HomeMy WebLinkAboutStaff Report 220-07TO:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:MAY 14, 2007 CMR: 220:07
SUBJECT:FIRST AMENDMENT TO LEASE FOR 300 HAMILTON AVENUE,
SUITE B, TO EXERCISE SECOND OPTION TO EXTEND
RECOMMENDATION
Staff recommends that the City Council approve and authorize the City Manager to execute the
attached first amendment to the lease between the City and 300 Hamilton Associates for the
property known as 300 Hamilton Avenue, Suite B, Palo Alto, to extend~the lease an additional
five years from July 1, 2007 to June 30, 2012 and adjust the base rent to $10,939.25 per month
($2.35 per square foot).
BACKGROUND
On July 22, 2002, the Council approved a software license and services agreement contract with
SAP, Inc. and authorized the City Manager to exercise a lease with 300 Hamilton Associates for
4,655 square feet of basement space at 300 Hamilton Avenue. The additional space was
necessary to accommodate 10 existing Information Technology (IT) staff displaced by expansion
of the Civic Center computer room, SAP activities such as testing and training, and SAP
contractors connected to the project. The term of the lease was 2.5 years with options to renew
for an additional 2.5 years or 5 years. On May 26, 2004, the lease was extended for an addition
term of 2.5 years, terminating on June 30, 2007.
DISCUSSION
The attached proposed amendment will extend the term of the lease for five years starting July 1,
2007. The space is still needed for City IT staff and SAP-related activities. The system is up and
running; however it is now necessary to make a major update to the SAP system that will
include: 1) upgrade of the current software application; 2) migration of the current utility billing
information system to the SAP environment; 3) implementation of new SAP modules such as
employee self service; and 4) implementation of a customer relationship management module.
Current monthly rent for the space is $9,354.22 ($2.01 per square foot) with monthly common
area charges and management fees of $7,419.67 ($1.59 per square foot). Starting July 1, 2007,
the adjusted base rent will be $10,939.25 per month ($2.35 per square foot), with annual
increases based on the Bay Area Consumer Price Index. Staff has researched rents for
comparable space in the area and determined that the proposed rent is comparable and even a bit
CMR:220:07 Page 1 of 2
lower than other sites within walking distance to the Civic Center. Except for the extension of
the term and newly negotiated rent, all other terms of the lease remain unchanged. The lease will
have no remaining options to extend.
RESOURCE IMPACT
Base .rent for the extended term is $10,939.25 per month. The pro-rated share of common area
charges and management fees are approximately $7,400 per month for an annual cost of
$209,271. This represents an annual increase of $19,020 over the current annual costs of
$190,251. Funds for these costs are included in the Technology Fund budget.
POLICY IMPLICATIONS
The SAP system supports a number of program elements of the Comprehensive Plan, primarily
in the Governance and Transportation chapters, and it provides technological support and
assistance to facilitate the flow of information throughout the City administration and the City’s
web page.
ENVIRONMENTAL REVIEW
Approval of the amendment does not constitute a project under the California Environmental
Quality Act (CEQA); therefore, no environmental assessment is required.
PREPARED BY: //~ /’ ’
WILLIAM W. FELLMAN
Manager, Real Property
DEPARTMENT HEAD APPROVAL:
Services
CITY MANAGER APPROVAL:
ATTACHMENTS
Attachment A: First Amendment to Lease
FRANK BENEST
City Manager
CMR:220:07 Page 2 of 2
ATTACHMENT A
FIRST AMENDM ENT TO LEASE
TH!S AGREEMENT made and entered into this 1-~: day of June 2007, by and between 300 H/~M1LTON
ASSOCIATES as "Landlord," and CITY OF PALO ALTO as T~nant, for the fo!lowing:
WHEREFORE, ON THE 20th day of Ju!y, 2002, Tenant and Landlord, entered into an Agreement to Lease for
approximately 4,655 square feet of space n that ce~ain premises knc~m as 300 Hamilton Avenue, Suite B, Palo Alto,
California. for a period of Two and one-half (2 ½)Years commencing July 1, 2002 and terminating on December 31, 2004;
and
On May 26, 2004, the Lease was extended for an additional period of Two and on~-half (2 ½) Years, terminating
on June 30, 2007; and
Landlord and Tenant now desire to amend the terms and conditions of that Lease in certain particulars as follows:
WITNESSETH
1. TERM:The term of this Lease shall be extended for a period of Five (5) years to expire on June 30, 20!2.
2. RENT:Eff~tive July I, 2007 the total Base Rent shall be adjusted to TEN THOUSAND NINE HUNDRED
THIRTY N IN E and 251100 ($10,939.25) Dollars per month.
3. ESCALATIONS: The Base Rent shall be subject to an annual San Francisco - Oakland - San Jose CPI adjustment
commencing July !, 2008.
4. OPTIONS: The Lease has no remaining options to extend.
Except as herein provided, all other terms and conditions of the Lease Agreement shall remain unchanged and
in full force and effect.
]N WITNESS HERETO the Tenant and Landlord have executed this document on the date first above written.
LANDLORD
300 HAMILTON ASSOCIATES~ //
Charles J, Keena~, HL, Trust~e ef the Keenan
Family Trust Dated l~ecember 20, 1988,
as amended
TENANT
CITY OF PALO ALTO
By:
city Manager
~lark T. Gates, Jr,, Trust,ae of the l~ark T. Gates
and Elizabeth W. Gates Living Trust Agreement
Dated September t0, 1953
Elizabeth W. Gates, Trustee o[ ~he }~’]ark T. Gates
and Elizabeth W. Gates L~vieg Trusl Agreement
Da~ed Septe~ber "tO, 1993