HomeMy WebLinkAboutStaff Report 398-06City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:OCTOBER 23. 2006 CMR: 398:06
SUBJECT:EARLY TERMINATION OF LEASE AGREEMENT WITH PREMIER
PROPERTIES FOR THE WEBSTER/COWPER GARAGE
This is an informational report and no Council action is required.
BACKGROUND
On August 9, 1990, Council approved a 15-year lease for the air rights of the Webster/Cowper
Garage with 505 Hamilton Avenue Partners. The lease required the tenant to provide for the: 1)
construction of two additional levels of parking at an estimated cost to the tenant of $3,150,000;
2) prepaid rent in the amount of $150,000; and 3) total maintenance for all seven levels of the
garage in exchange for 15 years of exclusive use of the spaces in the two new levels of the
garage. The lease was later assigned to Premier Properties. The actual cost of construction was
$3,400,000 due to the added expense of meeting more stringent structural code requirements.
Premier Properties subleased the garage space to Digital Equipment Corporation and the
sublease was later assigned to Alta Vista Corporation. In 2005, the sublease was terminated.
DISCUSSION
The lease term is set to expire on December 1, 2006. In order to provide much needed additional
parking during the busy holiday season, Premier Properties has agreed to terminate the lease one
month early on November 1, 2006 without a refund ofpre-paid rent. Parking in downtown is at a
premium, and the early termination will provide an additional 167 parking spaces on the upper
two levels of the garage available to the public for hourly and permit parking.
RESOURCE IMPACT
The tenant has prepaid the rent and covered all construction and maintenance costs during the
term of the lease; therefore, early termination will not result in revenue loss for the City. The
City’s cost to maintain the garage for the additional month has not been budgeted in Fiscal Year
2006/07; however, the fiscal impact is anticipated to be minimal because the tenant has agreed to
pay for the garage elevator maintenance through the end of November 2006.
POLICY IMPLICATIONS
Early termination of the lease does not represent any change to existing City policies.
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ENVIRONMENTAL REVIEW
Termination of the lease will not affect the use of the facility for parking. Therefore, the lease
termination is exempt from the requirements of the California Environmental Quality Act
(CEQA).
PREPARED BY:
WILLIAM W. FELLMAN
Manager, Real Property
DEPARTMENT HEAD APPROVAL:
CARL YEAT
Director,Services
CITY MANAGER APPROVAL:
City Manager
CMR:398:06 Page 2 of 2