the Base Rent for each calendar year of the lease term. County shall pay Landlord for any increase in operating expenses over the Base Operating Expenses as “additional rent.” Operating expenses do not include utilities or janitorial services. County shall be responsible for providing its own janitorial services for the interior of the building. An estimated two additional custodial employees (estimated cost of $225,000) will be requested at mid-year to perform such services. Additional operating costs, including security and utilities, will be monitored and budgeted.
Late Payment: County shall pay a late charge in an amount equal to 5% of overdue amounts. Landlord will not assess the late charge for one late rent payment in each calendar year.
Security Measures: County will use the existing card entry system and County shall be responsible for contracting with security provider for any other security measures or arrangements particular to County’s use of the premises.
Landlord Notice Prior to Listing Property for Sale: In the event that Landlord elects to list the Premises for sale during the initial term of the lease, Landlord shall notify County of such listing prior to making such listing public.
Upon approval of the proposed lease, additional costs are anticipated, including purchase and placement of furniture and security systems, movement and installation of existing furniture and department essentials, and allocation of two additional custodial positions. Capital Improvement Funds have been budgeted to support improvements and the move. Additional staffing in the custodial subdivision of property management will be requested at mid-year.
Staff is recommending the Board delegate authority to the Chief Executive Officer to execute the Commencement Date Memorandum (Exhibit D) once the premises have been delivered to the County, and any required Subordination, Nondisturbance and Attornment (SNDA) agreements that may be required by Landlord’s lender over the term of the Agreement provided such SNDA is in the form authorized in the Agreement (Exhibit E).
Requested Actions:
1. Approve and authorize Agreement No. 260113B with Gateway Partners 1, LLC to lease 40,000 square feet for a 10-year period with the option to extend the term for two consecutive five-year periods with an initial base rent of $86,000 per month and an escalation of 3% per year for the initial term for use by the Probation Department and Child Support Services for office space.
2. Authorize the Chief Executive Officer to execute the Commencement Date Memorandum (Exhibit D of the Agreement) and any Subordination, Nondisturbance and Attornment Agreement (Exhibit E of the Agreement) that may be required during the term of the Agreement.
FISCAL IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
Yes |
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Where is it budgeted? |
General Fund; Probation Department, Subdivision 1420000 |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Additional office space is needed to house Probation and Child Support Services (CSS). Movement of CSS makes needed space available for the District Attorney and movement of Probation makes space available for mandated Behavioral Health Services. |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
Base rent, additional rent, security costs, utilities, and additional custodial staffing will be budgeted in future fiscal years. |
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Consequences if not approved: |
Alternative space for Probation and/or other County departments would be needed to meet the space needs of County functions. |
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ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: General Rule. It can be seen with certainty that there is no possibility the proposed action may have a significant effect on the environment and therefore CEQA is not applicable. [See Guidelines for the Implementation of the California Environmental Quality Act, 14, CCR 15061(b)(3)]