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Community Development Agency <br />https://www.santa-ana.org/cd <br />Item # 28 <br />City of Santa Ana <br />20 Civic Center Plaza, Santa Ana, CA 92701 <br />Staff Report <br />March 2, 2021 <br />TOPIC: Homeless Navigation Center Lease at 1815 Carnegie Avenue <br />AGENDA TITLE <br />Approve Lease Agreement with DYER 18 LLC for Homeless Navigation Center (Non-General <br />Fund) <br />RECOMMENDED ACTION <br />1. Authorize the City Manager to execute a 15-year Lease Agreement with DYER 18 LLC for a <br />29,503 square-foot industrial building located at 1815 Carnegie Avenue (APN 430-021-02) for <br />a homeless navigation center, including improvements, with the option to purchase beginning <br />in Year Two. <br />2. Authorize the City Manager to execute any/all future agreements required by County, State <br />or Federal agencies for the use of HEAP, HHAP, PLHA, ESG, HHAP COVID-19, ESG-CV <br />and any/all other homeless-related funds available. <br />DISCUSSION <br />On June 16, 2020, the City of Santa Ana entered into an agreement for the development, <br />construction, and operation of a year-round homeless shelter and navigation center in the <br />City of Santa Ana at 1815 Carnegie Avenue, Santa Ana, CA 92705 (“Carnegie site”). <br />Specifically, the City Council authorized a two-year operator agreement, with eight, one- <br />year renewal options, for $4,000,000 in one-time costs for tenant improvements and <br />structural work, $591,289 for one-time start-up costs, and $3,155,367 for on-going <br />operational costs per year with an annual consumer price index (CPI) adjustment of 1.5%, <br />for a total not-to-exceed amount of $38,099,351 over ten years. <br />During May and June 2020 negotiations, the operator submittal included an itemization <br />of Tenant Improvements estimated to be $4,000,000 and were approved via a Request <br />for Proposals (RFP) process. During late 2020, it became apparent that the original <br />estimate for tenant improvements escalated to an amount exceeding $13,000,000. <br />City staff determined that the developer/operator had produced non-satisfactory <br />deliverables and/or non-performance in breach of the agreement, warranting termination. <br />While unwinding the agreement, staff began working toward Plan B—splitting the project <br />into two components. Component One would be for the property owner to initiate the <br />building improvements and lease the same improved building to the City. Component