HomeMy WebLinkAboutStaff Report 2507-4980CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, August 18, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
14.Approval to Extend the Lease Between 285 Hamilton LLC, and the City of Palo Alto for
the Premises Located at 285 Hamilton Avenue (Development Center) for 36 months, at a
Starting Base Rent of $49,420.45 per Month and Increasing 3 Percent Annually; CEQA
Status – Exempt Under CEQA Guidelines Section 15061(b)(3)
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: August 18, 2025
Report #:2507-4980
TITLE
Approval to Extend the Lease Between 285 Hamilton LLC, and the City of Palo Alto for the
Premises Located at 285 Hamilton Avenue (Development Center) for 36 months, at a Starting
Base Rent of $49,420.45 per Month and Increasing 3 Percent Annually; CEQA Status – Exempt
Under CEQA Guidelines Section 15061(b)(3)
RECOMMENDATION
Staff recommends that Council authorize the City Manager or their designee to countersign the
letter contained in Attachment A, from 285 Hamilton LLC, to extend the City’s lease for the
office space located at 285 Hamilton Avenue, Suite 100. The lease will extend for an additional
36 months commencing on February 1, 2026, through January 31, 2029. The initial base rent
will increase by 3% from the current amount, to $49,420.45 per month, and will continue to
increase 3% annually.
BACKGROUND
Planning and Development Services operate within the three locations listed below. They will
vacate 526 Bryant Street at the end of the current term on January 31, 2026, but desire to
continue operations from the other leased location at 285 Hamilton Avenue while maintaining
the City Hall 5th floor location.
Table 1: Planning and Development Services Locations
Address Expiration Date Square Footage
285 Hamilton Avenue 1/31/2026 6,361
526 Bryant Street 1/31/2026 3,076
City Hall – 5th Floor N/A 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 current agreement for 285 Hamilton Avenue was approved by the Council on June 21,
20211 and included two options to extend for additional one-year periods.
While the long-term plan is to relocate staff from 285 Hamilton Avenue into the soon-to-be-
vacated police wing at City Hall, that space will require repairs and space planning is currently
under way. An extension to the existing lease will provide sufficient time for completion of this
work .
ANALYSIS
The recommended amendment to the current lease agreement will extend the lease for an
additional 36 months, commencing on February 1, 2026 through January 31, 2029. The initial
base rent will increase by 3% from the current amount to $49,420.45 per month and will
continue to increase 3% annually, consistent with the annual increase in the current lease
agreement. All other provisions of the lease remain unaltered and in full force and effect. The
terms are similar to the options in the current agreement but extends the term to three total
years instead of two. The City will continue to be responsible for a portion of the operating
expenses (such as taxes, insurance, maintenance and repair, janitorial, and utilities), currently
estimated at $9,098 per month. The extended term is expected to provide sufficient time for
evaluating options for the future space of the development center and the Planning and
Development Services Department. The Development Center serves as a one-stop shop,
offering integrated City services to support the community in constructing safe, healthy, and
sustainable buildings in compliance with state and local codes and regulations.
FISCAL/RESOURCE IMPACT
The current base rent to lease 285 Hamilton Avenue, Suite 100, is $47,981.02 per month or
$7.54 per square foot. Upon commencement of the extended term, the monthly rent will
increase 3% to $49,420.45 or $7.77 per square foot and continue to increase at the same rate
annually. Current operating expenses are estimated at $9,098 per month. The current rental
costs are included in the FY 2026 Operating Budget. No additional funding is required at this
time and the annual appropriation will be included in the budget development process for the
remaining term.
STAKEHOLDER ENGAGEMENT
The Real Estate Division of the Administrative Services Department met with Planning and
Development Services to confirm the desire to remain at 285 Hamilton Avenue. Real Estate
Division staff engaged with the landlord to extend the lease term under terms similar to the
current agreement.
1 City Council, June 21, 2021; Agenda Item # 15;
https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2021/id-12334.pdf
ENVIRONMENTAL REVIEW
Approval of to extend the 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: Letter From 285 Hamilton LLC to Extend Lease
APPROVED BY:
Lauren Lai, Administrative Services Director
Thoits Bros., Inc.
629 Emerson Street
Palo Alto, CA 94301
650-323-4868
July 11, 2025
VIA EMAIL
City of Palo Alto
285 Hamilton Avenue
Palo Alto, California
Attn: Sunny Tong, Real Property Manager
Email: sunny.tong@paloalto.gov
RE: Office Lease dated October 18, 1998, as amended by that certain Amendment No. 1 to Office
Lease dated May 18, 1999, as further amended by that certain Amendment No. 2 to Office Lease
dated June 13, 2006, as further amended by that certain Amendment No. 3 to Office Lease
dated November 1, 2011, as further amended by that certain Amendment No. 4 to Office Lease
dated September 3, 2013, as further amended by that certain Fifth Amendment to Office Lease
dated February 1, 2016, and as further amended by that certain Sixth Amendment to Office
Lease dated as of May 22, 2017, a amended by Seventh Amendment to Office Lease dated as of
June 22, 2021 (collectively, the “Lease”) between 285 Hamilton LLC, a Delaware limited liability
company (“Landlord”), as successor to Thoits Bros., Inc. and The City of Palo Alto, a California
municipal corporation (“Tenant”)
Dear Sunny:
Tenant’s renewal options under the Lease have expired. However, Landlord is willing to extend the
Lease for an additional term of three (3) years expiring on January 31, 2029 (the “Extended Term”), with
no further options to extend under the Lease. Base Rent during the Extended Term will be increased
each year of the Extended Term by 3% above the Base Rent previously in effect, with the first escalation
occurring on February 1, 2026 (which will increase the Base Rent to $49,420.45 per month/$594,045.40
per annum), and each subsequent escalation to occur on the one year anniversary thereof. Tenant’s
Lease for the Extended Term will otherwise be on all the terms and conditions of the Lease.
Such offer to extend the Lease for the Extended Term shall be effective only if Tenant delivers a duly
executed copy of this Letter to Landlord by August 19, 2025, time being of the essence. If so executed by
Tenant, this letter shall amend the Lease. If Tenant fails to deliver such duly executed copy of this letter
by such date, this letter shall have no force or effect, and Tenant shall have no right to extend the Lease
for the Extended Term. Tenant’s signature may be delivered electronically, including by PDF, DocuSign
or AdobeSign.
By executing this Letter, Tenant hereby confirms that (1) except as modified hereby, all other terms and
conditions of the Lease remain unchanged and in full force and effect and are hereby ratified and
confirmed by the parties hereto, and the Lease together with this letter constitutes the entire
agreement between Landlord and Tenant with respect to Tenant’s lease of space at 285 Hamilton
Avenue, (2) Tenant accepts the Premises in its “as is” and “where is” condition, (3) as of the date of
Tenant’s execution of this letter : (a) Tenant is not in default under any of the terms and provisions of
the Lease; (b) Landlord is not in default in the performance of any of its obligations under the Lease and
Tenant is unaware of any condition or circumstance which, with the giving of notice or the passage of
time or both, would constitute a default by Landlord; (c) Landlord has completed, to Tenant’s
satisfaction, any and all improvements to the Premises, and has paid any and all allowances required of
it under the Lease; (d) Tenant has no defenses, liens, claims, counterclaims or right to offset against
Landlord or against the obligations of Tenant under the Lease, and (e) Tenant did not involve any
brokers in connection with this letter agreement and agrees to indemnify, defend and hold Landlord
harmless from any claims by a broker or finder based on alleged agreements or dealings with Tenant.
Sincerely,
285 Hamilton LLC,
a Delaware limited liability company
By: Thoits Bros., Inc.,
a California corporation,
its sole member
By: ____________________
John R. Shenk, CEO
Accepted:
The City of Palo Alto,
a California municipal corporation
By: _____________________________
Name:
Its Duly Authorized ________________.
Dated: August ____, 2025