Item 6-D

Council Meeting: 2/25/97                Santa Monica, CA

TO:       Mayor and City Council

FROM:     City Staff

SUBJECT:  Recommendation to Authorize the City Manager to
          Negotiate and Execute a Three-Year Lease Agreement with
          Eri S. Kroch and Yona K. Kroch for Office Space for the
          Housing Authority and a Two-Year Lease Agreement with
          Eri S. Kroch and Yona K. Kroch for Office Space for the
          Multi-Family Earthquake Repair Loan Program(MERL).

INTRODUCTION
This report recommends that the City Council authorize the the
City Manager to negotiate and
execute a three-year lease agreement with Eri S. Kroch and Yona
K. Kroch in the amount of 
$5,610/month for the Housing Authority and a two-year lease
agreement with Eri S. Kroch and 
Yona K. Kroch in the amount of $2,750/month for the Multi-Family
Earthquake  Repair Loan
Program(MERL). The proposed leases stipulate that any incremental
operating cost increase
incurred by the landlord during the term of the lease will be
passed on to the lessee after the first year of the lease.

BACKGROUND
The Housing Authority has occupied an office in the City owned
building located at 612 Colorado Boulevard since 1988. The MERL
program has occupied office space at the same location since
1994. Both programs have expanded and require more office space
than is currently available at 612 Colorado Boulevard. Staff
engaged the services of a professional commercial broker, at no
cost to the City, to analyze current market conditions and the
availability of  lease office space in Santa Monica. After
considering several other sites, the building located at 2121
Cloverfield Boulevard was found to be  the most accessible and
cost effective office space. There is sufficient office space  to
accommodate the needs of both programs, the site is easily
accessible by bus and on-site parking is available for both 
staff and clients. The Rent Control Hearings Office is also
located at the site and the three City programs often work
together on specific issues.

The proposed Housing Authority lease is for a three-year term.
The two-year term of the proposed MERL program lease reflects the
temporary nature of that  program which is anticipated to
complete its work and  close out by that time. Both proposed
leases reflect a monthly base rent of $1.65 per square foot. In
addition, parking spaces are provided at $55 per month per
parking space. The annual lease cost for the Housing Authority
(including parking) will be $67,320. The tenant improvements
required to accommodate  the Housing Authority exceed the owner's
tenant improvement allowance by $15,000 and are  built into the
first year of that  lease as a one-time cost for  total costs of 
$82,320, including parking.  The annual lease cost for the MERL
program (including parking) will be $33,000. 


BUDGET/FINANCIAL IMPACT
Neither  the Housing Authority or the MERL program are supported
by the  General Fund.
Consequently, there is no budget impact on the General Fund. 
Funds to pay the Housing
Authority's rent for 612 Colorado Boulevard are budgeted at
account  12-700-695-00000-7832-00000. The budget at this account 
must be  increased by $22,362 in order to pay for  the one-time
tenant improvement cost and the increased  per square foot
monthly lease cost through June 30, 1997. In addition, the budget
at account  01-620-264-00005-8809-00000 must be increased by
$20,000 for  fixtures, improvements and to replace furniture that
has exceeded its' useful life for the Section 8 office and by the
following amounts in order to reimburse the General Fund for this
cost: $20,000 at account 12-700-695-0000-7725-00000 and ($20,000)
at account No. 01-700-695-00000-7725-00000. Funds for the MERL
program's rent at 612 Colorado Boulevard are budgeted in Non-Departmental Account No. 19-700-695-00000-4483-00000. No
additional budget authority is  required for the MERL program.

RECOMMENDATION
It is recommended  that the City Council authorize the the City
Manager to negotiate and execute a three-year lease agreement
with Eri S. Kroch and Yona K. Kroch for the Housing Authority and
a two-year lease agreement with Eri S. Kroch and Yona K. Kroch
for the Multi-Family Earthquake  Repair Loan Program(MERL). It is
also recommended that the City Council approve the budget changes
set forth above.

Prepared by:   Jeff Mathieu, Director, Resource Management
               Department
               Bob Moncrief, Housing Manager
               Peter Mezza, Housing Coordinator