To: Board of Supervisors
Department or Agency Name(s): Sonoma County Public Infrastructure
Staff Name and Phone Number: Johannes J. Hoevertsz, 707-565-2550
Vote Requirement: 4/5th
Supervisorial District(s): Countywide
Title:
Title
Acquisition of 400 Aviation Boulevard, Santa Rosa, CA (APN 059-350-112)
End
Recommended Action:
Recommended action
A) Authorize the Clerk of the Board to post the Notice of Intent to Purchase 400 Aviation Boulevard, Santa Rosa, CA (APN: 059-350-112) pursuant to California Government Code section 6063.
B) Authorize the Director of Public Infrastructure to proceed with the terms of the Purchase and Sale Agreement (PSA) with American AgCredit FLCA, as Seller, executed by the Director of Public Infrastructure on October 31 for 400 Aviation Boulevard, Santa Rosa, CA (APN: 059-350-112), consisting of a 7.65 acre parcel containing a 132,000 gross square foot, 3-story, steel frame, fully furnished, Class A office building completed in 2016 by the Seller for their U.S. headquarters, for $56,100,000 for use as County offices.
C) Adopt a budget Resolution approving adjustments to the FY24/25 Public Infrastructure Department Budget in the amount of $650,000.
(4/5th Vote Required)
end
Executive Summary:
The Director of Public Infrastructure requests Board authorization to post the Notice of Intent to Purchase, pursuant to California Government Code section 6063, 400 Aviation Boulevard, Santa Rosa, CA (APN: 059-350-112) for $56,100,000, consisting of a 7.65-acre parcel containing approximately 132,000 gross square foot, 3-story, steel frame, fully furnished, Class A office building completed in 2016 by the Seller for their U.S. headquarters. County currently leases 73,036 rentable square feet of office space in the building at a rent cost of $1,928,150.40/year, with two other tenants in the building including Sonoma County Tourism occupying the building’s remaining 48,739 rentable square feet. On October 31, 2024, the County exercised an exclusive option in its lease to purchase the Property at a set option price of $56,100,000. The proposed acquisition will support the County’s Board’s Strategic Pillar of Resilient Infrastructure.
The source of funding will be the County Center Modernization Fund (23027-40803600), and increased budgetary appropriations will be required to execute the purchase transaction.
This requested action is required by Government Code Section 25350:
• Approval Requirement: Before a county can publish a notice of intention to purchase real property, the Board of Supervisors must approve the action in a public meeting.
• Public Notice: The governing body must also ensure that a notice of intention to purchase is published in a newspaper of general circulation within the jurisdiction for three successive weeks.
Reasons for the Regulation:
1. Transparency: This regulation ensures that the public is informed about potential government real estate transactions, allowing citizens to be aware of how public funds are being spent.
2. Accountability: Requiring governing body approval helps prevent unilateral decisions by individuals or small groups within the government, fostering oversight and deliberation.
3. Public Participation: By publishing a notice and holding discussions in public meetings, residents have an opportunity to provide input or voice concerns about the transaction.
4. Fairness and Competition: The process discourages under-the-table deals or favoritism by requiring clear and public procedures for real estate transactions.
Discussion:
On June 2024, an agent for the Seller approached the Director of Public Infrastructure with a proposal for the County to secure a lease for 73,036 square feet of fully furnished Class A office space located at 400 Aviation Boulevard, with the lease proposal including an option to purchase the property at a price of $56,100,000. This price is approximately $32.6 million dollars less than the building’s construction cost of $88.7 million in 2014-15, a figure provided by the Seller and has not been adjusted for inflation. The proposed purchase price of $56,100,000 is also approximately $32 million less than the estimated construction cost per square foot, for the County to build a comparably sized 132,000 gross square foot office building to replace aging facilities at the County Administration Center (this estimated cost was calculated by taking the lowest cost estimate of $557 per square foot (excluding overhead and management costs) for the new County Government Center that was presented to the Board in January 2021 and adjusting this estimated cost for inflation using the BLS CPI calculator). Lease negotiations continued through December 2023, when terms were agreed upon. Building to the standards and quality of 400 Aviation would be significantly more expensive than this.
On February 27, 2024, your Board approved execution of a 7-year lease of 73,036 square feet of fully furnished office space at 400 Aviation Boulevard that included a County option, exercisable in the first 36 months of the lease term (ending on 8/27/27) to purchase the property for $56,100,000.
On August 27, 2024, the lease commenced with the entire Public Infrastructure and Regional Parks Departments, representing approximately 250 County employees, relocating from 2300 County Center Drive, La Plaza A & B, into the premises.
On October 31, 2024, the Public Infrastructure Department Director exercised the County’s option to purchase the property for $56,100,000. On December 19, 2024, the Public Infrastructure Department Director executed the Purchase and Sale Agreement to purchase the property for a total of $56,100,000, with $46,100,000 allocated to the real property and $10,000,000 to the existing furniture, fixtures, and equipment, including networking infrastructure and other building features.
Approximately 42% or 55,440 gross square foot of space of 400 Aviation Boulevard is occupied by other tenants, or is vacant, and over time will be available for future County expansion. Staff estimates a budget of $10,000,000 may be needed for future tenant improvements and relocation expenses as the remaining space becomes available. In the meantime, the annual lease revenue that will be collected by the County in the amount of $29,504 per month from Sonoma County Tourism Bureau and $22,609 per month from Friedemann, Goldberg, Wargo, Hess (FRIGO Law). Both leases have fixed annual rent increases, and both have lease expiration dates in 2027 (Sonoma Tourism lease is 12/31/27, FRIGO Law is 5/31/27).
Purchase and Sale Agreement (PSA): The proposed PSA contains the following key provisions:
1. 400 Aviation Boulevard: Consisting of a 7.65 acre parcel containing a 132,000 gross square foot office building with 396 on-site parking spaces
2. Sale includes all personal property of Seller located at property, including furniture, artwork, fixtures, networking infrastructure, and other interior décor.
3. Purchase Price of $56,100,000; no financing contingency
4. Initial Deposit of $500,000, fully refundable prior to Board approval of purchase
5. Close of Escrow to occur by June 30, 2025.
Project Costs and Construction Schedule.
Category Budget Notes
Purchase Price $56,100,000
Initial Deposit (Refundable) $500,000 Deposit
Due Diligence Expenses $150,000
Within 30 days of Board authorization, the County is to make a $500,000 Earnest Money Deposit into escrow that is fully refundable; and initiate an estimated $150,000 in expenditures for property Due Diligence. Staff shall return to the Board in 60-90 days to present the findings of its Due Diligence on the property and to request Board Approval to purchase the property; with Close of Escrow to occur by June 30, 2025.
Procedural Authority. Government Code Section 25350 requires publication of notice of the Board’s intent to enter into a purchase for three successive weeks prior to final approval of the acquisition when the property being acquired is valued at more than $50,000. If your Board takes the requested action, this matter will return to the Board on or after February 25, 2025, for consideration and final approval of the acquisition.
Funding
The source of funding will be the County Center Modernization Fund (23027-40803600), and as of 1/28/25 five months of lease rent obligation, totaling $803,396, has been incurred by the County.
Strategic Plan:
This item directly supports the County’s Five-year Strategic Plan and is aligned with the following pillar, goal, and objective.
Pillar: Resilient Infrastructure
Goal: Goal 1: Invest in County buildings and technology to enhance service delivery and improve employee mobility
Objective: Objective 1: Align the Board of Supervisor’s strategic priorities, policy, and operational goals with funding and resources.
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
02/27/24 - Authorize Public Infrastructure Director to execute Lease
01/30/24 - Declare intent to enter into Lease
Fiscal Summary
|
Expenditures |
FY24-25 Adopted |
FY25-26 Projected |
FY26-27 Projected |
|
Budgeted Expenses |
|
|
|
|
Additional Appropriation Requested |
$650,000 |
|
|
|
Total Expenditures |
$650,000 |
|
|
|
Funding Sources |
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|
|
|
General Fund/WA GF |
|
|
|
|
State/Federal |
|
|
|
|
Fees/Other |
|
|
|
|
Use of Fund Balance |
$650,000 |
|
|
|
General Fund Contingencies |
|
|
|
|
Total Sources |
$650,000 |
|
|
Narrative Explanation of Fiscal Impacts:
SPI staff is requesting approval of a Budget Resolution to increase appropriations required to fund the earnest money deposit ($500,000) and due diligence ($150,000) expenses associated with this Board Item. If approved, the Budget Resolution will allocate $650,000 of fund balance from the County Modernization Fund (23027-40803600) to be transferred to the 400 Aviation Blvd Fund (23052-40806100) which was originally established to fund the tenant improvements and moving expenses associated with the 400 Aviation Blvd. lease/purchase agreement approved by the Board on February 27, 2024. The County Modernization Fund currently has an estimated available fund balance of approximately $72.9 million. A separate Budget Resolution will be included with the Board Item approving the purchase of 400 Aviation which will include purchase price and any closing costs associated with the transaction. Regarding future tenant improvement and moving costs, Staff proposes a budget of up to $10 million for 400 Aviation.
Narrative Explanation of Staffing Impacts (If Required):
None.
Attachments:
Attachment 1 - Purchase and Sale Agreement between County of Sonoma as Buyer and American AgCredit FLCA as Seller
Attachment 2- Notice of Intent to Purchase
Attachment 3 - Budget Resolution
Attachment 4 - County Notice of Exercise of Purchase Option
Attachment 5 - Brickway-Aviation Present Value
Attachment 6 - Further Analysis of 400 Aviation Purchase Price
Attachment 7 - CGC Sites Searched by Real Estate
Related Items “On File” with the Clerk of the Board:
Lease Agreement between County of Sonoma as Tenant and American AgCredit FLCA as Landlord