Loading...
HomeMy WebLinkAboutStaff Report 316-09TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: JULY 20, 2009 CMR: 316:09 REPORT TYPE: CONSENT SUBJECT: Approval of a Final Map to Subdivide Three Lots into Separate Parcels and Approval of Community Use Agreement at 3401, 3415, 3445 Alnla Street (Alma Plaza) RECOMMENDATION Staff recommends that the City Council approve the proposed Final Map for 3401, 3415, 3445 Alma Street (Alma Plaza) to subdivide the subject site into one mixed use lot, one smaller commercial lot, 37 single family fee lots, private streets/common areas and a 9,694-sq. ft. public park, and approve the related Community Room and Lease Agreement. BACKGROUND On January 26, 2009, the City Council approved the Tentative Map, as well as the Site and Design Review component for Alma Plaza. City Council approved the Tentative Map with one additional condition of approval specific to the Tentative Map: "Prior to the recordation of a Final Map, the applicant shall record a Reciprocal Easement and Maintenance Agreement (REA) covering the two commercial and mixed use parcels (parcels A and B) to the satisfaction of the City Attorney. The REA shall provide that the owner of the larger mixed use parcel will retain the right to dictate the timing and extent of all common area repairs and maintenance to the owner of the smaller parcel. The owner of the larger parcel may require the smaller parcel owner to pay for its pro-rata share, such as parking lot repairs, sweeping, and landscaping maintenance. The owner of the larger parcel may also determine whether uses proposed for the smaller parcel are acceptable. The owner of the larger parcel shall have the right to determine the timing, design and extent of any remodel of the structure of the smaller parcel." A Planned Community Zoning (PC 4956) was approved for the subject site on May 14,2007. The Planned Community approval controls the allowable land uses, developnlent intensity, and parking requirenlents for the site, to include: a) an approximately two-story 50,511-sq. ft. mixed CMR: 316:09 Page 1 of3 use building that consists of22,857 sq. ft. of commercial space (including 15,000 for a grocery store), 14 second-floor below market rate (BMR) units, and 1,757 sq. ft. for a community room; b) a smaller two-story 5,580-sq. ft. retail building; c) 37 single family residences; and d) parkland. The Final Map would create parcels consisting of one commercial and residential mixed use parcel, one smaller commercial parcel, a 9,694-sq. ft. public park, private streets and 37 single family residences. DISCUSSION The purpose of the final map is to subdivide the subject site (3401, 3415, 3445 Alma St.lAlma Plaza) into one commercial and residential mixed use lot, one smaller commercial lot, 37 single family fee lots, private streets/common areas and a 9,694-sq. ft. public park. The Final Map and the Record of Land Use Action for the Tentative Map have been provided for the Council's information. Staff of the Planning and Public Works Departments have reviewed the Final Map (Attachment B) and have determined that it is consistent with the approved Tentative Map. The map is consistent with the approved Tentative Map site layout, which was designed to meet the requirements of Planned Community 4956. The map also satisfies all approval conditions for the Tentative Map, including the preparation of a Subdivision Improvement Agreement, Park Maintenance Agreement, Community Room Use Agreement, Reciprocal Easement and Maintenance Agreement (REA) and BMR Agreement. The City Attorney, Public Works Department and Community Services Department have reviewed the agreements and concur. A copy of the Community Room Use Agreement is attached (Attachment A) for review and approval as required by the map conditions. According to the State Subdivision Map Act, the City Council must therefore approve the Final Map ifit complies with the approved Tentative Map. RESOURCE IMPACT There is no direct impact on City resources associated with the action recommended in this staff report. An assessment of the project's resource impacts was presented with the Site and Design Review in January 2009. POLICY IMPLICATIONS No changes in the Comprehensive Plan or Zoning Ordinance are required for this project. The Final Map complies with the Subdivision Map Act and the City's Subdivision Ordinance provisions for Final Maps. ENVIRONMENTAL REVIEW A Mitigated Negative Declaration was approved on May 14,2007 by the City Council for the PC Ordinance and subsequent applications, pursuant to the provisions of the California Environmental Quality Act (CEQA). The slight modifications to the site layout do not entail any additional impacts beyond those anticipated and addressed in the Mitigated Negative Declaration. The density and intensity of the development has not increased. The access and circulation of the project are substantially the same as the plans reviewed at the time. CMR: 316:09 Page 2 of3 PREPARED BY: DEPARTMENT HEAD: CITY MANAGER APPROVAL: ATTACHMENTS A. Community Room Use Agreement B. Final Map (Council members only) COURTESY COPIES McNellis Properties James E. Baer, Premier Properties Friends of Alma Plaza Dr. Van Der Wilt CMR: 316:09 ELENA LEE Senior Planner CURTIS WILLIAMS Interim Director of Planning and Community Environment L~)a~ ~ j{ I ,f,r ~/. JAMES ~ENE J} City Man,ter i Page 3 of3 j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j 3437 ALMA PLAZA, PALO ALTO COMMUNITY ROOM USE AGREEMENT USE AGREEMENT SUMMARY The infotmation contained in this "Use Agreement Summary" is incorporated into the tetms of the attached Use Agreement. 1. PREMISES OWNER: Trestle Alma Plaza, LLC, a California limited liability company ("Owner") 2. PREMISES USER: City'ofPalo Alto ("City") 3. DATE OF USE AGREENIENT (for reference purposes only): July -' 2009 4. PREMISES (paragraph 2.1): An approximately 1,757 square foot condominium unit located on the second floor of the mixed use building located at 3437 Alma Avenue, Palo Alto, California, hereinafter referred to as the "Building," along with the non- exclusive right to use the common areas as set forth in this Use Agreement. 5. TERM (paragraph 3): Fifty-nine (59) years. COMMENCEMENT DATE: Upon issuance of occupancy petmits for the Premises and the Building. EXPIRATION DATE: The day before the Fifty-ninth (59th) anniversary of the Commencement Date. OPTIONS: None. 6. CONSIDERATION (paragraph 4.1): One Dollar ($1.00) payable on execution of this Use Agreement 7. PERMITTED USE (paragraph 6.1): A class room and meeting room for the Palo Alto Parks & Recreation department and related uses as petmitted under City of Palo Alto Ordinance No.4956 during the Permitted Business Hours as set forth in Section 10 of this Use Agreement Summary. 8. PERMITTED BUSINESS HOURS: Weekdays: between 8 a.m. in the morning and 1 p.m. in the afternoon and after 6:30p.m. in the evenings. Weekends: between 8 a.m. in the morning and 11 a.m. in the morning and after 6:00p.m. in the evenings. The room shall also be available for use weekdays between 1 p.m. and 4 p.m. only for limited use by groups of not more than 20 people. i 9. ADDRESS FOR NOTICES (Paragraph 20): OWNER: CITY: 10. BROKERS: None. Trestle Alma Plaza, LLC c/o McNellis Partners LLC 419 Waverley Street Palo Alto, CA 94301 City of Palo Alto Real Property Division 250 Hamilton Avenue Palo Alto, CA 94301 11. P ARKING SPACES (paragraph 2.2): Non-exclusive use of the surface parking spaces serving the Building only during the Pennitted Business Hours and subject to the tenns of this Use Agreement. EXHIBITS Exhibit A ExhibitB Exhibit C OWNER: Premises Site Plan Work Letter Trestle Alma Plaza, LLC a California limited liability company By: John E. McNellis, Manager CITY: CITY OF PALO ALTO, CALIFORNIA, a chartered California municipal corporation Approved as to form: Asst. City Attorney 11 By: ______________________ __ City Manager USE AGREEMENT 1. Parties. This Use Agreement is made and entered into as of the "Date of Use Agreement", by and between "Ownernand "City", as those terms are defined in the "Use Agreement Summary", which Use Agreement Summary is attached to the front of and incorporated in and made part of this Use Agreement. 2. Premises, Parking and Common Areas. 2.1 Premises. Owner leases the Premises (as hereinafter defined) to City, and City Use Agreements the Premises from Owner for the Term, and for the consideration set forth in the Use Agreement Summary, and upon all of the conditions set forth herein and in the Use Agreement Summary. The Premises consist of an approximately 1,757 square foot room, being a separate condominium unit which is a portion of the second floor in the Building described in the Use Agreement Summary located at 3437 Alma Avenue (the "Building") on that parcel of land underlying the Building (the "Property"), and shown on the site plan attached as Exhibit A, including rights to the Common Areas as hereinafter specified, but not including any rights to the roof of the Building or the garage of the Building. The rentable area of the Premises is approximate, and any increase or reduction in the actual square footage shall not alter the terms of this Use Agreement. City acknowledges that Owner intends to create separate condominium units consisting of the first floor retail area of the Building ("Retail Area"), the Premises and the residential apartments on the second floor of the Building ("Residential Area"), as set forth in a subdivision map, Condominium Declaration and related documents (the "Condo Documents"). Owner may designate the Premises with a separate legal address. 2.2 Vehicle Parking. City shall be entitled to use the parking spaces, on the surface areas of those portions of the Common Areas designated by Owner for parking, on a non- exclusive, unreserved and unassigned basis, but only during the Permitted Business Hours as set forth in the Use Agreement Summary. City shall not permit or allow any vehicles that belong to or are controlled by City or City's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Owner for such activities or during any hours other than the Permitted Business Hours. Without limitation, City shall not use any portion of the underground parking garage for any purpose. Owner shall have the right to tow any vehicles parked in violation of this Use Agreement at City's cost. 2.3 Common Areas -Definition. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the Building and on the Property that are provided and designated by the Owner in the Condo Documents or from time to time for the general non-exclusive use of Owner, City and of other occupants of the Building and their respective employees, suppliers, shippers, customers and invitees, and include the first floor elevator lobby, surface parking areas on the Property, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas. The Common Areas specifically exclude the underground parking garage in the Building. The Common Areas shall also include the Limited Common Areas that are designated in the Condo Documents for the sole use of the Premises and the Residential Area. 2.4 Common Areas -City's Rights. Owner hereby grants to City, during the 1 term of this Use Agreement, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to the terms hereof and the terms of any rules, regulations and restrictions governing the use of the Building. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, tenlporarily or permanently, in the Common Areas. In the event that any unauthorized storage shall occur then Owner shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to City, which cost shall be immediately payable upon demand by Owner. 2.5 Common Areas -Rules and Regulations. Owner or such other person(s) as Owner may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations with respect thereto. City agrees to abide by and conform to all such rules and regulations, and to cause its employees, suppliers, shippers, customers, and invitees to so abide and conform. Owner shall not be responsible to City for the non-compliance with said rules and regulations by other tenants or occupants of the Building. 3. Term. Subject to and upon the conditions set forth in this Use Agreement, the term of this Use Agreement shall begin on the day Owner has substantially completed "Owner's Work" as described in Exhibit C attached hereto and incorporated herein, and tendered possession of the Premises to City (the "Commencement Date") and shall continue for the term stated in the Use Agreement Summary, unless sooner terminated pursuant to this Use Agreement. Owner shall not be liable for any damage to City caused by any delay by Owner in the delivery of possession, and this Use Agreement shall not be void or voidable nor shall the City be relieved of any obligation hereunder. Upon substantial completion of Owner's Work as provided in this Use Agreement, Owner and City (and/or their representatives) shall conduct a walk through of the entire Premises using diligence to specify any items remaining incomplete or improperly performed. Owner and City within ten (10) days of their inspection shall prepare a "punch-list" of incomplete or improperly performed items requiring further work or required to be redone, and Owner shall cause such work to be performed within a reasonable time. Taking of possession by City of all or any part of the Premises shall be conclusively deenled to establish that the Premises have been accepted as being in accordance with this Use Agreement, and are in good and satisfactory condition as of the date possession was so taken by City, except for such "punch-list" items. 4. Consideration for Use. 4.1 Up Front Payment. On the Commencement Date, City shall pay to Owner the Rent for the term of this Use Agreement as set forth in the Use Agreement Summary. 4.2 Operating Expenses. Except as provided in this Use Agreement, all costs associated with the operation, replacement, repair and maintenance of the Building structure and Common Area as required by this Use Agreement shall be paid by Owner without reimbursement by City, unless such replacement, repair or maintenance is necessitated by City's breach of this Use Agreement, negligence or wrongful acts or omissions, in which case City shall pay such costs. Costs to operate, repair, replace and maintain the interior of the Premises in a neat, clean and good order and condition and to supply utility and telephone service to the Premises shall be 2 paid by City. 5. Security. Owner may retain the services of a private security firm fronl time to time with respect to the Building, but shall have no obligation to do so. City shall be solely responsible for maintaining security services for its Premises if City desires or requires such services, and shall pronlptly notify Owner in writing of the nanle and contact number for all private security personnel retain by City. 6. Use. 6.1 The Premises shall be used and occupied only for the purposes set forth in the Use Agreement Summary during the Permitted Business Hours, and for no other purpose. City shall not use nor permit the use of the Premises or the Common Areas in any manner that will tend to create waste or a nuisance or shall tend to disturb other occupants of the Building or adjacent premises. City shall not maintain any sign on or about the Premises visible from outside the Premises without Owner's prior approval. City shall have no right or access to the Building roof and shall make no penetrations of the Building roof. City shall not prepare or serve any food or drink items within or about the Premises (except for prepackaged or precooked snack items and beverages, such as cookies, muffins, pastries, bagels, coffee, soft drinks and juice, and shall not serve alcoholic beverages of any kind. No smoking is permitted in the Premises or the Building. No amplified music, microphone or other amplified sound is permitted in or about the Premises or Building. City acknowledges that adjacent uses in the Building are residential and retail, and City shall not use the Premises in such a way as to annoy or interfere with the peaceful enjoyment of the other portions of the Building by the occupants thereof. 6.2 Compliance with Law. City shall, at City's expense, promptly comply with all applicable statutes, ordinances, rules, regulations, orders, covenants and restrictions of record, and requirements of any fire insurance underwriters or rating bureaus, now in effect or which may hereafter come into effect, whether or not they reflect a change in policy from that now existing, during the term, relating in any manner to the occupation or use by City of the Premises, and shall comply with all requirements of the Condo Documents. 6.3 Condition of Premises. Except as oth.erwise provided in this Use Agreement, City hereby accepts the Premises in their condition existing as of the Commencement Date, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record, and all matters disclosed thereby and by any exhibits attached hereto, except latent structural defects not discoverable on reasonable inspection. City acknowledges that neither Owner nor Owner's agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of City's business. 6.4 Hazardous Materials. City shall not cause or permit to be discharged into the plumbing or sewage system of the Building or onto the Premises, Building or land underlying or adjacent to the Building, any hazardous, toxic, or radioactive substances or materials, including, but not limited to, those materials identified in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended 42 U.S.C. Section 9601 et seq., the Hazardous Materials Transportation Act 49 U.S.C. Section 1801, et 3 seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., Sections 25117 and 25316 of the California Health and Safety Code, and Section 66680 of Title 22 of the California Administrative Code, Division 4, Chapter 30, and any new or additiona11aws or ordinances regarding hazardous, dangerous, toxic or hamlfu1 materials or waste, all as nlay be amended from time to time (collectively, "Toxic Materials"). City shall, at its sole expense, comply with any and all rules, regulations, codes, ordinances, statutes, and other requirements of lawful governmental authority respecting Toxic Materials, pollution, harmful chemicals and other materials released by City or brought by City, or by its agents, employees or contractors, onto or about the Premises and/or Building. 6.5 Signage. City shall not erect any signs on the Premises, Building or Common Area, except that City may have a sign on the entry door to the Premises of a size and type reasonably approved by Owner, and signage to help locate the Premises may be erected with Owner's prior approval, which shall not be unreasonably withheld or delayed. 7. Maintenance, Repairs, Alterations and Common Area Services. 7.1 Owner's Obligations. Subject to the provisions of Paragraphs 6 (Use), 7.2 (City's Obligations) and 9 (Damage or Destruction) and except for damage caused by any negligent or intentional act or omission of City, City's employees, suppliers, shippers, customers, or invitees, in which event City shall repair the damage, Owner at Owner's expense, shall keep in good condition and repair the foundations, exterior structural walls, and roof structure of the Building (excluding the roof membrane), as well as the parking lots, walkways, driveways, landscaping and utility installations of the Common Areas and all parts thereof. Owner shall not, however, be obligated to paint the interior surface of any walls, nor shall Owner be required to maintain, repair or replace windows, interior or exterior doors or plate glass of the Premises. Owner shall have no obligation to make repairs under this Paragraph 7.1 until a reasonable time after receipt of written notice from City of the need for such repairs. City expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford City the right to make repairs at Owner's expense or to terminate this Use Agreement because of Owner's failure to keep the Premises in good order, condition and repair, it being intended that the provisions of this Use Agreement shall govern in such events. Owner shall not be liable for damages or loss of any kind or nature by reason of Owner's failure to furnish any Common Area services when such failure is caused by accident, breakage, repairs, strikes, lockout, or other labor disturbances or disputes of any character, or by any other cause beyond the reasonable control of Owner. 7.2 City's Obligations. (a) Subject to the provisions of Paragraphs 6 (Use) and 7.1 (Owner's Obligations), City, at City's expense, shall keep in good order, condition and repair the Premises and every part thereof including, without limiting the generality of the foregoing, all plumbing, heating and ventilating systems, , electrical and lighting facilities and equipment within the Premises, utility systems within the Premises, communications facilities in the Premises, fixtures, interior walls and interior surfaces of exterior walls, floors, ceilings, windows, doors, plate glass, and skylights located in the Premises. Owner City shall reimburse, upon demand, for the cost thereof. 4 (b) If City fails to perfonn City's obligations under this Paragraph 7.2 or under any other Paragraph of this Use Agreement, Owner may enter upon the Premises after ten (10) days' prior written notice to City (except in the case of emergency, in which event no notice shall be required), perform such obligations on City's behalf and put the Premises in good ,order, condition and repair, and the cost thereof together with interest thereon at the statutory legal rate shall be due and payable as additional rent to Owner. (c) On the last day of the term hereof, or on any sooner tennination, City shall surrender the Prenlises to Owner in the same condition as received, ordinary wear and tear excepted, clean and free of debris and personal property of City. City shall repair any damage to the Premises occasioned by the installation or removal of City's trade fixtures, alterations, furnishings and equipment. Notwithstanding anything to the contrary otherwise stated in this Use Agreement, City shall leave the air lines, power panels, electrical distribution systems, communications systems (other than telephones), lighting fixtures, space heaters, air conditioning and plumbing on the Premises in good operating condition. 7.3 Alterations and Additions. (a) City shall not, without Owner's prior written consent in Owner's sole discretion, make any alterations, improvements, additions, or utility installations in, on or about the Premises or the Building. Owner nlay require that City remove any or all pennitted alterations, improvements, additions or utility installations at the expiration of the term, and restore the Prenlises and the Building to their prior condition. (b) City shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for City at or for use in the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises, or the Building, or any interest therein. City shall give Owner not less than ten (10) days' notice prior to the commencement of any work in the Premises, and Owner shall have the right to post notices of non-responsibility in or on the Premises or the Building as provided by law. If City shall, in good faith, contest the validity of any such lien, claim or demand, then City shall, at its sole expense defend itself and Owner against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against the Owner or the Premises or the Building, upon the condition that if Owner shall require, City shall furnish to Owner a surety bond satisfactory to Owner in an anlount equal to one and one-half times such contested lien claim. In addition, Owner may require City to pay Owner's attorneys fees and costs in participating in such action if Owner shall decide it is to Owner's best interest to do so. (c) All alterations, improvements, additions and utility installations (whether or not such utility installations constitute trade fixtures of City), which may be made on the Premises, shall be performed in accordance with all governmental requirements, and shall remain upon and be surrendered with the Premises at the expiration of the Use Agreement term, unless Owner requires their removal. City's machinery and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, shall remain the property of City and may be removed by City subj ect to the provisions of Paragraph 7.2. 5 8. Insurance; Indemnity. 8.1 Liability Insurance -City. City shall, at City's expense, obtain and keep in force during the term of this Use Agreement a policy of Combined Single Limit Bodily Injury and Property Damage insurance insuring City and Owner against any liability arising out of the use, occupancy or maintenance of the Premises and the Conunon Areas. Such insurance shall be in an amount not less than $1,000,000 per occurrence. The policy shall insure performance by City of the indenmity provisions of this Paragraph 8. The limits of said insurance shall not, however, limit the liability of City hereunder. 8.2 Liability Insurance -Owner. Owner shall obtain and keep in force during the term of this Use Agreement a policy of Combined Single Limit Bodily Injury and Property Damag~ Insurance in form and amount as is required by Owner's lender who has a deed of trust against the Building, insuring Owner against liabilities arising out of the ownership, use, occupancy or maintenance of the Building and the Common Area and which may include rental loss insurance, extended coverage, earthquake insurance or such other types of coverage as Owner or Owner's lender deem appropriate. 8.3 Property Insurance. Owner may obtain such property insurance coverage as Owner deems appropriate or necessary, or as may be required by Owner's lender( s) having a lien against the Property or any portion thereof. Owner shall not insure City's personal property, fixtures, equipment or City improvements. City shall insure the same with first party insurance reasonably satisfactory to Owner. 8.4 Insurance Policies. Insurance required of City shall be in companies holding a "General Policyholders Rating" of at least A minus, or such other rating as may be required by a lender having a lien on the Premises, as set forth in the most current issue of "Best's Insurance Guide." City shall not do or permit to be done anything which sqall invalidate the insurance policies carried by Owner. City shall deliver to Owner copies of liability insurance policies required of City within seven (7) days after the Commencement Date of this Use Agreement. No such policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days prior written notice to Owner. City shall, at least thirty (30) days prior to the expiration of such policies, furnish Owner with renewals or "binders" thereof. 8.5 Waiver of Subrogation. City and Owner each hereby reUse Agreement the other, and waive their right of recovery against the other for loss or damage arising out of or incident to the perils insured against which perils occur in, on or about the Premises, whether due to the negligence of Owner or City or their agents, employees, contractors and/or invitees, up to the amount of such insurance. City and Owner shall, upon obtaining the policies of insurance required, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Use Agreement. 8.6 Indemnity. City shall indemnify and hold harmless Owner from and against any and all claims arising from City's use of the Premises, Building, Common Areas and Property, or from the conduct of City's business or from any activity, work or things done, permitted or suffered by City in or about the same, and shall further indemnify and hold harmless 6 Owner from and against any and all claims arising from any breach or default in the performance of any obligation on City's part to be performed under the terms of this Use Agreement, or arising from any act or omission of City, or any of City's agents, contractors, or employees, and from and against all costs, attorneys' fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Owner by reason of any such claim, City upon notice fronl Owner shall defend the sanle at City's expense by counsel reasonably satisfactory to Owner. City, as a material part of the consideration to Owner, hereby assumes all risk of damage to property of City or injury to persons, in, upon or about the Premises arising from any cause except Owner's gross active negligence or willful misconduct,and City hereby waives all claims in respect thereof against Owner. 8.7 Exemption of Owner from Liability. City hereby agrees that Owner shall not be liable for injury to City's operations, business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of City, City's employees, invitees, customers, or any other person in the Premises, nor shall Owner be liable for injury to the person of City, City's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, p1unlbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or injury results from conditions arising upon the Premises, unless arising from Landlord's beach of this Agreement, willful misconduct or negligence. Owner shall not be liable for any damages arising from any act or neglect of any other tenant, occupant or user of the Building or any condominium unit therein. 8.8 Self Insurance. City may comply with any of its insurance obligations hereunder in whole or in part by means of self-insurance. In the event of any such self-insurance, self-insurance retention or deductible, City will provide at least ten (10) days' prior written notice to Owner of its election to self insure along with the details of City's self insurance program, and City will make available the same coverage, indemnity and proceeds under such self insurance as would be available under the third party coverage required above in this Section 8. 9. Damage or Destruction. 9.1 Notice. City shall give immediate written notice to Owner of any damage caused to the Premises by fire or other casualty. 9.2 Damage. In the event that the Premises shall be damaged or destroyed by ,fire or other casualty insured under Owner's insurance and Owner does not elect to terminate this Use Agreement as hereinafter provided, Owner shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Premises. If the Building shall (i) be destroyed or substantially damaged by a casualty not covered by Owner's insurance; or (ii) be destroyed or rendered untenantable to an extent in excess of fifty percent (50%) of the floor area by a casualty covered by Owner's insurance; or (iii) be damaged to such extent that the remaining terms of this Use Agreement and other Use Agreements of the Building are not sufficient to amortize the cost of reconstruction, as determined by Owner in its discretion, then Owner may elect either to terminate this Use Agreement as hereinafter provided or to proceed to rebuild and repair the Premises and! or Building. Should Owner elect to terminate this Use Agreement, Owner shall 7 give written notice of such election to City within ninety (90) days after the occurrence of such casualty. If Owner should elect not to tenninate this Use Agreement, Owner shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Premises and/or BUilding. 9.3 Limit to Rebuilding. Owner's obligation to rebuild and repair shall in any event be limited to restoring the work originally perfonned at Owner's cost to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the insurance proceeds available to Owner for such restoration. 9.4 Waiver. Owner and City waive the provisions of any statute which relate to tennination of an agreement when leased property is destroyed and agree that such event shall be governed by the tenns of this Use Agreement. 10. Real Property Taxes. 10.1 Pavment of Taxes. Owner shall pay any real property taxes applicable to the Building and Common Area. City will cooperate with Owner to obtain exemptions from property taxes due to City's status as a municipality and/or as a result of the Residential Area being made up of affordable units, as may be available by law. 10.2 Personal Property Taxes. City shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of City contained in the Premises or elsewhere. When possible, City shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Owner. If any of City'S said personal property shall be assessed with Owner's real property, City shall pay to Owner the taxes attributable to City within ten (10) days after receipt of a written statement setting forth the taxes applicable to City's property. 11. Utilities. City shall pay for all water, gas, heat, light, power, telephone, janitorial and other utilities and services supplied to the Premises, together with any taxes thereon. Owner may install a meter for the Premises for such utilities. If any such services are not separately metered to the Premises, City shall pay a share of such charges on an equitable basis as reasonably detennined by Owner and City taking into consideration the usage of such services by the premises jointly served. 12. Assignment and Subletting. City shall not either voluntarily or by operation of law (i) assign, transfer, encumber, mortgage, pledge or hypothecate this Use Agreement or any interest herein, (ii) sublet the Premises, or any part thereof, or (iii) enter into a license agreement or other arrangement whereby the ownership or use of the Use Agreementhold estate herein is held or utilized by another party, without the prior written consent of Owner. Any such act prohibited as aforesaid is a material breach under this Use Agreement. Notwithstanding the above, the Premises may be made available for the exclusive use of persons and groups consistent with city code and regulation requirements subject to the issuance of a pennit by the City Director of Community Services and subject to the payment of fees therefor as provided in the Palo Alto municipal fee schedule. 8 13. Default; Remedies. 13.1 Default. The occurrence of anyone or more of the following events shall constitute a material default of this Use Agreement by City: ( a) The failure by City to make any payment of rent or any other payment required to be made by City hereunder, as and when due where such failure shall continue for a period of ten (10) days after written notice thereof from Owner to City. (b) Except as otherwise provided in this Use Agreement, the failure by City to observe or perform any of the covenants, conditions or provisions of this Use Agreement to be observed or performed by City, other than described in Paragraph (a) above, where such failure shall continue for a period of thirty (30) days after written notice hereof from Owner to City; provided, however, that if the nature of City's non-compliance is reasonably subject to cure and is such that more than thirty (30) days are reasonably required for its cure, then City shall not be deemed to be in default if City commenced such sure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. To the extent permitted by law, such thirty (30) day notice shall constitute the sole and exclusive notice required to be given to City under applicable Unlawful Detainer statutes. 13.2 Remedies. In the event of any such default by City, Owner may at any time thereafter, with or without notice or demand and without limiting Owner in the exercise of any right or remedy which Owner may have by reason of such default: (a) Terminate City's right to possession of the Premises by any lawful means, in which case this Use Agreement and the term hereof shall terminate and City shall immediately surrender possession of the Premises to Owner. In such event Owner shall be entitled to recover from City all damages incurred by Owner by reason of City's default including, but not limited to, (i) the cost of recovering possession of the Prenlises; (ii) expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and any real estate commission actually paid; (iii) the worth at the time of award determined by the court having jurisdiction thereof of the amount of unpaid rent that had been earned for the time prior to the termination; (iv) the worth at the time of the award of the amount by which the unpaid rent that would have been earned after termination until the award exceeds the loss of rent for the same period that City proves could have been reasonably avoided, and (v) the worth at the tinle of the award by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that City proves could be reasonably avoided. The "worth at the time of the award" as used in Paragraph 13.2(a)(iii) and 13.2(a)(iv) is to be computed by allowing interest at the highest legal rate under law. The "worth at the time of the award" as referred to in Paragraph 13.2(a)(v) is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco plus one percent (1%). (b) Maintain City's right to possession in which case this Use Agreement shall continue in effect whether or not City shall have vacated or abandoned the Premises. In such event Owner shall be entitled to enforce all of Owner's rights and remedies 9 under this Use Agreement, including the right to recover the rent as it becomes due hereunder. (c) Pursue any other remedy now or hereafter available to Owner under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installments of rent and other unpaid monetary obligations of City under the terms of this Use Agreement shall bear interest from the date due at the maximum rate then allowable by law. 13.3 Default by Owner. Owner shall not be in default unless Owner fails to perfonn obligations required of Owner within thirty (30) days after written notice by City to Owner specifying wherein Owner has failed to perfonn such obligation; provided, however, that if the nature of Owner's obligation is such that more than thirty (30) days are required for perfonnance then Owner shall not be in default if Owner commences perfonnance within such thirty (30) day period and thereafter diligently prosecutes the same to completion. 14. Owner's Liability. The tenn "Owner" as used herein shall mean only the owner or owners, at the time in question, of the fee title or a City's interest in a ground Use Agreement of the portion of the Building underlying the Building. In the event of any transfer of such title or interest, Owner herein named (and in case of any subsequent transfers than the grantor) shall be relieved from and after the date of such transfer of all liability as respects Owner's obligations thereafter to be perfonned, provided that the grantee agrees to assume Owner's obligations under this Use Agreement. City agrees to look solely to Owner's estate and interest in the Building for satisfaction of any right or remedy of City hereunder, and no other property or assets of Owner, nor any partner, officer, shareholder, director or employee of Owner, shall be subject to any claim, levy, execution, attachment or other enforcement procedure for satisfaction of any claim of City under this Use Agreement, all of which are expressly waived by City. 15. Severability. The invalidity of any provision of this Use Agreement as detennined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 16. Interest on Past Due Obligations. Except as expressly herein provided, any amount due to Owner not paid when due shall bear interest at the legal rate then allowable by law from the date due. Payment of such interest shall not excuse or cure any default by City under this Use Agreement provided, however, that interest shall not be payable on late charges incurred by City nor on any amounts upon which late charges are paid by City. 17. Time of Essence. Time is of the essence with respect to the obligations to be perfomled under this Use Agreement. 18. Rent. All monetary obligations of City to Owner under the tenns of this Use Agreement shall be deemed to be rent. 19. Incorporation of Prior Agreements; Amendments. This Use Agreement contains all agreements of the parties with respect to any matter mentioned herein. No prior or contemporaneous agreement or understanding pertaining to any such matter shall be effective. This Use Agreement may be modified in writing only, signed by the parties at the time of the modification. 10 20. Notices. Any notice required or pennitted to be given hereunder shall be in writing and may be given by personal delivery or by certified mail, and if given personally or-by mail, shall be deemed sufficiently given if addressed to City or to Owner at the address shown on the Use Agreement Summary. Either party may be notice to the other specify a different address for notice purposes except that upon City's taking possession of the Premises, the Premises shall constitute City's address for notice purposes. 21. Waivers. No waiver by Owner or any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by City of the same or any other provision. Owner's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Owner's consent to or approval of any subsequent act by City. The acceptance of rent hereunder by Owner shall not be a waiver of any preceding breach by City of any provision hereof other than the failure of City to pay the particular rent so accepted, regardless of Owner's knowledge of such preceding breach at the time of acceptance of such rent. 22. Recording. The parties shall record a memorandum of this Use Agreement in fonn mutually agreed to between them. 23. Holding Over. If City, with Owner's consent, remains in possession of the Premises or any part thereof after the expiration of the tenn hereof, such occupancy shall be a tenancy from month to month upon the provisions of this Use Agreement pertaining to the obligations of City at a rate of one hundred fifty percent (150%) of the fair market rental value of the Premises, as detennined by Owner in its commercially reasonable discretion. 24. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. 25. Binding Effect; Choice of Law. Subj ect to any provisions hereof restricting assignment or subletting by City, this Use Agreement shall bind the parties, their personal representatives, successors and assigns. This Use Agreement shall be governed by the laws of the State of California and any litigation concerning this Use Agreement between the parties hereto shall be initiated in the county in which the Building is located. 26. Subordination. This Use Agreement, at Owner's option, shall be subordinate to any ground Use Agreement, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Building and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. City shall execute a Subordination and Attornment Agreement in such fonn as may be reasonably requested by Owner or Owner's lender having or proposing to have security against the BUilding. Notwithstanding such subordination, City's right to quiet possession of the Premises shall not be disturbed if City is not in default and so long as City shall pay the rent and observe and perfonn all of the provisions of this Use Agreement. 27. Attorneys' Fees. If either party brings an action to enforce the tenns hereof or declare rights hereunder, the prevailing party in any such action, on trial or appeal, shall be entitled to his reasonable attorneys' fees to be paid by the losing party as fixed by the court. 11 28. Owner's Access. Owner and Owner's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, inlprovements or additions to the Premises or to the Building as Owner may deem necessary or desirable. Owner may at any time place on or about the Premises or the Building any ordinary "For Sale" signs and Owner may at any time during the last one hundred twenty (120) days of the term hereofplace on or about the Premises any ordinary "For Lease" sigris. All activities of Owner pursuant to this Paragraph shall be without abatement of rent, nor shall Owner have any liability to City for the same. 29. Signs. City shall not place any sign upon the Premises or the Building without Owner's prior written consent, except that City my install a sign on the front entry door to the Premises at City's sole cost, of a size and type reasonably approved by Owner. 30. Merger. The voluntary or other surrender of this Use Agreement by City, or a mutual cancellation thereof, or a termination by Owner, shall not work a merger, and shall, at the option of Owner, terminate all or any existing subtenancies or may, at the option of Owner, operate as an assignment to Owner of any or all of such subtenancies. 31. Quiet Possession. Upon City paying the rent for the Premises and observing and performing all of the covenants, conditions and provisions on City's part to be observed and performed hereunder, City shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Use Agreement. 32. Authority. If City is an entity, each individual executing this Use Agreement on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Use Agreement on behalf of said entity. 33. Negotiated Agreement. City and Owner acknowledge that both have negotiated this Use Agreement at arms length and have had the opportunity to consult legal counsel in connection therewith. This Use Agreement shall not be construed for or against either party hereto regardless of which party drafted this Use Agreement. 34. Exhibits. Attached hereto are Exhibits A through C which constitute a part of this Use Agreement. 12 EXHIBIT A PROPERTY LEGAL DESCRIPTION 1 EXHffiITB SITE PLAN AND OUTLINE OF PREMISES 1 EXHIBIT C WORK LETTER AGREEMENT Date --------------------- The City of Palo Alto, a municipal corporation (hereinafter called "City") and Trestle Alma Plaza, LLC, a California Limited Liability Company (hereinafter called "Owner") are executing simultaneously with this Work Letter Agreement a written Use Agreement ("Use Agreement") of certain Premises in a newly constructed Building to be located at as 3437 Alma Avenue, Palo Alto, California, to which Use Agreement this Work Letter Agreement may be attached. Said Premises are described in the Use Agreement and are hereinafter called "the Premises." Capitalized or other terms that are not specifically defined herein shall have the meaning set forth in the Use Agreement. To induce Owner and City to enter into the Use Agreenlent (which is hereby incorporated by reference to the extent that the provisions thereof apply to this agreement) and in consideration of the mutual covenants hereinafter contained, Owner and City mutually agree as follows: 1. OWNER'S PLANS AND SPECIFICATIONS: Owner shall construct the base-building structure, core, roof and shell and the Common Areas associated with the Building (collectively, the "Building Shell") in substantial conformity with Owner's plans therefor as approved by the City of Palo Alto, at no cost to City. Owner shall also construct the initial improvements in the Premises (the "Owner's Work") in substantial conformity with the Plans (as defined below). Owner shall perform Owner's Work as set forth in Paragraph 2 below. Owner shall submit the working plans and specifications for such work ("Plans") to City within one hundred eighty (180) days from Owner's obtaining a grocery store for the retail portion of the Building as set forth in City of Palo Alto Ordinance No. 4956 for City's approval, which shall not be unreasonably withheld or delayed. It is agreed that all materials for Owner's Work will be building standard, and that Owner shall not be obligated to use any upgraded or designer materials. City shall approve such Plans within five (5) business days from receipt thereof and shall initial approved plans evidencing such approval, or specify in reasonable detail City's reasons for disapproval. City's approval shall not be unreasonably withheld or delayed. In the event of any delay in receiving City's final signed-off working Plans, the scheduled Conlmencement Date set forth in the Use Agreement Summary shall remain the same but, at Owner's sole option, the time period for making the Premises ready for occupancy shall be extended by the length of such delay. At Owner's sole option, failure of City to disapprove and specify reasons for disapproval within five (5) business days shall be deemed City's approval of the Plans. Notwithstanding the foregoing, in the event City delays approval of such Plans for forty-five (45) days or more, Owner shall have the right, in its sole discretion, to terminate this Use Agreement upon delivery of written notice to City and pursue any and all remedies of Owner hereunder and under the Use Agreement. 1 2. OWNER'S WORK AT OWNER'S COST AND EXPENSE: Owner shall deliver the Premises in "Warm Vanilla Shell" condition, including two (2) bathrooms and one (1) sink, by completing the following improvements at Owner's sole cost and expense in accordance with the Plans approved in accordance with this Agreement, which Owner's Work is more particularly described as follows: (a) DOORS A. Entry -one solid wood door. B. Toilet Rooms -two 3'O"x 6'8" by 1 3/4" hollow core doors with privacy lockset. C. All doors shall have hardware as specified by Owner. (b) WALLS AND PARTITIONS A. Exterior walls wood frame & stucco. B. Interior Area -all partition walls to be gyp board, taped, skim coated, sanded smooth and painted white. C. Toilet rooms -Marlite Wainscot on all walls over water-resistant gyp board as required per code. All gyp board to be primed, sealed and painted white. D. Demising Walls at Use Agreement lines to extend to roof framing or deck at one side of wall. (c) CEILING A. Acoustic tile ceiling 2' x 4' white tee bar suspension. Grid and panels both white. (d) PLUMBING A. Toilet Rooms per code in location specified by Owner with provisions for handicapped as required. Toilet rooms to include the following: Toilet paper holder 18" by 24" mirror Paper towel dispenser for CROWN #755 single fold Ceiling light/exhaust fan combination for ventilation B. Owner shall pay basic sewer connection fees. (e) LIGHTING A. Main Premises-One recessed fixture.per 75 square feet of Premises area. B. Toilet rooms-combination ceiling light/exhaust fan. C. Interior emergency lighting and exit lighting as required by code. 2 (f) ELECTRICAL A. Main electrical panel to be located as shown on plans. 100 amp main panel. B. All wiring to main panel, i.e., HVAC, lighting and outlets, include 110 volt outlets 6" above finished floor level, 20 feet on center. C. One Telephone outlet located as shown on plans. (g) HVAC A. Complete independent heating and forced air system at one ton per 350 square feet of building area. (i) FLOOR FINISHES A. Owner to provide a smooth concrete slab and linoleum flooring. B. Toilet rooms -standard linoleum. (1) SPRINKLERS A. To the extent required by code, the Owner shall provide automatic sprinkler system. City shall reasonably cooperate to obtain necessary approvals in accordance with Owner's approved Plans from the City of Palo Alto. 3. CONFLICTS: ill the event of any conflicts between the terms of this Work Letter Agreement and the Use Agreement, the terms of the Use Agreement shall govern and control. ill the event of any dispute under this Work Letter Agreement, the dispute shall be subject to the provisions of the Use Agreement relating to disputes under the Use Agreement, and the prevailing party shall be entitled to its fees and costs therein in accordance with the provisions of the Use Agreement entitled "Attorneys' Fees". SIGNATURES ON NEXT PAGE 3 AGREED AND ACCEPTED: TRESTLE ALMA PLAZA, LLC By: __________________________ _ JOHN E. MCNELLIS, MANAGER Date: ------------------------- THE CITY OF PLAO ALTO, a municipal corporation By: __________________________ _ Its: ---------------------------- Date: -------------------------- Attest: Its: --------------------------- 4