HomeMy WebLinkAboutStaff Report 14713
City of Palo Alto (ID # 14713)
City Council Staff Report
Meeting Date: 9/27/2022 Report Type: Consent Calendar
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Title: Approval of a First Amendment to Lease Between KG-Bryant, LLC, and
the City of Palo Alto for the Premises Located at 526 Bryant Street for an
Initial 12-month Term, at a Starting Base Rent of $5,616.11 per Month and
Increasing 3 Percent Annually
From: City Manager
Lead Department: Administrative Services
Recommended Motion
Staff recommends that Council authorize the City Manager to execute the First Amendment to
the Lease contained in Attachment A, between KG-Bryant, LLC, and the City of Palo Alto, for
office space located at 526 Bryant Street, in an amount not to exceed $675,895.46. The lease is
for an initial 12-month term commencing on February 1, 2023 through January 31, 2024, with
the right to automatically extend the term for four successive 12-month periods, potentially
through January 31, 2028. The initial base rent is $5,616.11 per month and increases 3%
annually.
Background
Planning and Development Services currently operates out of the three locations listed below.
Address Expiration Date Square Footage
285 Hamilton
526 Bryant
City Hall – 5th Floor*
1/31/2026
1/31/2023
N/A
6,361
3,076
4,388
Total 13,825
*5th Floor square footage is only 75% of the total since the floor is shared with Transportation.
It also excludes elevator and restroom area.
The premises at 526 Bryant Street contain 3,076 square feet in the basement level of an
approximate 14,500 square foot multitenant mixed-use office and retail building that was
constructed in 1935. There is no onsite parking, but the property is located roughly half a block
northwest of the Development Center (285 Hamilton Avenue) and approximately one block
northwest of City Hall.
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The City has been leasing 526 Bryant Street since 2017 for use by Development Services,
although the premises were also used for temporary staff relocation during the renovation of
floors at City Hall. Currently, the premises are occupied by fire inspectors, plan check services,
and building inspectors. The premises at 526 Bryant Street, along with the other two Planning
and Development Services locations at 285 Hamilton Avenue and City Hall, meet the
requirements for current usage and staffing levels. Staff is seeking a lease term that aligns with
the 285 Hamilton lease (which contains the option to potentially extend through January 31,
2028), while providing flexibility.
Discussion
The City currently leases approximately 3,076 square feet from KG-Bryant, LLC, in the basement
level at 526 Bryant Street for use by Planning and Development Services staff (CMR 11426). The
amendment to lease will allow Planning and Development Services to continue meeting its goal
of helping customers build safe, healthy, and sustainable buildings that comply with applicable
codes and regulations, while ensuring the safety of City staff. The new rent represents a three
percent increase over the current amount. The recommended structure ensure flexibility to
adapt as business needs adjust and in anticipation of a review of space upon the completion of
the new Public Safety Building.
Staff has negotiated an amendment with the basic provisions listed below.
• Term: initially 12 months commencing on February 1, 2023 and expiring on January 31,
2024, with the right to automatically extend the term for four successive 12-month
periods, potentially through January 31, 2028;
• Monthly base rent: initial base rent is $5,616.11 per month and increases 3% annually
o The initial monthly base rent represents a 3% increase from the current amount.
• Operating expenses: City is responsible for a portion of operating expenses (such as
taxes, insurance, maintenance and repair, janitorial, and utilities), estimated to be
$4,992.89 per month at the start of the new term and projected to increase up to 3%
annually.
Timeline
The current lease at 526 Bryant Street expires on January 31, 2023 and the amendment would
extend the term for one to four years.
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Resource Impact
The current base rent to lease 526 Bryant Street is $5,452.53 per month. The amendment
scheduled to commence on February 1, 2023, will increase the base rent by 3% from the
current amount to $5,616.11 and continue increasing 3% annually through January 31, 2028.
Operating expenses are also estimated to increase by 3% to $4,992.89 per month at the start of
the new term and continue increasing 3% annually through January 31, 2028. The annual rental
costs of approximately $127,000 are budgeted in the Planning and Development Services
Department and part of the FY 2023 Adopted Operating Budget. Adjustments to the budget to
align with the lease terms will be recommended as part of the annual budget process, and
funding in subsequent fiscal years is subject to appropriation by the Council.
Policy Implications
This recommendation does not present any changes to existing City policies.
Stakeholder Engagement
The Real Estate Division met with Planning and Development Services to determine their real
estate needs. Various options were considered including searching for alternative spaces to
lease as well as moving into property owned by the City. Planning and Development Services
determined that the most optimal option to provide functionality and continuity in service was
to extend their current lease at 526 Bryant Street. Real Estate Division and Planning and
Development Services staff engaged with the owner to extend the lease.
Environmental Review
Approval of this amendment to lease is exempt from review under the California Environmental
Quality Act (CEQA) because it can be seen with certainty that there is no possibility that the
activity in question may have a significant effect on the environment (CEQA Guidelines Section
15061(b)(3)).
Attachments:
• Attachment A: 526 Bryant Street First Amendment to Lease