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CITY OF PALO ALTO OFFICE OF THE CITY ATTORNEY
October 15, 2012
The Honorable City Council
Palo Alto, California
Approval of Amendment No. 2 to an Agreement Between the City of
Palo Alto and Casa Olga Relating to the University Avenue Area Off-
Street Parking Assessment District
Background
In Fiscal Year 2000-01, a downtown parking assessment district was formed to build two new,
multi-story garages in the downtown area and to refinance prior district debt. The garages
(one on High Street and one on Bryant Street) were built to accommodate additional parking
demand in the downtown from employees and shoppers and to alleviate parking in residential
areas. Property owners within the assessment district voted to self-assess themselves under
Proposition 218 guidelines in order to pay for the bonds to construct the garages.
One property owner, Casa Olga, made a reasonable claim at that time that the formula used for
allocating assessment costs (requirement of 1 parking space per 250 square feet) did not
properly reflect its parking needs since its building was structured as a convalescent care
facility. In order to avoid litigation and allow the assessment district to move forward, the City
reached a Settlement Agreement with Casa Olga providing that of the 195 spaces assessed,
Casa Olga would be reimbursed on an annual basis for 117 spaces and Casa Olga would pay for
78 spaces. This Agreement was approved by Council on March 19, 2001 (CMR: 177:01). With
Bond Counsel approval, the annual reimbursement to Casa Olga has been paid using proceeds
from the 2001 bond issue. In 2004, the Agreement was amended in a minor respect.
Discussion
Recently, Casa Olga has entered into a 50 year lease agreement with a hotel company, Joie de
Vivre, which is rehabilitating the property into an 86-room boutique hotel. In late 2010, Joie de
Vivre, Casa Olga and City staff reached an agreement in principle to modify the Settlement
Agreement to account for certain changes to the property. In light of the addition of 8 guest
rooms, the parties agreed that the reimbursement to Casa Olga would be reduced from 117
spaces to 109 spaces and that Casa Olga’s obligation would increase from 78 to 86 spaces. In
Updated: 10/10/2012 11:06 AM by Lalo Perez Page 2
addition, the parties agreed that Joie de Vivre/Casa Olga would pay parking “in lieu” fees for
800 square feet of retail space added on the ground floor.
Subsequently, the parties began to explore whether to pay off the Settlement Agreement by
using available proceeds to pay the net present value of the future stream of payments to Casa
Olga. Pre-paying the obligation will eliminate the burden of administering the agreement since
Casa Olga/Joie de Vivre would then pay the full annual assessment for 195 spaces.
Subject to Council approval, the parties have reached agreement on a Second Amendment to
the Settlement Agreement to (1) pre-pay the full amount of the annual obligations under the
original Settlement Agreement; and (2) implement the adjustments agreed to in late 2010 to
account for the changes at the site due to the Joie de Vivre project. The proposed Second
Amendment provides for the following payments:
$424,349 from the City to pre-pay the assessment obligation (funded by parking
assessment bond proceeds); and
$486,000 in parking “in lieu” fees from Joie de Vivre, which includes five spaces
eliminated by the reconstruction and three spaces for the ground-floor retail space
added by the project.
The Staff recommends that the Council authorize the City Manager to execute the attached
Second Amendment to the Agreement with Casa Olga.
ATTACHMENTS:
Second Amendment to Agreement between City and Casa Olga (PDF)
Department Head: Molly Stump, City Attorney
Updated: 10/10/2012 11:06 AM by Lalo Perez Page 3
This document is recorded for
the benefit of the City of Palo Alto
and is entitled to be recorded free of
charge in accordance with §6103
of the Government Code
After Recordation, mail to:
Office of the City Attorney
250 Hamilton Avenue
Palo Alto, CA 94301
SECOND AMENDMENT TO AGREEMENT BETWEEN THE CITY OF PALO ALTO
AND CASA OLGA RELATING TO THE UNIVERSITY AVENUE AREA OFF-STREET
PARKING ASSESSMENT DISTRICT
THIS SECOND AMENDMENT ("Second Amendment") TO AGREEMENT BETWEEN
THE CITY OF PALO ALTO AND CASA OLGA RELATING TO THE UNIVERSITY
AVENUE AREA OFF-STREET PARKING ASSESSMENT DISTRICT (the "Second
Amendment") is made and entered into this ~ day of tJe.ro atffL , 2012, by
and among CASA OLGA, L.P., a California Limited Partnership ("Casa Olga"), AG-JdVP
Casa Olga, L.P., a Delaware limited partnership ("AG-JdVP"), and the CITY OF PALO
ALTO, a California-chartered municipal corporation ("City").
RECITALS:
This Amendment is entered into upon the basis of the following facts, understandings,
and intentions of the parties:
A. Casa Olga and City previously entered into that certain Agreement
Between the City and Casa Olga relating to the University Avenue Area Off-Street
Parking Assessment District, dated March 29, 2001 (the "Agreement"}, pursuant to the
terms and conditions of which Cas a Olga and City agreed to the payment, allocation,
and reimbursement, of a parking assessment imposed by the University Avenue Area
Off-Street Parking Assessment District of City on the property located at 180 Hamilton
Avenue in Palo Alto ("Property").
B. The Agreement was recorded in the Santa Clara County Recorder's Office
as Document No. 15625420, on April 5, 2001, and the Agreement was amended by the
unrecorded Proposed Revised Letter Agreement ("First Amendment") Re: Casa Olga,
dated December 29, 2004.
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C. Pursuant to Section 1 of the Agreement, Casa Olga pays an assessment
amount based upon a parking requirement of 195 unprovided parking spaces for the
building which is part of the Property and City reimburses Casa Olga for 117 parking
spaces.
D. Casa Olga has entered into a lease (the "Lease"), pursuant to the terms of
which Casa Olga will lease to AG-JdVP and AG-JdVP will rent from Casa Olga the
Property and under the Lease Casa Olga has assigned to AG-JdVP certain rights and
responsibilities under the Agreement.
E. AG-JdVP now wishes to remodel the building on the Property to convert
the building to a hotel (a use permitted under City land use regulations applicable to the
Property), adding eight (8) hotel rooms, increasing retail space, and eliminating five (5)
on site parking spaces, and the City wishes to pre-pay its obligations under the
Agreement.
F. The parties now desire (1) to provide for the pre-payment of the City's
payment obligations under the Agreement as amended by the First Amendment and (2)
clarify how the current assessment will be calculated for the Property.
NOW THEREFORE, IN CONSIDERATION of the foregoing Recitals and the mutual
covenants and promises of the parties contained in the Second Amendment, the parties
agree to amend the Agreement as follows:
1. Assessment for 195 Spaces. City will assess the Property for 195
parking spaces under the City Council Resolution No. 9277-9279 Authorizing Refunding
of Limited Obligation Improvement Bonds and Issuance of 2012 Bonds ("University
Avenue Assessment District Bonds"). In no event shall the assessment under the
University Avenue Asssesment District Bonds be for more than 195 parking spaces.
The Property owner agrees to pay these assessment amounts in a timely manner.
2. Prepayment of City Reimbursement. With the addition of 8 hotel
rooms, the City would be required to reimburse the Property Owner for only 109 parking
spaces, rather than 117 parking spaces. Upon the full execution of this Second
Amendment, the City shall pay AG-JdVP the sum of Four Hundred Twenty-Four
Thousand Three Hundred Forty-Nine Dollars and No Cents ($424,349.00), which is the
present value of the total sum owed to the Property Owner under the Agreement after
the addition of the 8 additional hotel rooms. Upon payment of this sum, City shall no
longer be required to reimburse the Property Owner for any portion of any future
assessments under the University Avenue Assessment District Bonds.
3. Payment of In-Lieu Parking Fees. Upon the receipt of a certificate
of occupancy for the remodeled hotel, AG-JdVP shall pay the City the sum of Four
Hundred Eighty-Six Thousand Dollars and No Cents ($486,000.00), which sum shall
constitute an "in-lieu payment" to the City equivalent to eight (8) parking spaces at Sixty
Thousand Seven Hundred Fifty Dollars and No Cents ($60,750.00) per space (the "In
Lieu Fee"). The In-Lieu Fee shall constitute full and complete compensation to the City
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for any and all amounts owed by Casa Olga and/or AG-JVP as a result of: (i) the
elimination of five (5) parking spaces on the Property, which requires an in-lieu payment
for five (5) parking spaces; and (ii) the addition of 800 square feet of retail space on the
Property's ground floor, which requires an in-lieu payment for three (3) parking spaces.
4. Release. Except for the obligations of the parties otherwise
expressed in this Second Amendment, and except for the rights, duties and obligations
of Casa Olga, as Landlord, and AG-JdVP, as Tenant, under the Lease (as the same
may hereinafter amended from time-to-time), all claims by and between the parties
regarding the assessment of the Property under the 2001 University Avenue
Assessment District Bonds shall be considered compromised and settled, without the
admission of liability by any party, and each party agrees to waive and release, in favor
of each other party and all employee, officers, agents, contractors and representatives
of the other party, all claims, demands, causes of action, rights, damages, costs,
expenses, compensation, and legal entitlements of any kind or nature (including
attorney fees) arising out of or connected with the current assessment of the Property
under the 2001 University Avenue Assessment District Bonds and to accept the duties
and liabilities stated in this Second Amendment in full accord and satisfaction thereof.
However, this Second Amendment, including without limitation, this Paragraph 4 in no
way affects or binds the parties in regard to any future assessments on the Property.
5. Termination of Other Terms and Conditions. All other terms and
conditions of the Agreement and First Amendment are hereby rescinded.
6. Binding on Successors. This Agreement shall be recorded and shall
run with the land and shall be binding upon and inure to the benefit of the parties and
their respective assigns, heirs or other successors in interest.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day in
year first above written.
[signature page to follow]
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CITY OF PALO ALTO
City Manager
APPROVED AS TO FORM:
Assistant City Attorney
CASA OLGA, L.P.,
a California Limited Partnership
By: COLP LLC, a California
Limited Liability Company
Its: G artner
By:
Wal
AG-JdVP CASA OLGA, L.P.,
a Delaware limited partnership
By: AG-JdVP Casa Olga GP, L.L.C.,
a Delaware limited liability company,
its general partner
By: AG-JdVP Casa Olga Parent, L.P.,
a Delaware limited partnership, its
sole member
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By: AGR VIII Casa Olga GP, L.L.C.,
a Delaware limited liability
company, its general partner
By: AG Real Estate Manager, Inc.,
a Delaware corporation,
its manager
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STATE OF CALIFORNIA
COUNTY OF SAHhuN&s(J()
)
) ss:
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On ,fJep;131{B ~ M/~ ,before me &~5Rjt/P£J!l t mv/3. , Notary
Public, personallyppeared /(,kM-re Il #J9gdVAfr.NfNho proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to c me that @sRe executed the same in ~her
authorized capacity, and that b~ signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
I certify Linder penalty of perjury under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
STATE OF CALIFORNIA
COUNTY OF SG\(\~ G\ov{'~
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) ss:
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On \C>-~..-~\1--, before me, \'!\().,""~lt She;hC\~ ,Notary
Public, personally appeared S\~RhU\ Co 1\\ V( , who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/sI:le-executed the same in his/her
authorized capacity, and that by his/htr signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
I certify under penalty of perjury under the laws of the State of California that the
foregoing paragraph is true and correct.
Signature
~ L 0, f"", MAHOEE SHEHAOEH
~ NOTARY PUBLIC -CALIFORNIA
• i.1 COMMISSION # 1950656 e
SANTA CLARA COUNTY -
My Comm. Exp. September 2,2015
WITNESS my hand and official seal.
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