HomeMy WebLinkAbout0589.000Dec~r 6, 1990
THE HONORABLE CITY COUNCIL
Palo Alto, California
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MQPXIN"f 110. 1 TO 1IIBSTER-CQWFU. AIR RIGRTS LpSE
Members of the Council=
'eport in arief
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This ~eport recommends that council approve and adopt Amendment
Number One to the Air Rights Lease of tvo levels of parking ~t the
Webster-Cowper Parking Garage~ Tha amendment proposes the tenant
(505 Hamilton Avenue Partners) reimburse the city for funds
necessary to purchase the insurance required by the ter.ns of the
lease, instead of the tenant actually purchasinq the insurance.
Bae'qrowuS
On August 13, 1990, council authorized the City to enter into a 24-
month Option to Lease and Lease for Air Rights at the W'ebster
Cowper carage with 505 Hamilton Avenue Partners~ The parties now
desire to amend the lease to allow the tenant to reimburse the city
for the purchase of the insurance required as stipulated in the
lease. The insurance requirements, in particular th~ earthquake
coverage, was a cause for lengthy debate during the course of the
negotiations. The City insisted the tenant provide insurance in
light of the dual parking uses. However, the tenant has pointed
out that by providing the insurance, they ~ould, as a pra~tical
aatter, be potential litigation tarqets for many types of injuries
for which they are not responsible under the Lease. This proposal
would remove the tenant from that type of exposure~ The benefit to
the City is limited, but it would be easier for the City to monitor
insurance under its control. As proposed, the tenant would
reimburse the City for its cost in obtainin<j the insurance,
including administration cost. A copy of the prcposed amendment is
attached for your review~ Procedurally, the Mayor would sign
AllencD.ent Number One at the same time the Option to Leae;.e is
exercised, as previously approved by council in CKR:466:0~
CMR:589:0
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At the co.pletion of construction of the qarag6 6 the tenant has
also requested the city assign the lease to Premier Properties
Management (Premier). Jim Baer is also part owner in Premier, and
the .8eiqnaent is .erely a means to shift the maintenance responsi
bilities to the company that does the .aintenance for Mr. Baer's
p~ojeets. The City has an existing agreement with premier fo~ the
maintenance work at 250 University Avenue. Premier, in turn, will
sublease the two new levels at Webster-Cowper to Digital corpora
ti'On as part at Prellier and Digital tl"ansaction at 529 Bryant
Street.
The proposed insurance amendment and assignment do not constitute
a project under CEQA 7 and no Environmental Assessment is required.
Staff recommends that the City Council:
1) Authorize the Mayor to si9n the attached amendment number lOne
to the lease for Air Riqhts at the Webster-Cowper Caraqe at
the sa.e ti.e the Option to Lease is exercisedo
Respectfully submitted,
/liff{!jj~>J{ii -{If:, ",«-
WI w. F~
Real Property Manager
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Attachments: Amendment No. 1 to the lease
CC: Jim Saer, Premier Propertidl w. Russell Davis, Ware , Treidenrlch
Ralated Staff Report: CMR:466:0
CMR;5a9;O 2
AMENDMENT NUMBER I IO WEBSTERICO\Vl'ER AIR RIGHTS LE."'-SE
THIS A.'dENDMENT TO LEASE ("Amendment") i5 made as of t!lis __ day
of December, 1990, by IlOd be_n Ibe CITY OF PALO AI. TO, a municipal
<Xl<pCln00u~), IlOd SOS HAMILION Ava'lJE PARTNERS, a California
limitc:d partnenbip ("Tenant").
RECITALS:
A Lessor aDd T'l:nanc enterfd into thai certain Option Agreement (the
"Optioo Agreement"). dated OoI<>ber 11, 1990, pur.;uant to whkh Ienant obtained an
cxcliISM opIioD (the "Option") 10 Jease certain airspace above an exi'ting parking
garage __ by l..aoor aDd more pa:ticularly described therein. Upon lhe satisfaction
of cutain COlXIiticms set forth in the Option Agreemen~ Ienant is entitled to !ease said
airspace pur5uan1 10 the ronn of Jease (the "Lease") .ttached to the Option Agreement
as Ex!ubj! 1r.
l..csIor aDd Tenant DQ'il" desire to amend the Lease as bereinaflC: r
Tbio Amendment JhaH become effective upon the e.<cotion of the Lease by
C. AD: apitaIized terms DQ( defined herein shaD have the same meaning as
set forth in the Lease.
NOW, THEREFORE, i..eJSO< IlOd Tenant agree as follow>:
1. Insurance RC:Qui[c:~nts. Tenant shaD be relieved of its obIigat;on to
maintain c.enaiD types of insu..rar..r.e awerage required by the Lease and shall iru-tead be
required to pay me costs incurred by Lessor in maintaining the insurance descn~ d
below in sul>parasraph (b). Accordingly, Paragraph 11.1 and Paragraph 11.2 of the
Lease arc hereby deleted in their entirety and replaced with L~~ fonowing:
11.1 RCSluired Coverage.
(3) Tcnanl shaD maintain worker's compensatioo j!)surance
acceptable to Lc:ssor in the amount required by law in full force and effect
throughout the term of Ibe Lease.
(b) Lt-.ssor shaD maintain the following coverages. during the
term of the Lease:
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POLIcY MINIMUM LIABILITY LIMITS
(I) COMPREHENSIVE 53,000,000
AUTOMOBILE LIABILITY
including owned, hired,
Combined Sensle
Limit
and nDn~ed auto~Ces
(2) COMPREHENSIVE GENERAL Combined Single S3,000,O(lO
LIABILITY Umil
including prodUC'.s and
completed "P"rations,
broad form contractu al,
and pcrsolllli injury
(3) FIRE & EXTENDED
COVERAGE
Not less than 100% 0( the replacement crn;t 0(
an insurance improvements comprising the
Parking Garage and the Promises. Such
policies must include water damage and debriS
cleanup prO\isions. Additiona1 fire and
extended coverage shan be obtained in
accordance Vwith this clause upon comptet ion of
con5t.ruction or installation of any major
insurable improvement
(4) GARAGEKEEPER'S lEGAL
COVERAGE INSURING
vEHICLES IN lESSOR'S
POSSESSION
$1,000,000
Additionally, during construction of the Premises, Lesser shall :maintain an
earthquake insurance poljcy insuring the Premises i~ form reasonably iicc:epabJe
ta Tenant. FoDowing construction 0( the Premisc~ Lessor shan maintalD an
eartbquake insurance policy insuring the Premises and the Parking Garage in
form reasonably ."""plable 10 Tenant, provided that the premiums for said
policy arc, in Tenant's and Lessor's reasonable opinlo~ commercially reasonable.
Lessor shall submit an proposed eanhquake policies for the Premises and
Parking Garage 10 Tenant for rev'.ew pursu.n, to subparagrapb (e) below prior
10 accepting the same. Tenant sl-.all notify Le:s.sor in writing within fifteen (15)
days of ret:eiving any proposed policy of earthquake insurance if Tenant believes
the premium for such policy is not commercially reasonable. IT Lessor and
Tenant cannoc agree Ofi the commercia] reasonabJeness of earthquake insurance
premiums, the issue .hall be .ubmined by the parties to • neutral binding
arbitration in accordance with Pan 3, Title sa of the California Code of Civil
Procedure. The arbitrator shaD be knowledgeable in commerdal leasIng and/or
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oommerciaJ property manageIllent, mk management, insurance and municipal
gO\lcmment. If the parties are unable to agree upon an arbitrator, the presid:ng
Judge of the Superior Court baving jurisdiction to enforce the: arbitration result
shaD seiect the arbitrator. The panie! shall share equally the arbitrBtor~s fe~5.
100 liability, casualty, garagekeeper" legal roverage and earthquake policies
provided for bereinabove shan each name Tenant and any approved assignee
andt"" lubleJsee 0( Tenant as additional insured pa"ties and shaD provide that
ouch poIicieI may not be cancelled, limited in scope or coverage or nonrenewed
until after thirty (30) days written notice has been given to Tenant and its
8pproYcd assignees and/or scbles.sees at the addresses provided by Tenant and
such assignees.
(e) Tenant 5han reim!)iJf$C: Lessor foe Lite costs of insurance
maintained pursuant to subparagraph (b) above. USSO£ shaD submit proposais
for each policy provided foe above to Tenant for its appr<Mi~ which shaD nor be
unreasonably withheld. If Tenant fails to disapprove in writing any proposed
insurance policy within thirty (30) days foDowing r=ipt tbereo( from Lesso< or
its L""UIer, the propooed policy shan be deemed approved by Tenant. Tenant
shan pay to Lessor or, at Lessor's election,. directly to the insurance carrier
providing 1M ccwerage, the amount of the premiums for the foregoing policies
within thirty (30) days of receiving invoices therefor. IT Tenant <fisapproves 0(
the form 0< COS! 0( any proposed policy, (i) Lessor and Tenant shaD cooperate
with one another in order to procure a polley which is acceptabIe to TenalH and
Lessor or (ii) Tenant may elect to procure and maintain t.11e required insuranc.e
policy or POIicieJ. .ubject to Lessor's, reasonable approval and the requirements
set forth below. If Tenant elects to maintain one or more of such policies, each
policy maintained by Tenant ,haD contain the foDowing clauses:
1. 'This L'1SUranCe shaD nor: be canceHed, Ilmjt~d in
scope or coyerage or nonrenewed untfl after thirty (30) days .... Tinen notice has
been given to the:
City 0( Palo AltolRea! Estate Division
P.O. Box 10250
Palo Alto, California 94303'
2. II AI! rights of subrogation are bere by waived against
the City 0{ Palo Alto and the members of the City Council and elective or
appointive officers or employees, when acting wit.'1in the s.cope of their
employment or appoinlmenl. II
3. '7he City of Pa Yo Aho is added as an additkJnal
insured as respects operations of the named insured at or from the premises
leased from the City of Palo Aho.·
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4. '"It is agreed tbat any insurance maintained by the
City of hlo Alto 'Will apply in neess of, and not contnbute with insurance
provided by this policy.'
Prior 10 the expiration of any insurancc policy which Tenant
has elected to maintain, Tenant shan either renew such policy, subject to the
requirements stated above, or notify Les&oc in ... riting not less .~.an forty (40)
days before the expiration of such policy that Tenant will no longer main.ain
sucb insurance, in which even' Lessor shall maintain the insurance and Ten ant
,ball pay the cost therea( as prOllided above.
2. .Evidence of Insurance Coveralle. Paragraph 11.3 of the uase is hereby
deleted in its entirety and replaced wi.h the following:
11.3 Evidence of Coverage: Chanses. Each party agrees to deposit v,,'!!h
the: other) on or before the effective dale of this Lease, certificates of insurance
oe",,"'ary to satisfy the other party that the insurance provisioru; of this uase
have been romplied with, and 10 keep such insUTa""" in effect and !he
certJfica.cs !berefor on deposit during the en.ire term of this Lease. Shou Id
either party not prOllide evidence of such required .""erage at least three (3)
days prior to t.~e expiration of any .mOOg insurance coverage, Lessor, in Ibe
case of ins~ to be majntoined by Tenant or which Tenant has elected to
maintain, or Tenant, in the tase of insurance to be mail"ltained by Lessor,
following written notice to the other party, may purchase sucb insurance, on
behalf of the other party to provide six-months coverage.
Lessor shan retain t.~ right at any time to review the coverage, ferm, and
amount 0( the ir.surancc required by Paragraph II and each of its
SUbparagraphs.. If, in the reasonable opinion of Lessor·s Manager, Loss Con~rol.
the insurance provisions in this Lease do not provfde adeqlJO:itt ,protection for
I....essor-and for members of the public using the Premises, Lessor's Manager,
Real Propeny, may obtain or, if Tenant has elected to maintain the type of
insurance in question, may require TenGnt 10 obtain insurance sufficient Ln
coverage, fonD, and amount to provide adequate protection. Lessor's
requirements shall be reasonable and sban be designed to assure protection from
and against the kind and extent of risk which exists at the time a change In
insurance is required.
Lessor's ManagerJ Rea] Property. shall nuti~ Tenant in writing of changes
in the insurance requirements established pursuant to Paragrapb 11 and each of
its subparagrapru.; and if Tenanl is required to or has elected 10 mainla in such
OOYerage and docs not deposit copies of accep.able insurance policies wi.h
Lessor in<o<pora.ing ,ncb ehangos wi.hin sixty (60) days of receipt of such
notice, or in the c:vtlit Tena.,t fails to maintain in effect any required insurance
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coverage, this ~.se shall be in default without fumer no~ !O Tenant. Su<h
failllre shaD constitute a material breach aDd may be grounds for termination of
this Lease at the option of Lessor pursuant to Paragraph )} below.
3. NQ Cont1ict. Except as amended by this Amendmen~ tile terms and
conditions of tile ~ase ,haD remain in fuD for<e and effect. In the event of any
conflict between tile lerms of this Amendment and the Lease, the terms of this
Amendment shall pern and control the intent of the parties.
IN \\-lTNESS WHEREOF, the parties hereto have execuled this Amendment 10
Lease as of tho date first set forth above.
THE CITY OF PALO ALTO,
a municipal corporation
By,-------
Mayoc
Attest:
By, _______ _
aty Oerk
APPROVED AS TO fORM:
City Attorney
REroMMENDED FOR APPROVAL:
OJiof Transportation Official
Real Property Administrator
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TENANT:
505 HAMILTON AVENUE
PARTh'ERS, a California limiled
partnership
B}~ ffiM1, a California fimited
partnership, a general panner
By, __________________ __
James E. Bacr, Its General
PartDer
By: CHARLES KING &
ASSOClA TES, a California limiled
pannership" a general panner
By, __________________ __
Charles W. King, ]r., Trustee of
The OJarJes W. King, Jr.
Revocahle Trust dated
De<ember 17, 1986, Its general
partner