The lease consists of two office buildings:
• an existing building, which comprises approximately 70,000 square feet of office space, and
• a new building, which is expected to comprise approximately 120,000 square feet of office space.
The term of the Lease with respect to the existing building is expected to commence on June 1, 2013, and the term of the Lease with respect to the new building is expected to commence on November 1, 2014.
Initial annual rent for the existing building is expected to be $2.5 million and initial annual rent for the new building is expected to be $4.0 million. Rent will increase 3.75% per year through the initial term.
The initial term of the Lease with respect to both buildings expires on December 31, 2024, subject to two options to extend the term for a period of five years each.
The principal members of the Landlord are John C. Molina, the Chief Financial Officer and a director of the Company, and his wife. In addition, in connection with the development of the buildings being leased, the Landlord has pledged shares of common stock in the Company he holds as trustee.
Dr. J. Mario Molina, the Company’s Chief Executive Officer and Chairman of the Board of Directors, holds a partial interest in such shares as trust beneficiary.
News of developing new facilities in California for healthcare related companies may become a trend. On Monday, an affiliate of Alexandria Real Estate Equities, Inc. (NYSE: ARE) reported that Onyx Pharmaceuticals, Inc. had executed a 10-year lease for a new, single tenant, ground-up development at 269 East Grand Avenue in South San Francisco.
Alexandria expects to deliver the 269 East Grand Avenue in the fourth quarter of 2014 and is currently negotiating a secured construction loan to provide funding for this project.