43 One Gateway Plaza Los Angeles, CA

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1 43 One Gateway Plaza Los Angeles, CA T metro. net SYSTEM SAFETY AND OPERATIONS COMMITTEE MARCH 21, 2013 SUBJECT: ACTION: LEASE OF WAREHOUSE SPACE FOR RAIL COMMUNICATIONS APPROVE LEASE OF 1251 NORTH SPRING STREET, LOS ANGELES RECOMMENDATION A. Authorize the Chief Executive Officer to execute a five year (5) lease agreement commencing April 1, 2013, including three (3) one year options, with S & R Partners for the rental of approximately 100,000 square feet of land and 12,167 square feet of warehouse space located at 1251 North Spring Street, Los Angeles, at an estimated rental cost of $1,815, over the initial five year term of the lease. B. Authorize the Chief Executive Officer to enter into a five year (5) lease agreement with Mod Space Corporation (dba "Mod Space") for the lease of the existing trailers occupying the property at 1251 North Spring Street at an estimated rental cost of $243,514 over the initial five year term of the lease. BACKGROUND As part of the expansion of Metro's rail system and the follow-on requirement for Wayside Systems to provide additional and expanded maintenance and operational services, additional facilities are required. The lease of the building located at 1251 North Spring Street, Los Angeles (see Attachment A, Location Map) provides the land and building storage areas needed to address the following items and issues that are critical for efficient operations that currently take place at Location 61 : Storage, parking for non-revenue maintenance of way vehicles, and repair shop space for the three (3) Wayside Systems maintenance groups (Signals, Traction Power, and Rail Communications). Location 61 is currently beyond its maximum capacity to accommodate these functions. The five (5) communications support trailers that are stored at Location 61 facilitate the emergency response and event support team in the form of two-way radio, audio, data, and video services to Rail Operations Management. The

2 trailers impact parking of other Wayside System non revenue vehicles that are located at Location 61 and need to be relocated. Both Traction Power and Rail Communications are authorized and in the process of hiring additional staff due to the continued growth of new rail-support systems. This action will require additional non-revenue vehicles, their associated parking spaces, and expanded repair shop space. Location 61 no longer has adequate space to accommodate these new requirements. The planned startup and revenue operation of the Exposition II and Metro Gold Line 2A extensions in the near future will require additional storage of spare systems equipment for all Wayside Systems departments. The additional storage space cannot be accommodated due to the lack of suitable storage at Location 61. The Regional Connector, the Crenshaw Line, and the West Side Subway Extension will place even greater burdens on Location 61 resources which are already beyond capacity. Rail Communications does not have an area to stage new communications systems equipment prior to its installation into Metro's rail lines. At best, the Rail Communications Department has to stage new systems in a sub-system fashion and deploy these sub-systems into the field and stage/integrate in place. This is an inefficient process that hinders the timely deployment of new critical life/safety communications systems. The other two Wayside Systems departments have similar issues as the Rail Communications in their own respective areas. The property located at 1252 North Spring Street has the land area to accommodate the additional parking and storage of the five trailers and other operational requirements of Rail Communications. The existing building on the property can be retrofitted to accommodate the installation of parking lot monitoring equipment, equipment systems storage and new shops/staging areas. The space vacated by Rail Communications will then allow the remaining two Wayside Systems departments comprising of Traction Power and Signals to expand into the shop and parking areas vacated by Rail Communications resulting in additional resources to support the continued expansion of Metro's rail system. DETERMINATION OF SAFETY IMPACT This Board action will not have an impact on safety standards for Metro. The lease of the property will increase safety in that it will provide sufficient space to accommodate Rail Communications activities in an un-crowded environment N. Spring Street Lease for Rail Communications 2

3 ALTERNATIVES CONSIDERED No other location has been identified that meets the locational and space requirement of 1251 North Spring Street. This property provides a unique opportunity to meet MTA's immediate space requirements to accommodate the needs of Rail Communications. The site is located in the Chinatown area of downtown Los Angeles and is convenient to MTA's existing facilities at Location 61. The property was formerly a bus storage yard and is improved with an approximate 12,000 square foot building which was previously used for bus repair/storage. The prior bus storage terminated in February FINANCIAL IMPACTS The execution of the lease will require the payment of $57,000 consisting of a security deposit equal to one month's rent of $28,500 and the first month rent (July's rent) in the amount of $28,500. Lease payments for the existing trailers for the remainder of FY13 are estimated to be $16, A total of $73, will be required in FY13 to cover the security deposit and lease payments for the trailers. Funds to cover these payments are available in Cost Center 0651, project number (Rail Systemwide), Account No , Rent Property/Facilities. The owner is offering three (3) months of free rent covering the months of April, May and June. The remaining rental payments for the first year which will commence in August 2013 will be budgeted in the FY14 budget. Funding in the amount of $420,000 is included in the FY14 budget in cost center 0651, Non-Departmental Real Estate, under project number (Rail Systemwide), Account No , Rent Property/Facilities. The budgeted amount is expected to cover the monthly rental amount for the property, the annual lease of the office trailers that are currently located on the property and the cost of utilities and operating expenses for FY14. Since this is a multi-year lease, funding for each fiscal year will be included in the Operating Budget. Lease Terms and Rental Value The lease terms is for five years commencing April 1, 2013 and includes three (3) one year options to extend. The landlord retained the right to terminate the lease upon nine (9) months notice in the event of a sale or redevelopment of the property. The initial lease rate is $28,500/month ($.28.5/square foot) and is subject to a fixed 3% increase each year. The proposed lease rate has been compared to other comparable land leases in the general downtown area. (See Attachment B) Rental rates for comparable sites ranged from $.29/square foot of land to $.35/square foot of land. The proposed lease rate at $.28.5/square foot of land is a negotiated lease rates which takes into account the requirement to lease the office trailers at an additional cost to MT A. The lease rate is gross to MTA and the owner is required to pay taxes and insurance on the property N. Spring Street Lease for Rail Communications 3

4 NEXT STEPS Staff will complete negotiations of a lease agreement through the broker, Lee & Associates- Commerce, Inc. subject to review and approval by County Counsel. ATTACHMENTS Attachment A - Location Map Attachment B - Comparable Rental Properties in the Vicinity of 1251 N. Spring Street, Los Angeles Prepared By: Velma Marshall, Deputy Executive Officer - Real Estate (213) N. Spring Street Lease for Rail Communications 4

5 I RogerS. oliere / Chief, Real Property Management & Development - Arthur T. Leahy Chief Executive Officer 1251 N. Spring Street Lease for Rail Communications 5

6 ATTACHMENT A SUBJECT PROPERTY 1251 N Spring St, Los Angeles 100,000 SF of Land 12,167 SF of ComflfJid State Park Drawing not to scale. All sizss and dimensions 8T9 approximate and need to ba verlfifld. The land sq~hw lbcjtagip /s estlmbted and meets to be verffled viii suwy. DurJ to the ale's tlhflpe, in order for tha lessee to verify tha exact squara footage, we recommend the lassae obtain a survey of tha property N. Spring Street Lease for Rail Communications 6

7 ATTACHMENT B R en t a I P rope rf 1es 1n th v t 12s1 N s e ICinl ty. pr1ng St ree t Site Address Square Price/Square Foot Monthly Rate Footage 1920 S. Alameda 42,500 $.045 GRS $19, Los Angeles Alameda 70,000 $.030 GRS $21, Los Angeles, Lugo Blvd 67,802 $.30 NNN $20, Los Angeles N. Avenue 21 82,019 $.35 NNN $28, Los Angeles, N. Main Street 42,826 $.29 GRS $12, Los Angeles Sacramento Street 77,360 $.30 GRS $23, Los Angeles W. San Fernando Rd 65,949 $.29 NNN $19, Los Angeles, N. Spring Street Lease for Rail Communications 7