Leases, UC as Tenant

Are you considering leasing space off campus?

The Real Estate Office will help you coordinate with other campus units that will help you obtain campus approval, select a site, manage tenant improvements, and organize your move-in.   This webpage summarized the process, but your unit will need to be familiar with all the steps, which are described in the Lease Process - Regents as Tenant write up.

HOW TO GET STARTED

Even before you actively start looking for lease space, there are some questions to answer and steps to take:

  1. In accordance with the campus Space Management Principles, all space requests, including requests for possible leased space, must be processed through the unit/division's Space Control Officer (Dean, Vice Chancellor, Vice Provost, or the University Librarian) or their designee.
  2. The Space Control Officer or designee should first attempt to satisfy the space request within the unit/division's existing space.  If there is insufficient space within the unit/division, a formal space request should be submitted to Capital Planning and Space Management (CPSM).
  3. If CPSM cannot identify appropriate space to meet the needs identified in the space request, CPSM may make a recommendation to lease off-campus space.
  4. After receiving a recommendation to lease off-campus space, the Space Control Officer may begin the lease process by starting to fill out the "Lease Proposal Form" and sending it to Lisa Akeson.
  5. What level of project management support will your project require? REO will send your lease proposal to Physical Planning and Construction (PP&C) and ask them to assign a project manager to work with you to scope your lease project's requirements.
  6. What kind of funding will you need to budget for this leasing project? PP&C is a recharge unit, and so you will need to set up a "construction funding request" (CFR) for the project. Please see the Real Estate Support Matrix for the types of support PP&C provides for different sizes and scales of leasing projects and the planning-level budget associated with these services.

REO will set up your lease coordinating committee, which will work with you all the way through your leasing process through move-in.  Your unit, as the client, will need to designate a unit representative to serve as the single point of contact for your unit.   

CAMPUS APPROVAL PROCESS

All leases will require documentation of the Campus Provost/Executive Vice Chancellor's (CP/EVC) approval for entering into a lease.  The lease coordinating committee will work with your unit to provide sufficient information for campus approval. 

Forms you will need:

  • For most leases, the CP/EVC is approving a "Lease Proposal," which delineates the size and cost parameters within which a lease will be negotiated, providing flexibility in selecting a site and in lease negotiations. 
  • In some cases (e.g., extensions of existing leases), a "Project Summary" form will be required for approval, and will reflect all the negotiated terms of the agreement for the specified site. 
  • Requests for approval, in the form of a Lease Proposal or a Project Summary are submitted by your unit's Principal Officer (Vice Chancellor, Vice Provost or Dean), by signature on a lease project Concurrence Form (or via email) to REO.   

 

SITE SELECTION

If you haven't selected a site, the REO will conduct a search for space that meets your requirements. Typically, the REO issues a request for proposals (RFP) to the local real estate brokerage community, listing the space requirements and other specific needs as established in your Lease Proposal Form or as further developed by the lease coordinating committee

REO will produce a spreadsheet describing the spaces for lease, their specifications, associated costs, and strengths and weaknesses.  This will be used by the lease coordinating committee to assist you in selecting a site.   

DUE DILIGENCE

The coordinating committee will conduct due diligence at the selected site and confirm that it meets UC policy requirements and conforms to other applicable laws and regulations. Preliminary due diligence often helps inform the site selection process as well. The coordinating committee will perform the following due diligence:

  • Seismic and structural review
  • California Environmental Quality Act (CEQA) compliance
  • Building condition review
  • Conformance with UC Policy on Sustainable Practices
  • Environmental Phase I Assessment/other environmental review
  • Code compliance review
  • Americans with Disabilities Act review
  • Occupancy permit verification

TENANT IMPROVEMENTS

Different lease projects will require different levels of tenant improvements (TIs).  In general, if any improvements are required beyond the configuration of cubicle furnishings, these are included in the lease negotiations for the landlord to construct required TIs.

TIs are constructed after the lease is executed.  TIs may be funded and constructed in various ways, and a single TI project may include one or more forms of construction and payment.  The three predominant forms of TIs are:

  • Turn-Key TIs: Landlord funds and constructs TIs to UC specification, and the rent rate reflects the value of improved space
  • Amortized TIs: Landlord constructs TIs to UC specification, with the total project cost amortized over the life of the lease (or other specified period) at the landlord's cost of financing, to be paid by UC on a $/RSF/month basis in addition to base rent
  • UC-Constructed TIs: UC contracts for the construction of TIs at UC expense, requiring Unit to have sufficient funds available before project is bid.

What is required:

  • Detailed space program developed by CPSM in conjunction with unit representative
  • Summary of the scope of work to be performed and justification for the improvements
  • A list of sustainable measures considered
  • IT configuration plan
  • List of special unit requirements

Tenant improvement costs are limited to the level approved by the CP/EVC in the lease proposal.  

LEASE DOCUMENT REVIEW

Once your proposed lease action has received campus approval, you've selected a site, the lease coordinating committee has successfully completed the required due diligence,  and the REO representative has completed negotiation of lease terms and a draft lease form with the landlord, the coordinating committee will initiate further review of the draft lease form as appropriate.  The authority that the UC Regents delegate to UCSC to execute lease agreements requires that (1) Risk Services approves indemnification and insurance terms for all leases; and (2) University counsel review agreements prior to execution under certain circumstances.

EXECUTION

Once a final lease has been reviewed and the lease/license execution checklist is complete, the REO representative will coordinate the lease execution process. The REO representative will coordinate with the prospective landlord to arrange for landlord's execution, and upon the prospective landlord's return of an appropriate number of executed original documents, the REO representative will coordinate execution by the UCSC Chancellor, Vice Chancellor - Business & Administrative Services, or Real Estate Office Director as appropriate. Once the lease agreement has been executed, and the UCSC Campus Fire Marshal or other authority has granted an occupancy permit for the leased space, your unit may begin moving into the space. Regardless of the occupancy date, the University's obligations under the lease agreement commence upon lease execution. 

MOVE PLANNING AND IMPLEMENTATION

The coordinating committee will assist your unit with move planning, which will occur simultaneously with lease negotiations and due diligence activities.  For large or complex moves, a unit may be advised to contract with a move coordination consultant.  Similar to tenant improvements, move planning costs are limited to those approved by the CP/EVC.

BUDGET OVERSIGHT

The Capital Planning and Space Management representative will oversee the overall project budget throughout the lease, tenant improvement, and move processes, and will raise cost containment issues for the coordinating committee's consideration.  If costs cannot be kept within approved limits, the CPSM representative will coordinate with the unit to meet with the VC Planning and Budget to initiate CP/EVC approval of revised cost estimates.

TRANSMITTAL TO UNITS

Within one week of the execution of the lease agreement, the REO will prepare a 'Summary of Lease Obligations' and an annual cash flow projection over the life of the lease for your principal officer, clearly delineating the financial and other obligations your unit has assumed by entering into lease. The REO will also provide a draft 'Concurrence Letter' affirming that the Principal Officer understands and accepts the obligations outlined in the Summary of Lease Obligations, which your principal officer will send to the CP/EVC as soon as is feasible after execution.

Your unit can refer to the Summary of Lease Obligations document as necessary throughout the lease term to review its responsibilities and to determine how to respond to any issues that arise. The REO will continue to be available to answer any of your questions regarding the lease, of course.