SECOND AMENDMENT TO
LEASE AGREEMENT BY AND BETWEEN PALO ALTO UNIFIED SCHOOL
DISTRICT AS LANDLORD AND CITY OF PALO ALTO, A CALIFORNIA
CHARTERED MUNICIPAL CORPORATION AS TENANT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (“Second Amendment”) is made and entered into as of the date of its full execution, by and between Palo Alto Unified School District (“Landlord”) and City of Palo Alto, a California chartered municipal corporation (“Tenant”). Landlord and Tenant are collectively referred to herein as the “Parties”.
RECITALS
A. Landlord and Tenant are parties to that certain Lease, dated July 1, 2020, as amended by that certain First Amendment to and Partial Termination of Lease Agreement, dated June 28, 2022 (collectively, the “Lease”);
B. Pursuant to the Lease, Landlord has leased to Tenant comprising approximately 51,846 square feet of rentable building area and 15.94 acres of outdoor recreational area (“Premises”) of the Cubberley School (“Property”);
C. The Term under the Lease expires on December 31, 2024;
D. On October 28, 2024, the Parties executed a Memorandum of Understanding (“MOU”) setting forth the Parties’ mutual understanding of the steps each would take pursue the redevelopment of the Cubberley Community Center and District schools. The MOU, set forth in Exhibit C attached to this Second Amendment, contemplates the Parties would execute an extension to the Term under the Lease;
E. The Parties desire to extend the Term under the Lease on the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
SECTION 1. The following attachments to the Lease are hereby amended and replaced and each is hereby incorporated in full into this Second Amendment and into the Lease by this reference as follows:
Basic Lease Information of the Lease is hereby amended to read as set forth in Exhibit A to this Second Amendment;
Exhibit B of the Lease (Premises) is hereby amended to read as set forth in Revised Exhibit B to this Second Amendment.
SECTION 2. Section 2.1 (Premises) of Article 2 (Premises) of the Lease is amended to read as follows:
2.1 Premises. The Premises demised by this Lease are as specified in the Basic Lease Information. The Premises have the address and contain the square footage specified in the Basic Lease Information; provided, however, that any statement of square footage set forth in this Lease is an approximation which Landlord and Tenant agree is reasonable and no economic terms based thereon shall be subject to revision whether or not the actual square footage is more or less. Tenant shall have the right to reduce the Premises by surrendering the S Building back to Landlord upon 30 days written notice.
The portion of the Property including, but not limited to, parking, walkways, and other portions of the Property which are non-exclusive are collectively referred to herein as the “Common Areas”. Tenant shall have the non-exclusive right during the Term to use the Common Areas along with others having the right to use the Common Areas. Landlord shall have exclusive use of the restrooms in Building A and B.
SECTION 3. Article 3. (Term) of the Lease is amended to read as follows:
3. T
ERM. The term of this Lease (“Term”) shall be for the period specified in the Basic Lease Information, commencing on the Commencement Date (“Commencement Date”). This Lease shall terminate at midnight on December 31, 2029 (“Expiration Date”), unless sooner terminated or extended as hereinafter provided.
SECTION 4. Paragraphs (b) and (c) are added to Section 4.1 (Base Rent) of Article 4 (Rent) as follows:
(b) If Landlord discontinues its use of the Property and Tenant and Landlord agree that Tenant shall lease the full Property, the Base Rent shall be $2,500,000 per year.
Landlord shall provide Tenant with written notice of its decision to discontinue its use of the Property at least ninety (90) days in advance of such discontinuance. If written notice is not provided at least ninety (90) days in advance, the increase in Base Rent shall not increase until 90 days from the date of the written notice. Notwithstanding the foregoing, Landlord shall retain a right of access to and parking for Greendell School.
(c) Landlord shall provide Tenant with a credit of $1,000,000 for disputed maintenance costs incurred prior to December 31, 2024. The credit shall be provided against the Base Rent in six equal monthly installments of $166,666.67 each, commencing on July 1, 2026.
SECTION 5. Section 8.1 (Maintenance and Repair by Tenant) of Article 8 (Maintenance and Repair of Premises) of the Lease shall be amended to read as follows:
8.1 Maintenance and Repair by Tenant. Tenant shall maintain the Premises and Common Areas on the Property in substantially the same condition as of the Extension Date of this Lease Term. (Tenant is not responsible for the maintenance of all areas of the Property that are not part of the Premises or Common Areas). For buildings in which Tenant leases only one (or some) rooms as part of the Premises, the Tenant shall maintain the entire building except for the interior spaces of the rooms that are not part of the Premises. Tenant’s repair and maintenance obligations include, without limitation, repairs to: all interior and exterior work and Common Areas on the Property, and all janitorial, pest control, plumbing, fire sprinkler, sewage,
heating, ventilation, air-conditioning, roof repair and replacement, electrical and lighting facilities, irrigation systems, fences, landscaping, litter collection and removal. Tenant shall further, at its own costs and expense, repair or restore any damage or injury to all or any part of the Property caused by Tenant or Tenant’s agents, employees, invitees, licensees, visitors or contractors, including but not limited to repairs or replacements necessitated by (i) the construction or installation of Alterations to the Premises by or on behalf of Tenant; (ii) the moving of any property into or out of the Premises; or Tenant’s use and occupancy of the Premises. In the event that any law, regulation or mandate requires the expenditure in excess of $250,000 to bring the Property, or any portion thereof, into compliance the Parties shall negotiate in good faith a cost sharing agreement as between Landlord and Tenant for any amount in excess of $250,000. If no agreement is reached after ninety (90) days from the commencement of negotiations, the Parties agree to resolve the matter through the option available in Section 22.7 of this Lease.
SECTION 6. Section 19.4 is hereby added to Article 19 (Early Termination by Tenant) of the Lease to read as follows:
19.4 Bond Measure. The Parties acknowledge Tenant’s intention to submit a bond measure for voter approval to fund the purchase and redevelopment of a portion of the Property in November 2026. The bond measure is contingent on Landlord and Tenant each creating certain planning documents prior to the election. If such bond measure is not placed on the ballot by the statewide November election of 2026, or if it is placed on the ballot and the measure is not approved, either party may terminate this Lease early with an effective termination date on or after June 30, 2027. The party seeking to terminate this Lease shall give the other party at least one hundred eighty (180) days written notice prior to the effective termination date. Prior to the termination date, the Parties will meet at least once in good faith to discuss alternative plans.
SECTION 7. This Second Amendment is subject to the following terms:
This Second Amendment sets forth the entire agreement between the Parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements.
7.2 Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect. In the case of any inconsistency between the provisions of the Lease and this Second Amendment, the provisions of this Second Amendment shall govern and control. The capitalized terms used in this Second Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Second Amendment.
7.3 Each party represents and warrants that it has not dealt with any broker or agent in the negotiation for or the obtaining of this Second Amendment, and agrees to reimburse, indemnify, save, defend (at the indemnified party’s option and with counsel reasonably acceptable to the indemnified party, at the indemnifying party’s sole cost and expense) and hold harmless the other party for, from and against any and all cost or liability for compensation claimed by any other broker or agent employed or engaged by it or claiming to have been employed or engaged by it.
7.4 As of the Execution Date, each party represents and warrants to the other party that, to its actual knowledge, (i) Landlord and Tenant are not in default of any of their respective obligations under the Lease and (ii) no event has occurred that, with the passage of time or the giving of notice (or both) would constitute a default by either Landlord or Tenant thereunder.
7.5 Each signatory of this Second Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.
IN WITNESS WHEREOF, Landlord and Tenant have entered into and executed this Second Amendment as of the last date of signature.
LANDLORD:
Palo Alto Unified School District
By: ______________________________
Name: ____________________________
Title: _____________________________
Dated: ____________________________
TENANT:
City of Palo Alto,
a California chartered municipal corporation
By: ______________________________
Name: ____________________________
Title: City Manager or Designee
Dated: ____________________________
Approved as to form:
______________________________
Tim Shimizu
Assistant City Attorney
Exhibit A
Revised Basic Lease Information
Lease Date: Dated as of July 1, 2020 for reference purposes only Landlord: Palo Alto Unified School District
Landlord’s Address: Palo Alto Unified School District
25 Churchill Avenue
Palo Alto, CA 94306
Attn: Superintendent of Schools
Tenant: City of Palo Alto
Tenant’s Address: City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: Manager, Real Property
Property: The 27.48-acre Cubberley School consisting of approximately
15.94 acres of outdoor recreational area and an additional 11.54 acres of land improved with walkways, a parking lot, and 104,600 square feet of buildings, as depicted in Exhibit A (“Property”).
Usable Area: Approximately 807,486 square feet of area consisting of 15.94 acres (694,346 square feet) of outdoor recreational area and 104,600 square feet of buildings (“Usable Area”).
Premises: A portion of the Usable Area, as shown in Revised Exhibit B, consisting of the theater, pavilion, Gym A, Gym B, Rooms G5 and G8, City facilities within the G Building, S Building, FOPAL and fields.
Landlord will allow the use of M3 at no cost on a first-come, first-served basis as part of an agreement that allows Landlord to use the pavilion free of charge for student gym classes. Use of M3 will require compliance with a Use of Facilities permit per statute and per District processes.
Length of Term: 114 months
Commencement Date: July 1, 2020
Extension Date January 1, 2025
Expiration Date: December 31, 2029
Extension Option: None
Base Rent: From and after the Extension Date, Tenant will pay to Landlord $2,000,000 annually as Base Rent. Rent shall be paid in monthly installments of $166,666.66 per Section 4.1. In recognition of previous disputed responsibility for Landlord’s contribution of maintenance costs arising before the Extension Date, Landlord will credit Tenant $1,000,000 for disputed maintenance costs incurred prior to December 31, 2024. The credit will be provided against the Base Rent in six equal monthly installments of $166,666.67 each, commencing on July 1, 2026.
If the Premises are expanded to include the entirety of the Property, Base Rent will increase to $2,500,000 annually to be paid in monthly installments of $208.333.33.
Security Deposit: $0
Permitted Use: Any use permitted by law
Brokers: None
Revised Exhibit B
Premises
Exhibit is for illustration purposes only. The Property is the approximate area outlined in red.
Landlord currently occupies the areas referenced by the legend as PAUSD and has exclusive rights to the restrooms in Buildings A and B. The remaining areas are the Tenant’s Premises and Common Area.
Exhibit C
Memorandum of Understanding
(see following pages)