CITY COUNCIL
Special Meeting
Monday, May 19, 2025
Council Chambers & Hybrid
4:30 PM
Amended Agenda
Amended agenda items appear below in RED (Time estimates updated)
Palo Alto City Council meetings will be held as “hybrid” meetings with the option to attend by teleconference or in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda.
The meeting will be broadcast on Cable TV Channel
26, live on YouTube
https://www.youtube.com/c/cityofpaloalto
, and streamed to Midpen Media
Center
https://midpenmedia.org
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VIRTUAL PARTICIPATION
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Meeting ID: 362 027 238 Phone:1(669)900-6833
PUBLIC COMMENTS
General
Public
Comment
for
items
not
on
the
agenda
will
be
accepted
in
person
for
up
to
three
minutes
or
an
amount
of
time
determined
by
the
Chair.
General
public
comment
will
be
heard
for
30 minutes.
Additional
public
comments,
if
any,
will
be
heard
at
the
end
of
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agenda.
Public
comments
for
agendized
items
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person
and
via
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for
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to
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minutes
or
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determined
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Chair.
Requests
to
speak
will
be
taken
until
5 minutes
after
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staff’s
presentation
or
as
determined
by
the
Chair.
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submitted
in
advance
to
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will
be
provided
to
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Council
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available
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on
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City’s
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(1)
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type
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handle
objects
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(2)
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hazard;
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TIME ESTIMATES
Listed
times
are
estimates
only
and
are
subject
to
change
at
any
time,
including
while
the
meeting
is
in
progress.
The
Council
reserves
the
right
to
use
more
or
less
time
on
any
item,
to
change
the
order
of
items
and/or
to
continue
items
to
another
meeting.
Particular
items
may
be
heard
before
or
after
the
time
estimated
on
the
agenda.
This
may
occur
in
order
to
best
manage the time at a meeting or to adapt to the participation of the public.
1 May 19, 2025
Materials submitted after distribution of the agenda packet are available for public inspection at
www.paloalto.gov/agendas
.
CALL TO ORDER
SPECIAL ORDERS OF THE DAY (4:30 - 4:45 PM)
1. Proclamation Commemorating the 50th Anniversary of the Palo Alto Fire Department Paramedic Program and EMS Week May 18-24
2. Proclamation Recognizing May 2025 as Foster Care & Resource Parent Awareness Month STUDY SESSION (Item 3: 4:45 - 5:45 PM, Item 4: 5:45 - 6:45 PM)
3. 788-796 San Antonio Road [25PLN-00062]. Request for Council Prescreening to Rezone the Subject Property from Commercial Services to Planned Community/Planned Home Zoning and to Allow Construction of 168 Rental Units in an Eight-Story Structure on a 43,414-Square-Foot (One-Acre) Site. CEQA Status: Not a Project.
4. 800/808-814 San Antonio Road [25PLN-00066]: Request for Council Prescreening to Amend an Existing Planned Community Ordinance (Ordinance 5622) to Allow the Construction of 120 Residential Units and 1,078 Square Feet Commercial Space in a Five- Story Structure on a 38,194-Square-Foot (0.87-Acre) Site. CEQA Status: Not a Project.
AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT (6:45 - 7:15 PM)
Members of the public may speak in-person ONLY to any item NOT on the agenda. 1-3 minutes depending on number of speakers. Public Comment is limited to 30 minutes. Additional public comments, if any, will be heard at the end of the agenda.
COUNCIL MEMBER QUESTIONS, COMMENTS, ANNOUNCEMENTS (7:15 - 7:25 PM) Members of the public may not speak to the item(s).
CLOSED SESSION (7:25 - 9:25 PM)
5. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (Ed Shikada, Kiely Nose, Sandra Blanch, Nick Raisch, Tori Post, Molly Stump, Lauren Lai, Paul Harper, and Jennifer Fine) Employee Organization: Service Employees International Union, (SEIU) Local 521 Hourly Unit, Utilities Management and Professional Association of Palo Alto (UMPAPA), Palo Alto Peace Officers’ Association (PAPOA), Palo Alto Police Management
2 May 19, 2025
Materials submitted after distribution of the agenda packet are available for public inspection at
www.paloalto.gov/agendas
.
Association (PMA), International Association of Fire Fighters (IAFF) local 1319, Palo Alto Fire Chiefs’ Association (FCA); Authority: Government Code Section 54957.6 (a)
AA1.
CONFERENCE WITH LEGAL COUNSEL—POTENTIAL LITIGATION (two cases) Subject: Initiation of litigation in two cases, American Federation of Government Employees v. Trump, US District Court for the Northern District of California, Case No. 25-CV-03698 and City and County of San Francisco v. Trump, US District Court for the Northern District of California,
Case No. 25-CV-01350 Authority: Government Code Section 54956.9(d)(4) New Item
Added
CONSENT CALENDAR (9:25 - 9:30 PM)
Items will be voted in one motion unless removed from the calendar by three Council Members.
6. Approval of Minutes from May 5, 2025 Meeting
7. Climate Action and Sustainability Committee Recommendation to Council to Direct Staff to Develop an Affordable Multi-Family Housing Electrification Grant Program and to Approve a Budget Amendment in the Gas Utility Funds; CEQA Status: Under CEQA Guidelines section 15183, projects consistent with an existing general or comprehensive plan do not require additional CEQA review
Item Removed Off Agenda
8. Approval of Blanket Purchase Order with Olin Finance Company LLC for the Purchase of Bulk Sodium Hypochlorite for the Regional Water Quality Control Plant for a Two-Year Term with an annual amount of $400,000, for a Total Not-to-Exceed Amount of $800,000; CEQA Status – Not a Project
9. Approval of a Lease Agreement with Embarcadero Way Property Owner, L P, c/o BioScience Properties, Inc. for Laboratory and Office Space at 2470 Embarcadero Way for a Period of 20 Years, at an Initial Annual Lease Amount of $1.11 Million Per Year plus Common Area Expenses, and $4.5 million in Tenant Improvements; CEQA Status – Exempt Under CEQA Guidelines Section 15301
AA2.
Approval of the Appointment of Alan Kurotori as Utilities Director New Item Added
10. Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water Purification System project (WQ-19003); Authorization of Contract Contingency
3 May 19, 2025
Materials submitted after distribution of the agenda packet are available for public inspection at
www.paloalto.gov/agendas
.
in an Amount Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View; CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled Water Project (SCH 2011062037) Item Reordered to be
Heard Under Consent Calendar, Supplemental Report added CITY MANAGER COMMENTS (9:30 - 9:45 PM)
BREAK (15 MINUTES)
ACTION ITEMS (Item 11: 10:00 - 11:30 PM)
Include: Report of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Report of Officials, Unfinished Business and Council Matters.
10. Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water Purification System project (WQ-19003); Authorization of Contract Contingency in an Amount Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View; CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled Water Project (SCH 2011062037)
Item Reordered to be
Heard Under Consent Calendar, Supplemental Report added
11. FIRST READING: Adoption of an Ordinance Amending Section 18.42.110 (Wireless Communications Facilities) of Title 18 (Zoning) to Modify the Permit Process and Required Findings for Tier 2 and Tier 3 Wireless Communications Facilities to Require Architectural Review Board review and Repealing the Objective Aesthetic, Noise, and Related Standards for Wireless Communication Facilities in the Public Rights of Way.
ADJOURNMENT
INFORMATION REPORTS
Information reports are provided for informational purposes only to the Council and the public but are not listed for action during this meeting’s agenda.
12. City of Palo Alto Monthly Investment Activity Report for April 2025 (Unaudited)
13. Investment Activity Report for the Third Quarter, Fiscal Year 2025. CEQA Status – Not a Project.
4 May 19, 2025
Materials submitted after distribution of the agenda packet are available for public inspection at
www.paloalto.gov/agendas
.
OTHER INFORMATION
Standing Committee Meetings this week
Finance Committee May 20, 2025 –
Rail Committee May 20, 2025 –
Retail Committee May
21, 2025
Public Comment Letters
Schedule of Meetings
SUPPLEMENTAL/AMENDED AGENDA ITEMS
AA1.
CONFERENCE WITH LEGAL COUNSEL—POTENTIAL LITIGATION (two cases) Subject: Initiation of litigation in two cases, American Federation of Government Employees v.
Trump, US District Court for the Northern District of California, Case No. 25-CV-03698 and City and County of San Francisco v. Trump, US District Court for the Northern District of California,
Case No. 25-CV-01350 Authority: Government Code Section 54956.9(d)(4) New Item Added
7. Climate Action and Sustainability Committee Recommendation to Council to Direct Staff to Develop an Affordable Multi-Family Housing Electrification Grant Program and to Approve a Budget Amendment in the Gas Utility Funds; CEQA Status: Under CEQA Guidelines section 15183, projects consistent with an existing general or comprehensive plan do not require additional CEQA review
Item Removed Off Agenda
AA2.
Approval of the Appointment of Alan Kurotori as Utilities Director New Item Added
10. Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water Purification System project (WQ-19003); Authorization of Contract Contingency in an Amount Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View; CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled Water Project (SCH 2011062037)
Item Reordered to be Heard Under Consent Calendar,
Supplemental Report added
PUBLIC COMMENT INSTRUCTIONS
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5 May 19, 2025
Materials submitted after distribution of the agenda packet are available for public inspection at
www.paloalto.gov/agendas
.
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Meeting ID: 362-027-238 Phone: 1-669-900-6833
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Disability
Act
(ADA)
It
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Alto
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California Government Code §84308
, commonly referred to as the "Levine Act," prohibits an elected official of a local government agency from participating in a proceeding involving a license, permit, or other entitlement for use if the official received a campaign contribution exceeding $500 from a party or participant, including their agents, to the proceeding within the last 12 months. A “license, permit, or other entitlement for use” includes most land use and planning approvals and the approval of contracts that are not subject to lowest responsible bid procedures and have a value over $50,000. A “party” is a person who files an application for, or is the subject of, a proceeding involving a license, permit, or other entitlement for use. A “participant” is a person who actively supports or opposes a particular decision in a proceeding involving a license, permit, or other entitlement for use, and has a financial interest in the decision. The Levine Act incorporates the definition of “financial interest” in the Political Reform Act, which encompasses interests in business entities, real property, sources of income, sources of gifts, and personal finances that may be affected by the Council’s actions. If you qualify as a “party” or “participant” to a proceeding, and you have made a campaign contribution to a Council Member exceeding $500 made within the last 12 months, you must disclose the campaign contribution before making your comments.
6 May 19, 2025
Materials submitted after distribution of the agenda packet are available for public inspection at
www.paloalto.gov/agendas
.
City Council
Staff Report
From: City Manager
Report Type: SPECIAL ORDERS OF THE DAY
Lead Department: Fire
Meeting Date: May 19, 2025
Report #:2504-4484
TITLE
Proclamation Commemorating the 50th Anniversary of the Palo Alto Fire Department Paramedic Program and EMS Week May 18-24, 2025.
ATTACHMENTS
Attachment A: Proclamation Commemorating the 50th Anniversary of the Palo Alto Fire Department Paramedic Program and EMS Week May 18-24, 2025.
APPROVED BY:
Geoffrey Blackshire, Fire Chief
Item 1
Item 1 Staff Report
Item 1: Staff Report
Pg.
1 Packet Pg. 7 of 245
The 50th anniversary of Paramedic Services & EMS Week May 18th, 2025
WHEREAS, the Palo Alto Fire Department began delivering advanced life support (ALS) paramedic services and ambulance transportation services to the City of Palo Alto and Stanford in 1975; and WHEREAS, the Palo Alto Fire Department became one of the first fire departments in California to provide this service to the community; and
WHEREAS, access to quality emergency care dramatically improves the survival and recovery rate of those who experience sudden illness, injury or trauma; and
WHEREAS, National EMS Services Week, originally authorized by President Gerald Ford in 1974, takes place every year on the third week of May (May 18-24, 2025), this year’s theme is “We Care. For Everyone”; and
WHEREAS, those who give outstanding service to Palo Alto and nearby communities, who saves lives through their amazing work and dedication, and who value both family and community, deserve to be recognized; and
NOW, THEREFORE I, Ed Lauing, Mayor of the City of Palo Alto, do hereby commend the Palo Alto Fire Department's paramedic and ambulance program on the occasion of its 50th Anniversary and recognize the life- saving contributions of EMS professionals in the City of Palo Alto.
Presented: May 2025
______________________________
Name
Mayor
Proclamation
Item 1
Attachment A -
Proclamation
Commemorating the 50th
Anniversary of the Palo
Alto Fire Department
Paramedic Program and
EMS Week
Item 1: Staff Report
Pg.
2 Packet Pg. 8 of 245
City Council
Staff Report
Report Type: SPECIAL ORDERS OF THE DAY
Lead Department: City Clerk
Meeting Date: May 19, 2025
Report #:2504-4481
TITLE
Proclamation Recognizing May 2025 as Foster Care & Resource Parent Awareness Month
ATTACHMENTS
Attachment A: Foster Care & Resource Parent Awareness Month Proclamation APPROVED BY:
Mahealani Ah Yun, City Clerk
Item 2
Item 2 Staff Report
Item 2: Staff Report
Pg.
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FOSTER CARE & RESOURCE PARENT AWARENESS MONTH
WHEREAS, the City of Palo Alto is proud to proclaim May 2025 as Foster Care & Resource Parent Awareness Month in Palo Alto. Foster Care & Resource Parent Awareness Month provides a time to recognize that we can all play a vital part in transforming the lives of children and youth in foster care. It is also a time to deeply appreciate our caregivers and raise awareness about the critical need for more committed, nurturing, and consistent families where children in foster care cannot just survive, but truly thrive; and
WHEREAS, in Santa Clara County, over 600 children live in out -of-home care, and approximately half of these children need a stable, loving, and supportive home. While there are currently 151 active foster/resource homes that provide care for these children, there i s still a significant need for more foster/resource families. By becoming a foster/resource family, you can make a positive impact on a child's life and provide them with the safety, stability, and nurturing environment they need; and
WHEREAS, the Santa Clara County Department of Family & Children’s Services recognizes the crucial role of the community in supporting foster/resource families. Throughout the month of May, there are hundreds of community events across the country to appreciate, retain, recruit, and most importantly, support foster/resource parents; and
WHEREAS, all children, regardless of their circumstances, deserve a safe, loving, nurturing, accepting, and consistent place to live. A resource family provides exactly that, a home where a child can focus on just being a child. By opening our hearts and homes, we can help make all the difference in the life of a child in need.
NOW, THEREFORE I, Ed Lauing, Mayor of the City of Palo Alto, on behalf of the entire City Council, do hereby recognize May as Foster Care & Resource Parent Awareness Month in the City of Palo Alto . This is a time for us to come together, raise awareness, and take action to support the children in our community.
Presented: May 19, 2025
______________________________
Ed Lauing
Mayor
Proclamation
Item 2
Attachment A - Foster
Care & Resource Parent
Awareness Month
Proclamation
Item 2: Staff Report
Pg.
2 Packet Pg. 10 of 245
City Council
Staff Report
From: City Manager
Report Type: STUDY SESSION
Lead Department: Planning and Development Services
Meeting Date: May 19, 2025
Report #:2503-4399
TITLE
788-796 San Antonio Road [25PLN-00062]. Request for Council Prescreening to Rezone the Subject Property from Commercial Services to Planned Community/Planned Home Zoning and to Allow Construction of 168 Rental Units in an Eight-Story Structure on a 43,414-Square-Foot (One-Acre) Site. CEQA Status: Not a Project.
RECOMMENDATION
Staff recommends that Council conduct a prescreening and provide informal comments on the applicant’s request to rezone 788 San Antonio Road from Service Commercial (CS) to a Planned Home Zoning (PHZ).1 Comments provided during the prescreening process are not binding on the City nor the applicant.
EXECUTIVE SUMMARY
This prescreening is a request by the applicant to rezone the subject property, which is currently zoned Service Commercial (CS) to Planned Community (PC)/Planned Home Zoning (PHZ).1 The project site consists of two parcels totaling 43,414 square feet, and includes construction of a 189,884-square-foot building with 168 residential rental units. The site currently has an approved planning entitlement for 102 housing units and 1,803 square feet of commercial space. A location map of the proposed site is included in Attachment A.
In accordance with Palo Alto Municipal Code (PAMC) Section 18.79.030(A), a prescreening review is required for legislative changes, including Rezoning, prior to submittal of a formal application. Prescreenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Since this proposal may return to the City Council as a formal application, Councilmembers should refrain from forming firm opinions supporting or opposing the project.
1 Referred to in this report as "Planned Home Zoning" to emphasize the focus on housing as the benefit to the community. PAMC Section 18.38, which outlines the requirement and process for Planned Community (PC) Zoning, remains the underlying code supporting application of this policy.
Item 3
Item 3 Staff Report
Item 3: Staff Report
Pg.
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Following this prescreening, the applicant may choose to file a formal application to amend the zoning for the site. Planned Community Rezoning applications require an initial review by the Planning and Transportation Commission followed by a formal recommendation from the Architectural Review Board, a formal recommendation from the Planning and Transportation Commission, and Council’s final decision as set forth in PAMC Chapter 18.38.
BACKGROUND
On February 3, 2020, Council unanimously endorsed using the Planned Community (referred to here as Planned Home Zoning (PHZ)) for housing and mixed-use housing development projects to help spur housing production. In exchange for deviation from certain standards as allowed under the rezoning, if approved by Council, a PHZ application must meet two initial qualifying criteria established by the City Council: 1) provide 20% of the total units as affordable housing selected from a prescribed menu of options, and 2) provide housing units that meet or exceed the demand generated by any net new jobs.
Approved Entitlement
In 2020 Council approved a four-story, 86,614-square-foot mixed-used project with 102 condominium dwelling units, 1,803 square feet of commercial, and 102 parking spaces (19PLN- 00079). For informational purposes, Attachment D includes a comparison of the required zone standards, the approved entitlement project, and the proposed project. As detailed in the Project Description letter (Attachment C), the applicant states that the approved entitlement is no longer viable, and the property owners desire to build a denser project.2 The planning entitlement is valid through July 6, 2025, and is entitled to an additional 18-month extension in accordance with Assembly Bill (AB) 2729.
Project Description
The preliminary schematic drawings, included in Attachment D, are conceptual, as is appropriate at this stage of project consideration. As shown in these schematic drawings, the applicant is proposing an approximately 189,884-square-foot multi-family residential building with 168 rental units. The units would be a mix of studio (47), one-bedroom (90), and two- bedroom (31). As part of the project, two parcels currently addressed 788 San Antonio Road and 796 San Antonio Road would be merged. The proposed project would have a lot coverage of 29,467 square feet, consistent with the approved entitlement. The footprint of the building complies with the special setbacks.
The proposed development would be eight stories of residential wrapping two levels of above grade parking, with a proposed height of 85 feet. This does not include the height of the rooftop mechanical equipment, which may add up to 15 feet in height and is not included in the 2 The applicant has repeatedly stated that entitled project’s viability was negatively impacted by an increase in Park Impact Fees in 2022. This is incorrect, as the entitled project has never been subject to Park Impact Fees.
Rather, the entitled project is subject to Parkland Dedication In-Lieu fees, which did not experience a similar increase in recent years.
Item 3
Item 3 Staff Report
Item 3: Staff Report
Pg.
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conceptual plans.
A pedestrian entrance to the building would be provided from San Antonio Road. Access to the parking garage would be provided along Leghorn Street from a single entrance/exit. The above- grade parking structure would include 73 parking spaces (.43 spaces per dwelling unit).
Sheet A0.3 compares the proposed development standards to the approved entitlement. This project provides 66 more units than the prior entitlement, in a building with approximately double the floor area.
Surrounding Uses
This property is located within the boundaries of the proposed San Antonio Road Area Plan, as well as the Housing Incentive Program area. It is adjacent to the approved projects at 800 San Antonio Road (which also recently applied for a new prescreening) and 824 San Antonio Road to the north, as well as a proposed builder’s remedy development at 762 San Antonio Road. In addition to those projects, other nearby zoning and uses include other CS zoned parcels to the north (Enterprise and Hertz car rentals) and south (service station). To the west, across San Antonio Road, are commercial uses within the GM Zone District, and a multi-family residential use within a PC zone (the Greenhouse) at the intersection of Leghorn and San Antonio Road.
The property abuts industrial land uses in the City of Mountain View to the east. Adjacent buildings are generally single-story buildings; however, the approved and pending residential projects are four-to-seven stories tall.
ANALYSIS
Staff will prepare a thorough analysis of the Zoning Code and Comprehensive Plan compliance upon submittal of a formal application, if filed. A review of the conceptual plans, below, summarizes staff’s preliminary review of the proposal and highlights key policy considerations associated with the applicant’s request.
Comprehensive Plan Compliance
The Comprehensive Plan designation is Service Commercial. High-density housing is identified as an allowed use in some locations within this land use designation. These properties are not Housing Element sites; however, the approved project is included as 102 “Entitled Units” in the City’s 2023–2031 Housing Element to demonstrate the adequacy of the Residential Sites Inventory. While the properties contributed to the City’s planned capacity to meet its Sixth Cycle RHNA obligations, no RHNA credit has been claimed, as such credit is only granted upon building permit issuance. The newly submitted application, which includes 66 additional units beyond the previous entitlement, would increase the City's available site capacity buffer.
San Antonio Road Area Plan
The San Antonio Road Area Plan was initiated by the City Council on March 10, 2025, and is Item 3
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scheduled to be completed in late 2027/early 2028. It is currently in the initial stages of community outreach and assessing current conditions. The plan will seek to transform 275.3 acres along the Palo Alto and Mountain View border, creating an opportunity for cohesive mixed-use neighborhoods with safe access to transportation, employment, community services, and recreation. This will be achieved by a holistic approach to the plan area, including examining allowed land uses, increasing housing capacity, and improving mobility and interconnectivity within the plan area, as well as to the San Antonio CalTrain station and city amenities such as the Cubberley Community Center and Baylands Nature Preserve. To allow the plan the maximum flexibility in designing streets, bikeways, sidewalks, and related facilities to meet the demands of existing and new residents and visitors, it is important to maintain the existing special setbacks along San Antonio Road as much as possible during this time prior to plan adoption by the City Council.
Council may consider how the pending area plan may impact this project, and vice versa. Major considerations include transportation improvements and placemaking needs within the easement area and public right of way.
Zoning Compliance
In 2020 as a part of the original planning entitlement, Council amended the Zoning Code to encourage housing within several blocks of San Antonio Road, and modified the Palo Alto Municipal Code (Ordinance 5512) to enable the Housing Incentive Program (HIP) to apply to housing projects within these blocks. This code was updated in April 2024. The HIP incentives include a 2.0 FAR, no maximum density or lot coverage, and reduced parking requirements.
For PHZ rezoning projects, Council has the authority to set the parameters for most development standards, which would be reflected in the tailored ordinance for the new PHZ District. However, for informational purposes, Attachment B compares the development standards under the current CS zone district with HIP with the proposed project in order to assist Council in considerations of how these deviations relate to the proposed public benefits of the project.
In comparison to the existing zoning, the applicant is requesting that the new PHZ zone allow for the following. A full zoning code comparision is in Attachment B:
•A 3.31:1 Floor Area Ratio (FAR) where 2.0 FAR is allowed (as a housing incentive program compliant project);
•85 foot height where 50 feet is allowed;
•100 square feet per unit of private and common useable open space where 150 square feet per unit is required;
•No commercial space, where 1,500 square feet of commercial open space is required; •73 parking spaces where 199 parking spaces are required; Item 3
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•The project currently does not include a loading space, where one is required for multi- family buildings with 50 or more units. The loading space is intended to serve ride share vehicles, delivery vehicles, and moving trucks.
The project is also encouraged to meet the Objective Design Standards in PAMC Chapter 18.24.
Some notable diviations from the Objective Standards include:
•The building massing is not stepped back where it is more than 20 feet taller the average height of an adjacent building. This step back would start within two vertical feet of the height of the adjacent building. The step back would be a minimum depth of six feet along both the façade on the primary building frontage and the facing façade of the adjacent building, and the step shall occur for a minimum of 70% of each façade length.
•Privacy requirements within 30 feet of a residential use (800 San Antonio), including landscape screening, obscured glazing, angled or high silled windows, etc. •The building lacks façade articulation at least 4 feet deep that extends the full height of the building.
•Certain streetscape improvements such as street trees and bike racks may need additional consideration with the San Antonio Road Area Plan.
Special Setback
This project fully complies with the 24-foot San Antonio Road Special Setback and the 25-foot Leghorn Street Special Setback.
Height
The 85-foot proposed height is significantly taller than other buildings in the area, and is taller than the proposed Builder’s Remedy project at 762 San Antonio Road. The project complies with the required CS setbacks, including a proposed 10-foot setback from the 800 San Antonio Road site. A building of this height in this context might be expected to provide stepbacks on the upper floors to transition from the neighboring building height(s).
Floor Area Ratio (FAR)
The proposed FAR of 3.31 is more than the allowed FAR of 2.0 in the CS Zone.
Special Standards
The project would be subject to the special standards for PCs as set forth in PAMC Section
18.38.150, as a result of it now being adjacent to a residential PC. This condition did not exist when the project was previously entitled. The proposed project exceeds the 50-foot height limit, and the code would require, unless modified by the PC ordinance, landscape screening adjacent to 800 San Antonio. Other special requirements for setbacks and daylight plane are met as shown in the conceptual plan.
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Multi-Modal Access & Parking
Valley Transit Authority (VTA) bus line 21 and ACE transit orange line are the nearest bus lines to the project site. The San Antonio Road Caltrain Station is located approximately 1.4 miles from the project site. This project has not yet been analyzed for consistency with the City’s Bicycle and Pedestrian Transportation Plan and other transportation policies such as Council’s Local Transportation Impact Analysis Policy adopted on June 15, 2019 (CMR 11256). This analysis would be conducted as a part of any formal application and reviewed by the Office of Transportation.
Parking
The building would include two levels of above-grade parking. Access to the parking garage would be provided from Leghorn Street from a single entrance/exit, consistent with the prior approval. The parking garage would include 73 stalls. Under the Zoning Code, 199 stalls would be required based on the sizes of the housing units, representing a 63% reduction. While the code allows for up to a 30% maximum reduction using combined measures such as a Transit Demand Management Plan, off site parking, or other measures, a 63% reduction would not be allowed under the zoning code without approval of a PHZ application.
Bicycle parking is currently shown within the ground level parking garage, with access from within the garage and outside of the building in the utility corridor. The proposed bike parking area holds 132 bikes, where 199 long term bike spaces is required. The bike room meets or can be designed to meet the requirements of a Restricted-Access Bicycle Enclosure as defined in PAMC 18.54.060(a)(2)(B). Eighteen short term bicycle racks will also be available.
Inclusionary Requirement and Jobs Housing Imbalance
The intent of limiting PHZ projects to residential and residential mixed-use is to address the job/housing imbalance. PHZ projects are required to provide more housing than jobs on site. As this is a 100% residential project, no new jobs would be created.
The project is required to provide 20% of the units at Below Market Rate at an average of 80% AMI in accordance with Council’s requirements for projects seeking to rezone using the PHZ process. The applicant is currently proposing 15% (24 unit) at an unspecified affordability level.
While the entitled project was for condominiums, the proposed project is for rental units. A rental project is not required by code to provide BMR units on site, and could instead pay development impact fees, however the established PHZ requirements include 20% of the 120 units (24 units) be provided onsite as BMR units, per the set formula.
POLICY IMPLICATIONS
Pre-screenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Therefore, informal comments from Councilmembers would not impact policy.
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The San Antonio Road Area Plan is also in its initial planning stages. The projects that are pending or approved during the preparation of the plan may impact some of the policies of the plan.
FISCAL/RESOURCE IMPACT
The proposed project would eliminate planned ground-floor retail space, resulting in the loss of potential sales tax revenue. However, the increase in residential units would likely generate higher property tax revenue.
The prescreening and any future formal application are funded by applicant fees. The project would also be subject to impact fees to address its effects on public services and infrastructure.
STAKEHOLDER ENGAGEMENT
The Palo Alto Municipal Code requires notice of this public hearing be published in a local paper and mailed to owners and occupants of property within 600 feet of the subject property at least ten days in advance. Notice of a public hearing for this project was published in the Daily Post on May 9, 2025, which is 10 days in advance of the meeting. Postcard mailing occurred on May 7, 2025, which is 12 days in advance of the meeting.
As of the writing of this report no project-related public comments were received. The prior entitlement also included the HIP Ordinance. At those public hearings, there were comment letters in support, and well as a couple expressing concern about vehicle circulation and traffic on San Antonio Road. These comments noted that San Antonio Road does not have bus service, lacks bike safety features, and is gridlocked at certain times of day.
ENVIRONMENTAL REVIEW
The prescreening is a preliminary review process in which Councilmembers may provide comment, but no formal action will be taken. Therefore, no review under the California Environmental Quality Action (CEQA) is required at this time. A full review in accordance with CEQA would be initiated with the formal filing of a development application.
ATTACHMENTS
Attachment A: Location Map
Attachment B: Zoning Comparison
Attachment C: Applicant’s Description Letter
Attachment D: Project Plans
APPROVED BY:
Jonathan Lait, Planning and Development Services Director Item 3
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4062
808-
814
796
800
809
777
790
801
799
797
795
821
815
824
816
788
780
762
760
4074
SAN ANTONIO ROAD
LEGHORN STREET
CS
CS (AD)
This map is a product of the
City of Palo Alto GIS
This document is a graphic representation only of best available sources.
Legend
Special Setback Frontages
Park
School
abc Building Roof Outline
Underlying Lot Line
abc Easement
abc Lot Dimensions
Zone Districts
abc Zone District Labels
City Jurisdictional Limits:
Palo Alto City Boundary
Tree
Highlighted Features
0' 73'
Attachment A
Location Map
788-796 San Antonio Road
CITY OF PALO ALTO
I
N
C
O R P O R A
T
E
D
CAL I FORN IA
P a l o A l t o
T h e C i t y o f
A
P
R
I L 1 6 1
8 9
4 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2016 City of Palo Alto ekallas, 2025-04-30 08:22:38
(\\cc-maps\Encompass\Admin\Personal\Planning.mdb)
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Attachment A - Location
Map
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ATTACHMENT B
ZONING COMPARISON TABLE
788 San Antonio Road, 25PLN-00062
Table 1: COMPARISON WITH CHAPTER 18.16 (CS DISTRICT)
Residential Development Standards
Regulation CS w/HIP Zoning 19PLN-00079 Proposed PC
Minimum Site Area, width and
depth
None APN 147-03-041 (788
San Antonio Road):
22,622 sf
APN 147-03-043 (796
San Antonio Road):
21,267 sf
Resulting parcel:
43,414 sf
.99 acre
No change
Minimum Front Yard (Leghorn
Street)
Street Side Yard (San Antonio
Road)
24 feet special setback 25 feet 26 feet
Rear Yard 10 feet for residential
portion of proposed
project; none for
commercial
10 feet No change
Interior Side Yard None 10 feet No change
Min. yard for lot lines abutting
or opposite residential
districts or residential PC
districts
10 feet (2) Complies/Not
applicable
Complies adjacent to
the 800 San Antonio
PC
Max. Site Coverage 50% (21,707 sf)
Or as approved by the
Director of PDS as a
part of a discretionary
review under the HIP.
67.9% (29,467 sf) 67.9% (29,467 sf)
Max. Building Height 50 feet 49 feet 5 inches 85 feet
PC Special Requirements for
height
50 ft when adjacent to
RM-30, RM-40, 35 ft
when adjacent to RE,
R-1, R-2, RMD, RM, or
PC
Complies/Not
applicable
85 feet
Daylight Plane for lot lines
abutting one or more
residential zone districts other
than an RM-40 or PC Zone
None, as this site is not
abutting a residential
zone (6)
Not Applicable Not Applicable
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Comparison
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PC Special Requirements for
Daylight Plane
Non-residential uses
abutting any RE, R-1, R-
2, RM or any
residential PC district –
10 ft and a 3:6 slope
For >60% residential
PC, the daylight planes
may be identical to the
daylight plane
requirements of the
most restrictive
residential district
abutting the site
Not Applicable Not Applicable
Residential Density 30 du/ac per CS Zone
No maximum density
per Housing Incentive
Program
102 DU/AC
(102 units proposed)
168 DU/AC
(168 units proposed)
Maximum Floor Area for HIP 2.0:1, inclusive of a
minimum of 1,500 sf
commercial area
(86,828 square feet)
2.0:1 (86,614 sf total)
2.98:1 (84,811 sf
Residential)
0.02:1 (1,803 sf
Commercial)
3.3:1 (189,884 sf total)
0 commercial
proposed
Minimum Useable Open Space 150 sf per unit Common Open Space Provided: 6,587 sf or
64.6 sf per unit
Combined Total Private
Balcony Open Space:
8,788 sf or 86.2 sf per
unit
Average total per unit
meets 150 sf min sf
Common Open Space
Provided: 6,474 sf or
38.5 sf per unit
Private Open Space:
12,864 sf or 77 sf per
unit
Average total per unit
100 sf
Minimum Mixed-use Ground
Floor Commercial FAR
1,500 sf (c) 1,803 sf 0 sf
(1) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard.
(2) Any minimum front, street side, or interior yard shall be planted and maintained as a landscaped screen excluding areas required for access to the site. A solid wall or fence between 5 and 8 feet in height shall be constructed along any common interior lot line. (6) The initial height and slope shall be identical to those of the most restrictive residential zone abutting the site line in question. (c) A high-density residential or mixed-use project in the CS zone district, but not within the Ground Floor (GF) or Retail (R) combining districts, shall be required to replace only 1,500 square feet of an existing Retail or Retail-Like use. For the purposes of this partial exemption, high-density shall mean 30 or more dwelling units per acre.
Table 2: CONFORMANCE WITH CHAPTER 18.52 (Off-Street Parking and Loading) for Existing Commercial and Proposed Residential*
Type Required 19PLN-00079 Proposed
Vehicle Parking 1/1-bedroom unit 126 spaces required
126 spaces provided
199 spaces required
73 proposed
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Comparison
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2/2-bedroom or larger
unit
No parking required for
commercial
Bicycle Parking 1 LT space per unit
.1 ST space per unit
102 LT and 12 ST
required
102 LT and 18 ST
provided
199 LT and 20 ST
required
132 LT and 18 ST
proposed
Loading Space 1, for residential
structures with >50
units
Not applicable at time
of approval
None proposed
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CHARLOTTE 4601 Park Road, Charlotte, NC 28209 T. 704 372 5616 F. 704 372 9882 CARY 117 Edinburgh S Drive, Cary, NC 27511 T. 919 461 3950 F. 919 461 3939 WINSTON -SALEM 500 W 5th Street, Winston-Salem, NC 27101 T. 336 923 7650 F. 336 777 0624 ATLANTA 47 Perimeter Center East, Atlanta, GA 30346 T. 770 604 3387 F. 770 604 3959 grubbproperties.com
Grubb Properties, LLC
4601 Park Road, Suite 450
Charlotte, NC 28209
March 06, 2025
Jonathan Lait, Director of Planning
Planning and Community Environment Department
250 Hamilton Avenue
Palo Alto, CA 94301
[email protected]
RE: Pre-Screen Application for 788 San Antonio Road Project
Dear Mr. Lait,
On July 27, 2022, Grubb Properties acquired the pro perty located at 788 San Antonio Road with an exist ing entitlement in place for that certain 102-unit hous ing project that was approved by City Council on 11 /16/2020.
Since that acquisition, Grubb made a good faith eff ort to see that project through as entitled and sub mitted the building permit application that December 2022. In April 2023, we made the tough decision to put this project on hold as it was no longer economically viable. This was the result of three key factors:
1. Extreme Rate Hike in Park Impact Fees that went int o effect in 2022. This project’s feasibility and subsequent design were decided at a time when these fees were at the highest $4,116/unit ($419,832 total).
In 2022, the new rate hike went into effect increas ing the rate to $42,468/unit ($4,331,736 total). Th ese fees are now $48,302.43 per unit, representing an increase of $4,507,015 on this single impact fee.
2. Worsening Economic Conditions in Construction Costs. In the aftershock of Covid, construction escalation jumped to 14% in 2021 followed by 15.8% in 2022 - t he highest escalation on record in decades. On top of the unprecedented escalation, The Fed has sustained it’s high-interest rate policy making the cost of capital for housing projects prohibitively expensive.
3. Structural Design Modifications for Sub-grade Parki ng. As the team progressed through the permitting phase of the existing 102-unit project, the structural design of the subgrade parking garage was required to be enhanced to accommodate the groundwater conditio ns present. While this parking was originally budgeted at $70,000 per stall, a typical cost for subterranean parking, the required structural modifications increased the cost to $110,000 per stall. With 126 parking stalls, this represents a $5,040,000 increa se to cost.
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Applicant’s Description
Letter
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grubbproperties.com
Grubb is submitting a new project application that responds to these factors outlined and represents a feasible housing project in the year 2025. Increased building height, increased FAR, and reduction to parking ratios are the core aspects of the modification requested. Despite Builder’s Remedy being an available avenue for us, Grubb never felt this was the appropriate pathway for our project as our intent is to move forward in partnership with Palo Alto.
As you begin the process of crafting the San Antonio Road Area Plan, our intent is to work in collaboration with you for the broader vision of this area while upholding our needs as a Stakeholder in its future. We understand that this project requires bold change from the City of Palo Alto; however, the requested changes are deeply rooted in our shared commitment to contribute meaningfully to the Housing Goals of this community.
We look forward to bringing 788 San Antonio Road back to life.
Sincerely,
Megan Watson
Senior Director, Grubb Properties
[email protected]
CC: Ted O’Hanlon, Consulting Project Manager
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Applicant’s Description
Letter
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Project Description - 788 San Antonio Road
Scope - The request for the City Council Pre-Screen is to review an updated 168 rental unit plan, with 8 floors above grade consisting of a 2 story podium of mixed indoor parking with 73 car stalls, amenities and residential units and 6 U-shaped floors on top of residential units providing an open court yard in the middle, with maximum heights of 85'-0".
Uses - The property currently has 2 vacant commercial/light industrial buildings on a 1-acre parcel. In 2020 the property was approved to build a 50’ high multi-family project with 102 total units on 4-levels and a 2-level subterranean garage. The proposed use of 68 units would consist of (31) 2-bedroom/2 bath units, (90) 1-bedroom units and (47) studios. As required by the City, 15% of these (25 units) will be designated for Below-Market Rate qualified users or an in-lieu fee would be paid.
Purpose of Change - The 788 San Antonio Road project was the “catalyst” project for the Housing Incentive Program (HIP). The project was approved in 2020 using the HIP program from 2019, which presently is no longer feasible due to several market changes:
• Increased construction costs (materials, labor, and below-grade parking) • Higher interest rates that create more significant financing burdens • Significant increases in Developer Impact Fees implemented in 2021, for example, park impact fees increased 10x
• The need, call and demand for more housing in a new housing element cycle with new state laws promoting housing development as well as Palo Alto’s own focus on housing Design, Materials, Landscaping, Lighting – The 2020 project was approved for 102 units by Palo Alto Architectural Review Board including a final Subcomittee review. While the new project proposes more units, height and above grade parking, the intent of the project is to maintain the approved design intent, materials, colors and construction methods.
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Applicant’s Description
Letter
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If you need assistance reviewing the above documents, please contact the Project Planner or call the Planner-on-Duty at 650-617-3117 or email [email protected]
Project Plans
In order to reduce paper consumption, a limited number of hard copy project plans are provided to Council members for their review. The same plans are available to the public, at all hours of the day, via the following online resources.
Directions to review Project plans and environmental documents online:
1. Go to: bit.ly/PApendingprojects
2. Scroll down to find “788 San Antonio” and click the address link
3. On this project-specific webpage you will find a link to the project plans and other important information
Direct Link to Project Webpage:
https://www.paloalto.gov/Departments/Planning-Development-Services/Current-Planning/Projects/788-San- Antonio-Road-Pre-screening
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Plans
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City Council
Staff Report
From: City Manager
Report Type: STUDY SESSION
Lead Department: Planning and Development Services
Meeting Date: May 19, 2025
Report #:2503-4400
TITLE
800/808-814 San Antonio Road [25PLN-00066]: Request for Council Prescreening to Amend an Existing Planned Community Ordinance (Ordinance 5622) to Allow the Construction of 120 Residential Units and 1,078 Square Feet Commercial Space in a Five-Story Structure on a 38,194-Square-Foot (0.87-Acre) Site. CEQA Status: Not a Project.
RECOMMENDATION
Staff recommends that Council conduct a prescreening and provide informal comments on the applicant’s request to amend Ordinance 5622 and the Associated Development Plan, rezoning the subject properties. Comments provided during the prescreening process are not binding on the City nor the applicant.
EXECUTIVE SUMMARY
This prescreening is a request by the applicant to amend Ordinance 5622 (which rezoned the subject properties at 800 and 808-814 San Antonio Road to Planned Community (PC)-5622) and the associated Approved Development Plan to allow 120 residential units and a 1,078-square- foot commercial space, where 75 residential units and a 1,078-square-foot commercial space are allowed. The proposed project would maintain an approximately the same building envelope and site plan as the Approved Development Plan, but would reduce the size of the residential units and increase the parking by extending the footprint of the garage into the building setbacks. A location map of the project site is included in Attachment A.
In accordance with Palo Alto Municipal Code (PAMC) Section 18.79.030(A), a prescreening review is required for legislative changes, including Rezoning, prior to submittal of a formal application. Prescreenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Since this proposal may return to the City Council as a formal application, Councilmembers should refrain from forming firm opinions supporting or opposing the project.
Following this prescreening, the applicant may choose to file a formal application to amend the PC Zone District for the site. Planned Community Amendments follow the same process as the initial Planned Community Rezoning and require an initial review by the Planning and Item 4
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Transportation Commission followed by a formal recommendation from the Architectural Review Board, a formal recommendation from the Planning and Transportation Commission, and Council’s final decision as set forth in PAMC Chapter 18.38.
BACKGROUND
On February 3, 2020, Council unanimously endorsed using Planned Community (also referred to herein as Planned Home Zoning [PHZ]1) for housing and mixed-use housing development projects to help spur housing production. In exchange for deviation from certain standards as allowed under the rezoning, if approved by Council, the project must include at least 20% of the housing units as deed restricted for lower income households.
Prior Entitlement
On May 6, 2024, Council approved a PHZ application to rezone the subject properties from Commercial Services (CS) to PC-5622. The Approved Ordinance and Development Plan allow 75 units and a 1,078-square-foot commercial space in an 114,888-square-foot, five story building, with 148 underground parking spaces. This included 7 one-bedroom, 52 two-bedroom, and 16 three-bedroom condominiums. Although the planning entitlement is still valid, the applicant has expressed that project as approved is no longer viable and that these modifications would be necessary to make the project viable. The approved project proposed condominiums, though the applicant has not yet submitted the required subdivision application to merge the parcels and to create the condominium units.
The approved application included the following public benefits:
•BMR units in excess of the minimum required (6 units provided at a rate affordable to very low income households, five units affordable to low income households, and 4 units affordable to moderate income households;
•Retail commercial space on the ground floor;
•Space for future expansion of bicycle and pedestrian infrastructure along San Antonio Road (including granting of an easement).
Project Description
The preliminary schematic drawings, included in Attachment F, are conceptual, as is appropriate at this stage of project consideration. As shown in these schematic drawings, the applicant is proposing an approximately 114,888-square-foot multi-family residential building with 120 residential units and 1,078 square feet of commercial space. The unit mix would include 23 studios, 41 one-bedroom, 50 two-bedroom, and six three-bedroom. Consistent with the prior project, the two parcels addressed 800 San Antonio Road and 808-814 San Antonio Road would be merged to create a 38,194-square-foot (0.87-acre) site, however, the applicant is not proposing to subdivide this project into condominiums. The development would include five stories of residential units above a two-story below grade parking garage, with a proposed 1 Referred to in this report as "Planned Home Zoning" to emphasize the focus on housing as the benefit to the community. PAMC Section 18.38, which outlines the requirement and process for Planned Community (PC) Zoning, remains the underlying code supporting application of this policy.
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height of 55 feet, consistent with the approved project.
A pedestrian entrance to the building would be provided from San Antonio Road. The building increases the proposed number of parking spaces from 148 spaces to 179 spaces. Access to the parking garage would continue to be provided from San Antonio Road. The prior approval included protrusions of the below grade garage beyond the footprint of the proposed building.
This project further encroaches into the setbacks on all four sides of the building, to accommodate the increase in parking spaces. This includes below-grade encroachment into the Special Setback on San Antonio Road, however the amount is not dimensioned on the plans.
Category Prior Entitlement
(Approved 2024)
Proposed Project
(Prescreening Stage)
Total Residential
Units 75 units 120 units
Unit Mix 7 one-bedroom, 52 two-bedroom, 16 three-
bedroom (all condominiums)
23 studios, 41 one-bedroom, 50 two-
bedroom, 6 three-bedroom (rentals)
Parking Spaces 148 underground spaces 179 underground spaces Parking Layout Encroachments beyond building footprint Increased encroachments on all four sides, including Special Setback
Commercial
Space 1,078 square feet 1,078 square feet
Building Height 55 feet (5 stories above 2-level garage) 55 feet (5 stories above 2-level garage)
Site Size 38,194 sf (0.87 acres), merged parcels Same
Public Benefits
- 15 BMR ownership units at various income
levels - Ground-floor retail - Easement for
future bicycle/pedestrian infrastructure
Not specified (20% at 80% AMI
required)
Setback
Encroachments
Below-grade garage protrusions only,
including within the San Antonio Road Special
Setback
Further below-grade garage
encroachments into all setbacks,
including San Antonio Road special
setback
Application
Status
Approved PHZ and zoning (PC-5622), but
subdivision map not submitted Preliminary prescreening submitted Surrounding Uses
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This property is located within the boundaries of the proposed San Antonio Road Area Plan, as well as the Housing Incentive Program area. It is adjacent to the approved mixed-use project at 788 San Antonio Road (which also recently applied for a new prescreening) and the proposed project at 762 San Antonio Road to the south, as well as a Hertz car rental and the approved 824 San Antonio Road to the north. To the West, across San Antonio Road, are commercial uses within the general manufacturing (GM) Zone District, including a biomedical use, Immune-Onc Therapeutics, immediately across the street, and a multi-family residential use within a Planned Community Zone district (the Greenhouse residential development) at the intersection of Leghorn and San Antonio Road. Adjacent buildings are generally single-story buildings; however, the approved and pending residential projects vary between four and eight stories tall.
ANALYSIS
Staff will prepare a thorough analysis of the Zoning Code and Comprehensive Plan compliance upon submittal of a formal application, if filed. A review of the conceptual plans, however, summarizes staff’s preliminary review of the proposal and highlights key policy considerations associated with the applicant’s request.
Comprehensive Plan Compliance
The Comprehensive Plan designation is Service Commercial. High-density housing is identified as an allowed use in some locations within this land use designation.
The 2023-2031 Housing Element includes the 75 approved units as “Entitled Units” to demonstrate the adequacy of the Residential Sites Inventory. While the properties contributed to the City’s planned capacity to meet its Sixth Cycle RHNA obligations, no RHNA credit has been claimed, as such credit is only granted upon building permit issuance. The newly submitted application, which includes 45 additional units beyond the previous entitlement, would increase the City's available site capacity buffer.
San Antonio Road Area Plan
The San Antonio Road Area Plan was initiated by the City Council on March 10, 2025, and is scheduled to be completed in late 2027/early 2028. It is currently in the initial stages of community outreach and assessing current conditions. The plan will seek to transform 275.3 acres along the Palo Alto and Mountain View border, creating an opportunity for cohesive mixed-use neighborhoods with safe access to transportation, employment, community services, and recreation. This will be achieved by a holistic approach to the plan area, including examining allowed land uses, increasing housing capacity, and improving mobility and interconnectivity within the plan area, as well as to the San Antonio CalTrain station and city amenities such as the Cubberley Community Center and Baylands Nature Preserve. To allow the plan the maximum flexibility in designing streets, bikeways, sidewalks, and related facilities to meet the demands of existing and new residents and visitors, it is important to maintain the existing special setbacks along San Antonio Road as much as possible during this time prior to plan adoption by the City Council.
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Council may consider how the pending area plan may impact this project, and vice versa. Major considerations include transportation improvements and placemaking needs within the easement area and public right of way.
Zoning Compliance
On May 6, 2024, Council approved Ordinance 5622, rezoning the subject properties from CS to PC. Therefore, the existing zoning of the parcel is PC-5622. This zone district allows for 75 multi- family residential units and a 1,078-square-foot ground floor commercial retail space. The proposed PC amendment would rezone the subject properties and the associated development plan to maintain the commercial space and allow 120 multi-family residential units. Although the floor area ratio did not increase, the density increases by 60%. Council may wish to consider if this is an appropriate density.
Attachment B includes the required development standards from the prior CS zone district and the approved PC-5622 and compares these to the proposed project.
The project proposes the same above-grade footprint and height. However the interior divides the space into more, smaller dwelling units. Because the exterior is unchanged, some units would not have the required open space. This would be a requested deviation from the approved development plan. The schematic plans show a larger portion of the roof would now be dedicated as roof deck space, however the plans to do not specify the total square footage; therefore the total square feet proposed is unclear.
Multi-Modal Access & Parking
Valley Transit Authority (VTA) bus line 21 and ACE transit orange line are the nearest bus lines to the project site. Consistency with the City’s Bicycle and Pedestrian Transportation Plan is assumed as the project is not substantially different from the prior project as it relates to street connectivity for bicyclists and pedestrians.
Parking
The building would include two levels of below-grade parking. Access to the parking garage would be provided from San Antonio Road from a single entrance/exit, consistent with the prior approval. The parking garage would include 179 stalls. Under the PC Ordinance, 148 parking spaces is required for the 75 units and 1,078 square feet of commercial space, where 144 would have otherwise been required under the CS Zoning. The proposed project includes 179 spaces where 148 spaces would be required under the previous CS and HIP Zoning.
The prior approval included protrusions of the below grade garage beyond the footprint of the proposed building. This project further encroaches on all four sides of the building, to accommodate the increase in parking spaces, however this encroachment is not dimensioned on the plan set. Staff recommends the project utilize the HIP parking requirement, as the parking garage would not require further protrusion into the San Antonio Road Special Setback.
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Bicycle parking is currently shown on the ground level, adjacent to the lobby, consistent with the prior approval. The number of bike racks is increased to accommodate 120 long term spaces as required by the Zoning Code.
Refuse
The proposed plan show trash staging in the same configuration as the approved plans.
However, with the increase in units, Staff anticipates an increase in service frequency to three times a week. This would mean the bins would be out on the San Antonio Road frontage more often than under the current approval. It may be possible to increase bin size rather than increase service frequency. This would be further analyzed as a part of a formal application.
Public Benefits
The proposed project modifies the previously approved public benefits of the project. The public benefits under the new proposal would include:
•24 BMR units with an average affordability to 80% AMI; •Space for future expansion of bicycle and pedestrian infrastructure along San Antonio Road (including granting of an easement);
Inclusionary Requirement and Jobs Housing Imbalance
The intent of focusing the use of PC projects to residential and residential mixed-use is to address the job/housing imbalance. PHZ projects are required to provide more housing than jobs on site. As this is a 100% residential project, no new jobs would be created.
The approved project provided 20% of the units (15 units) at Below Market Rate in accordance with Council’s requirements for projects seeking to rezone using the PHZ process. This included six units affordable to Very-Low Income households, five units affordable to Low Income households, and four units affordable to Moderate Income households. While it is not listed formally as a public benefit, Council had noted that these units were a great opportunity for families, since it included 10 two-bedroom units and three three-bedroom units. The applicant did not provide information on how the affordability would change under the new proposal, outside of noting that the PHZ project requires 20% of the units to be provided at below market rates.
As a part of proposing additional units, the owner has expressed the intent to rent these units instead of selling them as condominiums. The owner has since expressed that they are considering all options, including rental, condo, or to do a condominium subdivision, and rent the units while preserving the right to sell at a later date. A rental project that is not subdivided is not required by code to provide BMR units on site, and could instead pay development impact fees, however the established PHZ requirements include 20% of the 120 units (24 units) be provided onsite as BMR units, per the set formula.
POLICY IMPLICATIONS
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Prescreenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Therefore, informal comments from Councilmembers would not impact policy. That said, there is interest among other home builders and property owners to learn of the Council’s initial reaction to the subject request, which may influence the filing of future prescreening requests.
The San Antonio Road Area Plan is also in its initial planning stages. The projects that are pending or approved during the preparation of the plan may impact some of the policies of the plan.
FISCAL/RESOURCE IMPACT
The prescreening and processing of any formal application, if filed, are funded by applicant fees. The project would also be subject to development impact fees to offset impacts on public services and infrastructure.
STAKEHOLDER ENGAGEMENT
The Palo Alto Municipal Code requires notice of this public hearing be published in a local paper and mailed to owners and occupants of property within 600 feet of the subject property at least ten days in advance. Notice of a public hearing for this project was published in the Daily Post on May 9, 2025, which is 10 days in advance of the meeting. Postcard mailing occurred on May 7, 2025, which is 12 days in advance of the meeting.
As of the writing of this report, one project-related public comment was received (Attachment E). In it, the resident expressed disappointment that the project was changing from ownership to rental.
ENVIRONMENTAL REVIEW
The prescreening is a preliminary review process in which Councilmembers may provide comment, but no formal action will be taken. Therefore, no review under the California Environmental Quality Action (CEQA) is required at this time. A full review in accordance with CEQA would be initiated with the formal filing of a development application.
ATTACHMENTS
Attachment A: Location Map
Attachment B: Zoning Comparison
Attachment C: Approved PC Ordinance 5622
Attachment D: Public Comments
Attachment E: Applicant’s Description Letter
Attachment F: Project Plans
APPROVED BY:
Jonathan Lait, Planning and Development Services Director Item 4
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FABIAN STREET
SAN ANTONIO ROAD
LEGHORN STREET
EAST CHARLESTON ROAD
SAN ANTONIO ROAD
CO
M
ME
RCIAL STREET
EAST CHARLESTON ROAD
CS
CS(A
PC-2711
4918
This map is a product of the
City of Palo Alto GIS
This document is a graphic representation only of best available sources.
Legend
Special Setback
abc Known Structures
Tree (TR)
Zone Districts
Project Site
0' 181'
Attachment A:
Project Site
CITY
OF PALO ALTO
I
N
C
O R P O R A
T
E
D
CAL I FORN IA
P a l o A l t o
T h e C i t y o f
A
P
R
I L
1 6
1 8
9 4
The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto chodgki, 2022-06-13 16:24:25
(\\cc-maps\Encompass\Admin\Personal\Planning.mdb)
Mountain View
GM
PC-2711
Item 4
Attachment A - Location
Map
Item 4: Staff Report
Pg.
8 Packet Pg. 33 of 245
ATTACHMENT B
ZONING COMPARISON TABLE
800 San Antonio Road, 25PLN-00066
Table 1: COMPARISON WITH CHAPTER 18.16 (CS DISTRICT)
Residential Development Standards
Regulation Prior CS w/HIP Zoning
(For reference only)
Entitled PC
22PLN-00129
Proposed PC
Minimum Site Area, width and
depth
None APN 147-03-038 (800
san Antonio Road):
18,719 sf
APN 147-03-043 (808-
814 San Antonio Road):
19,475 sf
Resulting parcel:
38,194 sf
0.88 acres
No change
Minimum Front Yard 24 feet special setback 24 feet special setback No change Rear Yard 10 feet for residential
portion of proposed
project; none for
commercial
10 feet
Some corners of
balconies protrude 2”-
1’11”. Protrusion is
allowed per CS zoning
in the rear setback.
No change
Interior Side Yard None 5 feet both sides No change
Min. yard for lot lines abutting
or opposite residential
districts or residential PC
districts
10 feet (2) Not Applicable Not Applicable,
however this may
change if 788 San
Antonio concurrently
proposes a PC.
Max. Site Coverage 50% (19,097 sf) 60% (22,885 sf) 60% (22,885 sf) Item 4
Attachment B - Zoning
Comparison
Item 4: Staff Report
Pg.
9 Packet Pg. 34 of 245
Max. Building Height 50 ft or
35 ft within 150 ft. of a
residential district
(other than an RM-40
or PC zone) abutting
Rooftop Garden
allowed to exceed
height by 12 ft. Stair
and Elevator overrun
allowed to minimum
height feasible for
access
Mechanical equipment
allowed to exceed
height by 15 ft.
60 feet 8 inches to top
of roof parapet
64 feet 8 inches to
Rooftop Garden Trellis
and mechanical
enclosures
60 feet 8 inches to top
of roof parapet
64 feet 8 inches to
Rooftop Garden Trellis
and mechanical
enclosures
PC Special Requirements for
height
50 ft when adjacent to
RM-30, RM-40, 35 ft
when adjacent to RE,
R-1, R-2, RMD, RM, or
PC
Not Applicable/not
adjacent to existing
residential zone
Not Applicable,
however this may
change if 788 San
Antonio concurrently
proposes a PC.
Daylight Plane for lot lines
abutting one or more
residential zone districts other
than an RM-40 or PC Zone
None, as this site is not
abutting a residential
zone (6)
Not Applicable/not
adjacent to existing
residential zone
Not Applicable,
however this may
change if 788 San
Antonio concurrently
proposes a PC.
PC Special Requirements for
Daylight Plane
Non-residential uses
abutting any RE, R-1, R-
2, RM or any
residential PC district –
10 ft and a 3:6 slope
For >60% residential
PC, the daylight planes
may be identical to the
daylight plane
requirements of the
most restrictive
residential district
abutting the site
Not Applicable/not
adjacent to existing
residential zone
Not Applicable,
however this may
change if 788 San
Antonio concurrently
proposes a PC.
Residential Density 30 du/ac per CS Zone
40 du/ac per Housing
Element
107 du/ac per Housing
Incentive Program
85 DU/AC
(75 units proposed)
136 DU/AC
(120 units proposed)
Item 4
Attachment B - Zoning
Comparison
Item 4: Staff Report
Pg.
10 Packet Pg. 35 of 245
Maximum Floor Area for HIP In no event shall the
Director approve a
commercial FAR that
exceeds the standard
in Table 4 of Section
18.16.060(b) or a total
FAR (including both
residential and
commercial FAR) in
excess of 2.0
3.0:1 (114,893 sf Total)
2.98:1 (113,815 sf
Residential)
0.02:1 (1,078 sf
Commercial)
3.0:1 (114,888 sf
Total)
2.98:1 (113,810 sf
Residential)
0.02:1 (1,078 sf
Commercial)
Minimum Useable Open Space 150 sf per unit Common Open Space Provided: 1,830 sf roof
deck, 1,529 sf
courtyard = 3,359 sf or
44.8 sf per unit
Private Open Space:
Typical 65 sf – 155 sf
Average total per unit
meets 150 sf min sf
Common Open Space
Provided: roof deck,
courtyard, unknown
useable size
Private Open Space:
Typical 65 sf – 155 sf
Approx. 45 units
would not have
balconies
Intends to meets 150
sf min sf
Minimum Mixed-use Ground
Floor Commercial FAR
0.15:1(10)
5,729.1 sf or 1,500 sf (c)
1,078 sf 1,078 sf
(1) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard.
(2) Any minimum front, street side, or interior yard shall be planted and maintained as a landscaped screen excluding areas required for access to the site. A solid wall or fence between 5 and 8 feet in height shall be constructed along any common interior lot line. (6) The initial height and slope shall be identical to those of the most restrictive residential zone abutting the site line in question. (10) In the CC(2) zone and on CN and CS zoned sites on El Camino Real, there shall be no minimum mixed use ground floor commercial FAR for a residential project, except to the extent that the retail preservation requirements of Section 18.40.180 or the retail shopping (R) combining district (Chapter 18.30(A)) applies.
(c) A high-density residential or mixed-use project in the CS zone district, but not within the Ground Floor (GF) or Retail (R) combining districts, shall be required to replace only 1,500 square feet of an existing Retail or Retail-Like use. For the purposes of this partial exemption, high-density shall mean 30 or more dwelling units per acre.
Table 2: CONFORMANCE WITH CHAPTER 18.52 (Off-Street Parking and Loading) for Existing Commercial and Proposed Residential*
Type Required Existing Proposed
Vehicle Parking 1/1-bedroom unit
2/2-bedroom or larger
unit
144 spaces total
N/A 148 spaces (76 EVSE
ready)
Bicycle Parking 1 LT space per unit
76 spaces
N/A 76 LT
8 ST
Loading Space 1, for residential
structures with >50
units
N/A One
Item 4
Attachment B - Zoning
Comparison
Item 4: Staff Report
Pg.
11 Packet Pg. 36 of 245
0160140_20240417_ay16 1
Ordinance No. 5622
Ordinance of the Council of the City of Palo Alto Amending Section 18.08.040 of the Palo Alto Municipal Code (The Zoning Map) to Change the Classification of Property Located at 800-8 14 San Antonio Road fr om Service Commercial (C S) to PC Planned Community Zone (PC-5622) for the Construction of Multifamily Residential Units.
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. Findings and Declarations.
(a) On January 19, 2023, Architect Mark Donahue, on behalf of TS 800 SA, LLC (“Applicant”) submitted an application for Rezoning to Planned Community/Planned Home Zoning (PHZ) and Major Architectural Review to redevelop the 800-814 San Antonio Road site with 75 condominium residential units and 1,078 sf of commercial s pace (the “800 San Antonio Project”).
(b) Following Staff Review, the Planning and Transportation Commission (Commission) reviewed the project on June 14, 2023 and recommended the project to the Architectural Review Board.
(c) The Architectural Review Board reviewed the project on August 17, 2023 and March 7, 2024; and recommended approval of the project to the City Council. (d) The Planning and Transportation Commission reviewed the project on April 10, 2024; and recommended approval of the project to the City Council. (e) Approval of the Planned Community Project would constitute a project under the provisions of the California Environmental Quality Act of 1970, together with related state and local implementation guidelines promulgated thereunder (“CEQA”). (f) The City is the Lead Agency pursuant to Public Resources Code section 21067 as it has the principal responsibility to approve and regulate the Planned Community Project.
(g) The City, in compliance with CEQA, prepared an Environmental Impact Report (EIR) Addendum to provide an assessment of the potential environmental consequences of approving and constructing the 800 San Antonio Project. (h) The Council is the decision-making body for approval of the Planned Community Project.
Docusign Envelope ID: 7E815D50-0C91-4640-9449-D25272C84520 Item 4
Attachment C - Approved
PC Ord 5622
Item 4: Staff Report
Pg.
12 Packet Pg. 37 of 245
0160140_20240417_ay16 2
SECTION 2. Amendment of Zoning Map.
Section 18.08.040 of the Palo Alto Municipal Code, the “Zoning Map,” is hereby amended by changing the zoning of Subject Property from Service Commercial (CS) to “PC Planned Community Zone 5622”.
SECTION 3. Project Description.
The Project as a whole is described in the Project Plans. With respect to the Subject Property, the project comprises the uses included in this Ordinance, depicted on the Project Plans, incorporated by reference, including the following components:
(a) Demolition of three existing commercial buildings, as described in more detail in the Project Plans, to facilitate the c onstruction of a 5-story building with 1,0 78 square feet of retail space, and 75 residential condominium units, including 15 units to be sold at below market rates (BMR) in accordance with the City’s BMR guidelines ( 6 units affordable to Very-Low Income households, 5 units affordable to Low Income households, 4 units affordable to Moderate Income households).
SECTION 4. Land Uses.
(a) The following land uses shall be permitted:
(1) Multiple family residential, subject to BMR requirements stated in the project description.
(2) Accessory Facilities and uses customarily incidental to permitted uses
(3) Home Occupations, when accessory to permitted residential uses.
(b) The following land uses shall be permitted on the ground floor, in an area neither greater nor lesser than approximately 1,078 square feet:
(1) Eating and Drinking Services, excluding drive-in and take-out services
(2) Retail Services, excluding liquor stores
(3) Personal Services
(4) Banks and Financial Services
SECTION 5. S
ite Development Regulations and Development Schedule.
(a) Development Standards:
Docusign Envelope ID: 7E815D50-0C91-4640-9449-D25272C84520 Item 4
Attachment C - Approved
PC Ord 5622
Item 4: Staff Report
Pg.
13 Packet Pg. 38 of 245
0160140_20240417_ay16 3
Development standards for the Subject Property shall be those conforming to the Project Plans.
(b) P arking and Loading Requirements:
The Owner shall provide parking and loading as set forth in the Project Plans.
(c) Mo difications to the Development Plan, Land Uses and Site Development Re gulations:
Once the project has been constructed consistent with the approved Development Plan, any modifications to the exterior design of the Development Plan or any new construction not specifically permitted by the Development Plan or the site development regulat ions contained in Section 5 (a) – (b ) above shall require an amendment to this Planned Community zone. Any use not specifically permitted by this ordinance shall require an amendment to the PC ordinance.
(d) De
velopment Schedule:
C onstruction of the project shall commence within two years of the effective date of this ordinance. Prior to expiration of this timeline, the Owner may seek a one year extension from the Director of Planning and Development Services. All cons truction and development of the project shall be complete within 3 years of the start of construction.
SECTION 6.
Public Benefits.
(a) Public Benefits:
Development of the Project Site under the provisions of the PC Planned Community District will result in public benefits not otherwise attainable by application of the regulations of general districts or combining districts.
The public benefits provided by the Project include deed-restricted BMR units in excess of the minimum required , retail commercial space on the ground floor, and space for future expansion of bicycle and pedestrian infrastructure along San Antonio Road.
(b) M
onitoring of Condition s and Public Benefits:
Not later than three (3) years following issuance of a certificate of occupancy and at least every three (3) years thereafter, the Owner shall request that the City review the for compliance with the PC district regulations and the conditions of approval for the associated development. The applicant shall provide adequate funding to reimburse Docusign Envelope ID: 7E815D50-0C91-4640-9449-D25272C84520 Item 4
Attachment C - Approved
PC Ord 5622
Item 4: Staff Report
Pg.
14 Packet Pg. 39 of 245
0160140_20240417_ay16 4
the City for these costs. If conditions or benefits are found deficient by staff, the applicant shall correct such conditions in not more than 90 days from notice by the City. If correction is not made within the prescribed timeframe, the Director of Planning and Development Services will schedule review of the project before the Planning and Transportation Commission and Council to determine appropriate remedies, fines or other actions.
SECTION 7.
Environmental Review.
An Addendum to the EIR for the Housing Incentive Program (HIP) on San Antonio Road was prepared in accordance with the California Environmental Quality Act. The City Council adopted Resolution No. 9925 certifying the adequacy of the EIR and making findings, including a statement of overriding considerations. //
//
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0160140_20240417_ay16 5
SECTION 8. Effective Date.
This o rdinance s hall be e ffective o n the t hirty-fi rst d ay a fter t he da te o f its adoption (second reading).
INTRODUCED: May 6, 2024
PASSED: June 3, 2024
AYES: BURT, LAUING, LYTHCOTT-HAIMS, STONE, TANAKA, VEENKER NOES: KOU
ABSENT:
ABSTENTIONS:
ATTEST:
__________________
__________
City Clerk
APPR
OVED AS TO FORM:
__________________
__________
Assistant City Atorney
____________________________
Mayor
APPROVED:
____________________________
City Manager
___________________________
Acting Director of Planning and
Development Services
Exh
ibit A: Subject Property Plat and Legal Description
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EXHIBIT "A"
Legal Description
CLTA Preliminary Report Form - Modified (11.17.06) Printed: 03.23.21 @ 10:03 AM by SCA0002402.doc / Updated: 07.10.19 CA----SPS-1-21-FWPS-2989210632 For APN/Parcel ID(s): 147-03-043
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF PALO ALTO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
Lot 12, Tract No. 219 Peninsula Garden Farms, as shown on a Map recorded May 8, 1944 in Book 7, Pages 46 and 47 of Maps, Records of Santa Clara County, California.
EXCEPTING THEREFROM that portion of said land referred to as Parcel 32 in that certain Final Judgment of Condemnation recorded June 30, 1961 in Book 5217 at Page 178, of Official Records.
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Order Number: NCS-1066568-SM
First American Title Insurance Company
LEGAL DESCRIPTION
Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows:
LOT 13, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "TRACT NO. 219 PENINSULA GARDEN FARMS,"
WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON MAY 8, 1944 IN BOOK 7 OF MAPS, AT PAGE(S) 46 AND 47.
APN: 147-03-038
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1 Kallas, Emily
From: Sandra M Karol <[email protected]>
Sent: Thursday, March 20, 2025 3:20 PM
To: Kallas, Emily; Sandra Karol
Cc: Sandra Karol
Subject: Re: 800 San Antonio Road Prescreening /Thank you CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.
Hi Emily
1) it’s all profit and hopefully the Board thinks ownership brings a community together and it’s a toss up. 2) Keep me posted and keep me informed for Plan B.
3) It’ s also politically driven and tax driven at no surprise to me. 4) After years of looking
at old old condos in disaster conditions, this is. breathe of fresh air for a first responder from Stanford Medical Center and a volunteer for our
Mitchell Park Library guest lecturer team for 13 years. 5) Rent receipts are worthless.
6) Please present this email to the board and note this reality:
Rent Rate 2008 $1575 Parker Park Apartments
Rent Rate third owners 2025 $3200 one bedroom built in 1976 7) Moved when recruited by Stanford from La Jolla Scripps Hospital….with a plan to buy my third home with family wealth in my plans,not making Prometheus any wealthier than they are now! 8) Thanks to Claire and to you!
Respectfully,
Sandra M Karol MS RVT RDMS
Owner Sandra M Karol Medical Insurance Company
Guest instructor Stanford School of Medicine ߜߛߚ Volunteer since 2016 after I retired from Medical Center my Sent from my iPhone
On Mar 20, 2025, at 2:27 PM, Kallas, Emily <[email protected]> wrote:
Hi Sandra,
I received your voicemail. I can confirm that the owners of 800 San Antonio are now proposing for their project to be rental as opposed to condominiums. You will have an opportunity to provide public comment on this, either by responding by email or during public comment at the prescreening, which is anticipated to be May. It is likely May 19th but this is subject to change. i’m
Thanks,
Emily
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2 Emily Kallas, AICP
Senior Planner
Planning and Development Services Department
(650) 617‐3125 | [email protected]
www.cityofpaloalto.org
Parcel Report | Palo Alto Zoning Code | Online Permitting System | Planning Forms & Applications | Planning Applications Mapped
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PROJECT DESCRIPTION
Date: March 11, 2025 Project Name San Antonio Road Housing Project
Address:
800 -808 San Antonio Road
Palo Alto, CA 94303
Project No : 21 -041
The proposed project is located on San Antonio Rd. between Middlefield Rd. and E. Charleston Rd. The combined lots of 800 and 808 San Antonio provide 0.88 acres on which to site a 120-unit residential building.
The proposed building is 5 floors, 4 levels of type III-A construction over 1 above grade level of type I-A with two levels of subterranean parking. The project also includes interior courtyard, patios and balconies.
Active amenity spaces such as a community space and a gym are provided for the residents on the ground floor street front. Additionally at the street front entrance is a double-height, glass lobby that leads visually and physically into a vegetated interior courtyard with a feature wall including potential art, green walls, and a water feature.
Active amenity spaces include a large roof deck, lobby clubhouse, and gym. A two-story glass storefront opens into a double-height lobby, visually and physically connecting the entry to the vegetated interior courtyard, which features potential art, green walls, and a water feature.
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Letter
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If you need assistance reviewing the above documents, please contact the Project Planner or call the Planner-on-Duty at 650-617-3117 or email [email protected]
Project Plans
In order to reduce paper consumption, a limited number of hard copy project plans are provided to Council members for their review. The same plans are available to the public, at all hours of the day, via the following online resources.
Directions to review Project plans and environmental documents online:
1. Go to: bit.ly/PApendingprojects
2. Scroll down to find “800 San Antonio” and click the address link
3. On this project-specific webpage you will find a link to the project plans and other important information
Direct Link to Project Webpage:
https://www.paloalto.gov/Departments/Planning-Development-Services/Current-Planning/Projects/800-San- Antonio-Road-Pre-Screening
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City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: May 19, 2025
Report #:2505-4633
TITLE
Approval of Minutes from May 5, 2025 Meeting
RECOMMENDATION
Staff recommend that the City Council review and approve the minutes.
ATTACHMENTS
Attachment A: May 5, 2025 Draft Action Minutes
APPROVED BY:
Mahealani Ah Yun
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CITY COUNCIL
DRAFT ACTION MINUTES
Regular Meeting
May 5, 2025
The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:30 P.M.
Present In Person: Burt, Lauing, Lu, Lythcott-Haims, Reckdahl, Stone, Veenker Present Remotely:
Absent:
Special Orders of the Day
1. City Employee Years of Service Awards and Proclamation acknowledging Public Service Recognition Week: May 4-10, 2025
NO ACTION
2. Proclamation Honoring Russ Reich for his Service to the City of Palo Alto
NO ACTION
3. Proclamation of May 2025 as Affordable Housing Month
NO ACTION
Closed Session
4. CONFERENCE WITH CITY ATTORNEY - EXISTING LITIGATION
Subject: McGavock v. City of Palo Alto, et al.
Santa Clara County Superior Court Case No.23-CV-413813
Authority: Government Code Section 54956.9(d)(1)
One Case, as Defendant
5. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
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DRAFT ACTION MINUTES
City Council Meeting
Draft Action Minutes: 05/05/2025
Authority: Government Code Section 54956.8
Property: 2470 Embarcadero Way, Assessor’s Parcel Number 008-03-072 Negotiating Parties: Bioscience Properties, Inc. City Negotiators: Karin North, Sunny Tong, Caio Arellano
Subject of Potential Negotiations: Lease Price and Terms of Payment MOTION: Councilmember Lythcott-Haims moved, seconded by Councilmember Reckdahl to go into Closed Session.
MOTION PASSED: 7-0
Council went into Closed Session at 6:00 P.M.
Council returned from Closed Session at 7:10 P.M.
Mayor Lauing announced no reportable action.
Agenda Changes, Additions and Deletions
Council Member Questions, Comments and Announcements
City Manager Comments
Ed Shikada, City Manager
Public Comment
Study Session
6. City Manager Transmittal of the Fiscal Year 2026 Proposed Operating and Capital Budgets
NO ACTION
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DRAFT ACTION MINUTES
City Council Meeting
Draft Action Minutes: 05/05/2025
Consent Calendar
Councilmember Burt requested to pull Agenda Item Number 11.
Councilmember Burt registered a no vote on Agenda Item Number 11.
MOTION: Council member Lythcott-Haims moved, seconded by Council member Reckdahl to approve Agenda Item Numbers 7-13.
MOTION PASSED ITEMS 7-10, 12-13: 7-0
MOTION PASSED ITEM 11: 6-1, Burt no
7. Approval of Minutes from April 14, 2025 and April 21, 2025 Meetings
8. 2025 City Council Priority Objectives, and Committee Objectives and Workplans
9. Approval of Contract Change Order No. 1 in the Amount of $1,500,000 to Contract C23186274 with Monterey Mechanical Company, for On -Call Emergency and Critical Construction Services at the Regional Water Quality Control Plant, for a Total Compensation Not-to-Exceed Amount of $3,000,000, funded by Wastewater Treatment Fund Capital Improvement Plant Repair, Retrofit, and Equipment Replacement Capital Project (WQ-19002); CEQA Status – Not a Project
10. Approval of Amendment and Extension of Supplement Agreement No.1 to the Master Funding Agreement Between the City of Palo Alto and the Metropolitan Transportation Commission, to Prepare a Downtown Housing Plan for the City of Palo Alto. CEQA Status: Exempt Under CEQA Guidelines Sections 15061(b)(3) and 15262.
11. Approval of Boards, Commissions, and Committees Interview Process as recommended by Policy and Services Committee
12. SECOND READING: Ordinance of the Council of the City of Palo Alto Amending PAMC Sections 2.04.190 and 2.04.200 to Set the Regular Meeting Time of the Finance Committee and the Policy and Services Committee by Resolution or Ordinance
13. SECOND READING: Ordinance of the Council of the City of Palo Alto Amending Section
18.08.040 of the Palo Alto Municipal Code (The Zoning Map) to Change the Classification of Property Located at 70 Encina Avenue from Service Commercial (CS) Zone to Planned Community Zone (PC)
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DRAFT ACTION MINUTES
City Council Meeting
Draft Action Minutes: 05/05/2025
Action Items
14. PUBLIC HEARING / QUASI-JUDICIAL. 4075 El Camino Way [23PLN-00202]: Adoption of an Amendment to a Planned Community Ordinance (PC-5116) to Allow for Modifications to an Existing 121 -Unit Assisted Living and Memory Care Facility. Environmental Assessment: Exempt from the Provisions of the California Environmental Quality Act (CEQA) in Accordance with CEQA Guidelines Section 15301 (Modifications to Existing Facilities).
This agenda item has been continued to a date uncertain.
Adjournment: The meeting was adjourned at 11:23 P.M.
ATTEST: APPROVED:
____________________ ____________________
City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC)
2.04.160(a) and (b). Summary minutes (sense) are prepared in accordance with PAMC Section
2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423, the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City’s website.
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: May 19, 2025
Report #:2412-3877
TITLE
Climate Action and Sustainability Committee Recommendation to Council to Direct Staff to Develop an Affordable Multi-Family Housing Electrification Grant Program and to Approve a Budget Amendment in the Gas Utility Funds; CEQA Status: Under CEQA Guidelines section 15183, projects consistent with an existing general or comprehensive plan do not require additional CEQA review
RECOMMENDATION
Staff and the Climate Action and Sustainability Committee recommend that the City Council:
1. Direct staff to develop a program to provide incentives for electrification of dedicated affordable multi-family housing central and in-unit gas equipment;
2. Direct staff to explore including a provider cost-share contribution in the program;
3. Authorize staff to use up to $6.6 million in Gas Utility Cap and Trade Revenues for the program, and
4. Amend the FY 2025 Budget Appropriation (requires a 2/3 vote) for the Gas Utility Funds:
a. Increase Gas Resource Management Operating Expenses for Contract Services by $6.6 million; and
b. Decrease the Cap and Trade Reserve by $6.6 million.
EXECUTIVE SUMMARY
This action would enact an affordable housing electrification retrofit pilot program with the objective of helping local affordable housing providers take advantage of State and Federal incentive programs. This program has been on an accelerated timeline as these programs have limited budgets, have expressed great demand and need, and critical Federal funding support is uncertain so timing of the City support program is important.
The proposed budget for the program is $6.6 million, funded from the Gas Cap and Trade Reserves. The program budget will not directly impact utility rates or the General Fund budget, but will indirectly affect both by facilitating the conversion of gas equipment to electricity. The Climate Action and Sustainability Committee also unanimously recommended that the City Item 7
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Council direct staff to explore including a provider cost-share contribution in the program. The program will have the capacity to electrify central heating or water heating systems serving up to 500 units (about 20% of Palo Alto affordable housing units) and equipment in up to 275 individual units (about 10% of Palo Alto affordable housing units). In addition, this program will have the capacity to save about 800 to 1,000 metric tons of carbon-dioxide equivalent (MT CO2- e) per year, comparable to the emissions savings of the Advanced Heat Pump Water Heater Pilot Program’s capacity.
The program fulfills 2023-2025 Sustainability and Climate Action Plan (S/CAP) Work Plan items
2.1(I) and 2.1(K) focused on affordable housing pilots and are consistent with City Council priorities related to Climate Change and Housing. Alternative program designs with differing costs and emissions impacts are also included in this report.
BACKGROUND
On June 3, 2023 the Council adopted the S/CAP, including California Environmental Quality Act (CEQA) analysis, and the 2023-2025 S/CAP Work Plan. The S/CAP includes the goal of reducing carbon emissions 80% from 1990 levels by 2030, which requires extensive electrification of vehicles and buildings. The 2023-2025 Work Plan includes work items to achieve that goal, including work items focused on affordable housing electrification. Affordable housing electrification retrofits will be important to equitably achieving the community’s emissions reduction goals. Without these retrofits low-income renters in Palo Alto could be exposed to higher gas prices as other Palo Altans electrify their homes and businesses. Pursuing these goals is consistent with the 2024 Council priorities on Climate Action and Housing, which were also City Council priorities in the four previous years.
There are 1,843 units of subsidized affordable rental housing in Palo Alto in 37 developments1, 299 below market rate (BMR) rental units in market-rate rental complexes, and 265 BMR ownership units in 48 market-rate condo developments. 2023-2025 S/CAP Work Plan work items 2.1(I) (Affordable Housing EV Charging and Electrification Pilot) and 2.1(K) (Multi-family and Affordable Housing Electrification and EV Charger Access Strategy Development) both focus on piloting scalable strategies for electrifying these units and providing EV charging. In addition, work item 4.A (Multi-Family and Commercial End Use Study) focuses on doing studies to identify opportunities for electrifying equipment in multi-family buildings.
On January 16, 2024 the City Council approved a contract with Energy and Environmental Economics, part of Willdan, to complete a study of multi-family and non-residential electrification opportunities (along with other studies).2 The study is nearly complete and will 1 23 managed by Alta Housing, three by Front Porch, two by Eden, two by MidPen Housing, two by Abode, one by Bridge Housing, as well as Stevenson House, Terman Apartments, the Moldaw Residences, and the HomeKey transitional housing project still under development
2 Staff Report 2308-1939, https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/budget- adjustments-and-monitoring/fy-2024-budget-adjustments/january/january-18-ccm-item-4.pdf Item 7
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be ready for Council review once the final report is written. Over the course of the study Willdan visited several multi-family buildings, including buildings managed by three different affordable housing providers who between them manage most of Palo Alto's dedicated affordable housing (27 properties out of 37 total). Staff consulted a fourth provider for data from a study they did on their own. The studies identified aging equipment representing good opportunities for building electrification in six buildings with 428 units of affordable housing in them. Equipment nearing end of life across all six surveyed properties included six central water heaters, one central space heater, as many as 240 in-unit space heaters, and a central kitchen.
The providers are ready or close to ready to replace the equipment and eager to electrify it, providing a unique opportunity to electrify equipment serving about 20% of the dedicated affordable units in Palo Alto. Some of these replacements could be showcase projects for which the provider and the City could submit for awards, allowing the community to demonstrate that fully electrified affordable housing is an attainable goal.
ANALYSIS
Staff is recommending an affordable housing electrification program based on the results of the Willdan study. Electrifying multi-family building equipment is expensive and will not happen without incentives. Having identified these opportunities, the community is well-positioned to take advantage of State programs (and Federal programs if funding is released) that provide substantial incentives for multi-family affordable housing building electrification:
•The Home Energy Efficiency Retrofits and Residential Assistance (HEEHRA) program offers rebates of up to $14,000 per household, covering up to 100% of electrification costs for low- and moderate-income households, including heat pumps, electric panel upgrades, and energy-efficient appliances (note that project costs tend to exceed the incentive cap). The program is funded by the Inflation Reduction Act, and California’s share of the funding that has been allocated specifically for multi-family housing is $35 million. Initial interest in the program is high, which may result in limits on per-project or per-provider incentives that can be received. This program is unlikely to be available in the near term or at all, however, due to Federal funding currently being withheld. •The State has allocated over $120 million to the Low-Income Weatherization Program (LIWP) Multi-Family Program since State Fiscal Year 2014/2015,3 providing incentives on a $/MT CO2-e basis for energy efficiency and solar photovoltaic systems, and electrification upgrades, focusing on reducing energy costs for low-income individuals and greenhouse gas emissions.
•The Technology and Equipment for Clean Heating (TECH) multifamily program has offered incentives of up to $1,200 per unit in the past for multi-family central water 3 Low Income Weatherization Program Guidelines, State Dept of Community Services & Development, June 8, 2022. https://www.csd.ca.gov/Shared%20Documents/LIWP-2022-Multi-Family-2.0-Final-Program-Guidelines.pdf Item 7
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heating. Renewed funding and adjustments to incentive levels are expected to be announced soon.4
While the above programs provide significant incentives, electrification projects are costly and most housing providers will need local matching funds to be able to take advantage of the State and Federal programs, particularly for in-unit improvements. Assuming that these incentive funds remain available, staff believes affordable housing providers in Palo Alto may be eligible to receive nearly $7 million in State and Federal incentives for these projects, based on the equipment to be electrified and the incentive program rules, though over half of that is Federal funds unlikely to be delivered. However, these projects are estimated to cost over $10 million (of which an estimated $6.5 million would be related to in-unit measures). Costs average about $10,400 per unit for projects focused primarily on central systems and $34,500 for projects that include in-unit heating electrification as well. This implies a need for at least $3.7 million in local incentives to cover 100% of known project costs, likely closer to $6 million without Federal funding.
Other providers, aside from those who participated in the Willdan study, may also wish to apply, which would necessitate an increased budget to support those projects as well. Staff is proposing a budget of $6.6 million; $2.5 million for central system incentives and $4.1 million for in-unit + central incentives. This provides adequate funding for 500 units of central heating incentives plus 275 units of in-unit incentives, assuming the City will provide incentives of up to $7000 per unit for projects involving central systems only and an additional $15000 per unit when both central and in-unit electrification measures are included. These incentives would only be available after the provider has applied for all State and Federal incentives and would only cover any residual cost. Staff proposes funding these incentives from the Electric Utility Public Benefits reserves and Gas Cap and Trade reserves as described in the “Fiscal Impact” section below.
In practice, the program budget might not be used completely. As noted above, if estimated State and Federal incentives were received, the known electrification projects would require $6 million in local incentives. However, logistical challenges may prevent some projects from proceeding. In some cases project costs may come in lower or higher than expected. Staff could report back to Council in late 2025, once State and Federal incentive allocations are known and projects are underway, and unused budget could be returned to reserves.
Another factor is the potential provider contribution, which the Climate Action and Sustainability Committee (Committee) recommended the City Council direct staff to explore.
This would involve requiring a funding contribution from providers (a cost share) representing the cost of like for like replacement. Replacing equipment at end of life would normally be a provider’s responsibility. Staff could determine the funding contribution required for each 4 Technology and Equipment for Clean Heating
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project to electrify by having a building consultant calculate a cost estimate for a like for like gas replacement, with the option for the affordable housing vendor to provide actual contractor quotes as an alternative.
The budget for the program could be reduced using this approach, but the exact amount of reduction is difficult to estimate without having actual quotes for like for like gas replacements.
Willdan performed a rough analysis of one property that estimated like for like replacement costs at 20% of the cost of central water heating and 40% of the cost of in-unit space heating.
This analysis relied on average costs in the Bay Area for gas equipment replacement and likely did not include some project-specific additional costs that would be incurred. Based on those numbers, the maximum provider contribution could reach up to $1.9 million, or $460,000 if only a central equipment program is considered. But these numbers are very uncertain and will depend on actual project design and quotes, and a lower provider contribution may be needed to avoid deterring participants who have not yet accumulated the capital to pay for their contribution.
Staff is only aware of one other program providing similar grants, the Silicon Valley Clean Energy (SVCE) Multifamily Retrofit program, which provides direct install services for affordable housing owners or up to $450,000 in grants to affordable housing owners who hire their own contractors. The program budget is about $12 million. Sacramento Municipal Utility District (SMUD) provides multifamily building electrification rebates in the range of $1000 to $2000 per unit served. Other multifamily services in PG&E territory focus primarily on energy efficiency.
Committee Review
On March 21, 2025, the Committee considered the staff proposal and budgets for a set of potential alternatives5 that included:
•A grant program with no provider contribution
•Starting with a smaller budget and increasing if necessary •Requiring a provider contribution, or
•A smaller grant program only covering central equipment.
Variations on these themes were also presented, including the possibility of loans rather than grants for the provider contribution. The Committee recommended that that Council approve the staff proposal with the recommended direction that staff consider a provider contribution at a size that would not deter potential participants.
5 For more detail, see Staff Report 2503-4392
(https://portal.laserfiche.com/Portal/DocView.aspx?id=152221&repo=r-704298fc), Climate Action and Sustainability Committee, March 21, 2025, Recommendation to Council to Direct Staff to Develop an Affordable Multi-Family Housing Electrification Grant Program and to Approve a Budget Amendment in the Gas Utility Funds Item 7
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Comments and questions from the Committee included:
•Questions aimed at demonstrating the public purpose return on investment for the program, that is, how many metric tons of emissions reduction would be obtained at what cost, how that compared to other programs, and the overall impact of the program. Staff explained how the program had a scale of impact and cost-effectiveness comparable to the 1000-unit Advanced Heat Pump Water Heater Program in those terms.
•Questions about the regulations governing the use of Cap and Trade funds, a clarification that transformer upgrades and induction cooktops would be eligible aspects of the grant funding, and whether parts of the gas system would be retired as a result (staff did not see obvious opportunities to do so from these projects). •Explorations of possible additional funding sources, including philanthropy and rehabilitation grants, as well as the potential alternatives and the idea of a provider contribution, which ultimately settled on this report’s recommendations.
FISCAL/RESOURCE IMPACT
The staff recommendation would be implemented using existing staff, but would increase program spending by up to $6.6 million, funded by the Gas Cap and Trade reserves. Those reserves are currently at $13.5 million, with projected annual revenues of $3 million to $4 million per year as authorized through 2030. This spending would not directly impact gas rates, but Gas Cap and Trade reserves can potentially be used to provide climate credits. $6.6 million is equivalent to about a 2% decrease in gas rates if spread over five years. The Finance Committee will be considering potential uses of the funding sources for this $6.6 million (and for other proposed Climate Programs in the FY 2026 Proposed Budget) before this item goes to Council for approval.
The use of Gas Cap and Trade revenues is governed by Title 17 California Code of Regulations Section 95893(d), which requires that it be used for the primary benefit of retail natural gas ratepayers, subject to any limitations imposed by Council, and must be used for:
•Energy efficiency, including energy efficiency equipment rebates, building retrofits and other projects that reduce energy demand;
•GHG emissions reducing activities, which include projects to reduce gas leaks that are not mandated by federal, state or local health and safety requirements; •Non-volumetric return to some or all ratepayers in the form of a climate credit; •Administrative and outreach costs and educational programs.
The Council adopted a policy on the use of Gas Cap and Trade Revenue on January 26, 2015 (Resolution 5397) and updated it October 3, 2022 (Resolution 10077),6 which stated that:
6 Resolution 10077 https://portal.laserfiche.com/Portal/DocView.aspx?id=38224&repo=r-704298fc Item 7
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The following uses of the City’s auction proceeds from the sale of Allocated Allowances are permitted, with a preference that greenhouse gas reduction measures be pursued before providing rebates:
a. Investment in energy efficiency programs for the natural gas portfolio and retail customers; b. Purchases or investment in cost effective renewable bio-gas resources for the gas portfolio; c. Fuel switching from natural gas to electricity that reduces greenhouse gas emissions; d. Investment in other carbon reduction activities for the natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; e.Rebates to natural gas retail ratepayers. Rebates, if provided, must be allocated on a non- volumetric basis as stated in Title 17 CCR Section 95893 (d)(3).
STAKEHOLDER ENGAGEMENT
Affordable housing electrification has been discussed extensively as part of the stakeholder engagement for the S/CAP as a whole, and during adoption of the 2023-2025 S/CAP Work Plan, but this program has not received any stakeholder engagement due to the rapid turnaround needed to avoid missing out on access to State and Federal incentives. In developing this program staff consulted with various affordable housing providers to understand their needs and relied on studies performed by Willdan of various properties.
ENVIRONMENTAL REVIEW
Potential environmental impacts of an affordable housing building electrification pilot program were analyzed as part of the Sustainability and Climate Action Plan (S/CAP) Addendum to the Comprehensive Plan Environmental Impact Report. On June 5, 2023 (Staff Report #2303-1158) Council certified the Addendum, which found that the S/CAP programs would not result in any significant or substantially more severe effects beyond what was previously analyzed in the Comprehensive Plan EIR. Under CEQA Guidelines section 15183, projects consistent with an existing general or comprehensive plan do not require additional CEQA review.
ATTACHMENTS
None
APPROVED BY:
Brad Eggleston, Director of Public Works
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: May 19, 2025
Report #:2504-4582
TITLE
Approval of Blanket Purchase Order with Olin Finance Company LLC for the Purchase of Bulk Sodium Hypochlorite for the Regional Water Quality Control Plant for a Two-Year Term with an annual amount of $400,000, for a Total Not-to-Exceed Amount of $800,000; CEQA Status – Not a Project
RECOMMENDATION
Staff recommends that the City Council approve and authorize the City Manager or their designee to execute a Blanket Purchase Order with Olin Finance Company LCC for the purchase of bulk sodium hypochlorite for the Regional Water Quality Control Plant for a two-year term (July 1, 2024 through June 30, 2026) with an annual amount of $400,000 and a total not-to- exceed amount of $800,000.
BACKGROUND
The Regional Water Quality Control Plant (RWQCP) treats wastewater from a total of six communities (Partner Agencies) and produces approximately 230 million gallons per year of tertiary-treated recycled water for beneficial reuse. The RWQCP operates under strict regulatory requirements for disinfection of recycled water; sodium hypochlorite is used as the primary disinfectant to meet these standards.
The City has a three-year (Fiscal Years 2024-2026) pricing agreement with Olin Finance Company (Olin) to purchase sodium hypochlorite. Given this chemical's essential role in ensuring uninterrupted plant operations and regulatory compliance, the initial contract allocation was promptly approved at the staff level in accordance with approval authority procedures and procurement requirements at the time.
For Year 1 (Fiscal Year 2024), blanket purchase order Number 4624000004 was issued in the amount of $200,000. For Year 2 (Fiscal Year 2025), blanket purchase order number 4625000022, staff anticipates that the current contract capacity is not adequate. As chemical needs and unit prices have increased, staff is now bringing this request forward for City Council Item 8
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authorization to ensure compliance with procurement processes and reinforce transparency in managing these important operational expenditures.
ANALYSIS
On July 7, 2023, the City executed a three-year pricing agreement with Olin for purchase of bulk sodium hypochlorite. The three-year term pricing agreement included up to $250,000 per year with CPI-U-based price escalation. However, an unanticipated increase in chemical usage and unit pricing led to the projected depletion of funds ahead of schedule. In Year 2 (Fiscal Year 2025), this gap has become more apparent and is primarily driven by operational changes and data reliability issues associated with the ongoing construction of capital improvement projects at the RWQCP. Staff have observed a slight increase in both Biochemical Oxygen Demand (BOD) and ammonia in wastewater concentrations, which have required additional sodium hypochlorite dosing to maintain regulatory compliance for disinfection.
Additionally, equipment calibration issues with the RWQCP’s chemical analyzers have resulted in inconsistences in accurately recording sodium hypochlorite dosing volumes, potentially leading to higher-than-expected chemical use. Staff is actively working to address these instrumentation concerns, but the combined effect has contributed to greater than anticipated chemical consumption in Year 2.
For the Year 3 (Fiscal Year 2026) blanket purchase order, a similar increase in contract capacity is requested to account for anticipated increases in chemical usage and unit pricing.
Procurement Process
The RWQCP regularly conducts a competitive procurement process to secure contracts for purchase of bulk sodium hypochlorite, issuing a new Request for Quotation (RFQ) every three years. The most recent RFQ (No. 188055) for the purchase of bulk sodium hypochlorite and delivery was issued on PlanetBids on May 1, 2023 and was due May 30, 2023. The low bidder, Olin Corporation, quoted a unit price of $2.419 per gallon of sodium hypochlorite based on an estimated annual need of 120,000 gallons (Attachment A). The RFQ establishes a price increase based on CPI-U (Consumer Price Index for Urban Wage Earners and Clerical Works in the San Francisco-Oakland-San Jose, CA area) on a fiscal year basis.
Table #1: Summary of Request for Proposal
Proposed Length of Project Three years
Total Days to Respond to Bid 30 days
Pre-Bid Meeting None Scheduled
Number of Responsive Bids Received 2
Range of Proposal Amounts
(based on estimated annual quantities & unit prices) $290,280 to $371,400 per year Item 8
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FISCAL/RESOURCE IMPACT
Funding for the recommended increase to the purchase order in this report is available in the Fiscal Year 2025 Adopted Wastewater Treatment Fund operating budget. Any unspent funds from the blanket purchase order will be returned to the Wastewater Treatment Fund. Funding in subsequent fiscal years is subject to Council’s approval of each fiscal year’s budget appropriation.
STAKEHOLDER ENGAGEMENT
Staff engaged with prospective vendors through a competitive RFQ process. Internal coordination also occurred between RWQCP Operations and Administrative Services to align on anticipated chemical usage with a strategic procurement and contractual approach. In addition, an interdepartmental team, including Administrative Services, Public Works, Utilities, City Attorney’s Office, and City Manager’s Office staff meets monthly to review and discuss the RWQCP, including the budget impacts and market trends.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because the purchase of sodium hypochlorite for the RWQCP is a continuing administrative or maintenance activity. CEQA Guidelines section 15378(b)(2).
ATTACHMENTS
Attachment A: Request for Quotation Submitted Bid, Olin Finance Company LLC, Pioneer Americas LLC
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
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CITY OF PALO ALTO RFQ 188055 PAGE 1
Rev. 12/02/10
May 1, 2023
The City of Palo Alto, Purchasing and Contract Administration, on behalf of the Public Works Department, Regional Water Quality Control Plant Division, requests a quotation for:
PROJECT TITLE:
12.5% BULK SODIUM HYPOCHLORITE AND DELIVERY
REQUEST FOR QUOTATION (RFQ) NUMBER 188055
RFQ DUE DATE: TUESDAY, MAY 30, 2023, 3:00 P.M.
Documents will not be accepted after 3:00 P.M., Tuesday, May 30, 2023 Table of Contents:
SECTION I Request for Quotation and Bidder Required Information (including submittal instructions) *
SECTION II Purchase Order Terms and Conditions and Insurance Requirements SECTION III Specifications and Bidder’s Bid Pages*
*Complete, sign and submit forms as instructed in the RFQ. Failure to complete and/or submit these forms may cause rejection of your Bid.
FOR BID DOCUMENTS: CONTACT PURCHASING AND CONTRACT ADMINISTRATION: (650) 329-2271
CITY OF
PALO
ALTO
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Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
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CITY OF PALO ALTO RFQ 188055 PAGE 2 Rev. 12/02/10
SECTION I
In response to this Request for Quotation ( RFQ), the undersigned, as Bidder, declares that the only persons or parties interested in this Bid as principals are those named herein; that this Bid is made without collusion with any other person, firm or corporation; that the Bidder has carefully exami ned the specifications herein referred to; and the Bidder proposes and agrees, if this Bid is accepted, that the Bidder will contract with the City of Palo Alto (City), to provide all necessary materials, and furnish the specified requirements in this RFQ, in the manner herein prescribed and at the prices stated in the Bid.
Project Title
12.5% Bulk Sodium Hypochlorite
City of Palo Alto Request for Quotation (RFQ) number:
188055
Quotation Due Date
Quotation acceptance period closes (your quotation must be received by Purchasing and Contract Administration not later than) 3:00 P.M., Tuesday, May 30, 2023.
Online Q&A Due Date
Should discrepancies or omissions be found in this RFQ or should there be a need to clarify this RFQ, questions or comments regarding this RFQ must be emailed and received by the City no later than 1:00 p.m., Monday, May 22, 2023.
Senior Buyer/Contracts Administrator
Saira Cardoza
Telephone Number: (650) 329-2327
[email protected]
Specifications
The specifications and/or scope of work included have been prepared to describe the standard quality, performance, and other characteristics needed to meet City requirements. The City will accept alternate proposals of a designed material, product, thing, service, “or equal”, and will determine if such alternate proposals are satisfactory in meeting a mandatory requirement or specification and if the proposed alternate meets the intent of the original mandatory requirement.
Term of Agreement
City intends to issue a Blanket Order to provide for the purchase and delivery of 12.5% Bulk Sodium Hypochlorite as required by the Public Works Department, Regional Water Quality Control Plant Division. A City of Palo Alto representative will issue release orders for goods on an as-requested and authorized basis.
Quantities specified in the Bidder Bid Pages are approximate and total of the bid will be used for the purpose of selecting the lowest responsible bidder. The initial term of the pricing agreement shall be effective on July 1, 2023 and shall expire June 30, 2024 and may be extended by City for up to an additional two (2) 12-month periods for a maximum of 36 months, subject to:
1. Firm price for the initial term of the pricing agreement;
2. City of Palo Alto City Council’s annual approval of each current year’s budget and appropriation of funds;
3. The Vendor’s compliance with the terms and conditions as established by this RFQ;
4. The Vendor’s satisfactory performance, and timely compliance with the requirements of this RFQ; and
5. Firm pricing for the two optional twelve (12) month term extensions, as set forth herein.
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Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
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CITY OF PALO ALTO RFQ 188055 PAGE 3 Rev. 12/02/10
(Please check Bid Pages for price escalation clause for 2nd and 3rd year.)
Note: If a price increase is to apply to the City’s optional contract extensions, specify such in the space provided on each bid schedule.
Notwithstanding the foregoing, City may terminate the agreement, with or without cause, by providing ten (10) days written notice.
Contract Award
The contract, if awarded, shall be awarded to the lowest responsive and responsible bidder. The lowest bid shall be the lowest total of the bid prices quoted on the Bid Schedule. This total is being used for the purpose of determining the lowest bid. City will award a not-to-exceed amount based on the needs of and prices quoted.
Pursuant to Palo Alto Municipal Code Section 2.30.440, a responsible bidder is a bidder determined by the awarding authority:
1. To have the ability, capacity, experience and skill to perform the work, or provide the goods and/or services in accordance with the bid specifications;
2. To have the ability to perform the contract within the time specified;
3. To have the equipment, facilities and resources of such capacity and location and location to enable the bidder to perform the contract;
4. To have the ability to provide, as required, future maintenance, repair, parts and service for the use of goods purchased;
5. To have a record of satisfactory or better performance under prior contracts with the city or others; and
6. To have complied with applicable laws, regulations, policies (including city council policies), guidelines and orders governing prior or existing contracts performed by the bidder.
F.O.B. Point
Prices shall be F.O.B. Palo Alto, Freight Prepaid. Price shall include all applicable transportation and delivery charges. See Bid Schedule for delivery point.
Submittal of Documents
In order to submit bids to the City of Palo Alto, the Bidder shall submit a bid through the City of Palo Alto’s electronic procurement system (PlanetBids), in PDF format. The submittal shall consist of this document, which includes the Bidder Bid Pages and the Bidder’s Questionnaire form.
Bids must be received no later than 3:00 P.M. no later than the closing date outlined in this RFQ. No bids will be accepted after that time by the electronic procurement system.
Complete, sign and submit the RFQ/Bidder Information, Nondiscrimination Certification, and Bidder Bid Pages with your quotation. Failure to complete and/or submit these forms may cause rejection of your quotation. All quotations must be submitted on these forms.
Delivery Requirements
When delivery time is requested in the quote or bid documents, time sh all be of the essence; therefore, the quote or bid shall include the delivery date. In some instances, the City may specify only a m aximum number of days for de livery and will use this delivery date as part the criteria to determine the award. The purchase order to be awarded is for a specific quantity purchased at one time.
Decision to Reject
The City reserves the right to reject any or all quotations, to waive any informalities contained therein, and to select quotations on an item-by-item basis. The City reserves the right to award more than one contract from this solicitation. No quotation may be withdr awn for a period of sixty (60) days fo llowing the dat e of bid opening. The terms and conditions (the provisions) that shall govern any resulting ag reement between City Item 8
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Finance Company LLC,
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CITY OF PALO ALTO RFQ 188055 PAGE 4 Rev. 12/02/10
and the Lowest Responsible Bidder are contained in this RFQ. No charges of any kind will be allowed unless specifically made part of your quotation and are specified in your response.
RIGHTS OF THE CITY OF PALO ALTO
This RFQ does not commit the City to enter into a contract, nor does it obligate the City to pay for any costs incurred in preparation and submission of quotation or in anticipation of a contract.
Exceptions
To the specifications or requirements i ssued must be itemized and justified i n writing and included with proposals or quotations submitted.
Documentation
Manuals, when applicable, shall be furnished by the Vendor with the shipment or under separate cover.
Taxes
Quotations shall include all ap plicable federal, state and local taxe s, import duties, commissions or other charges.
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Finance Company LLC,
Pioneer Americas LLC
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BIDDER REPRESENTATION :
The Bidder represents that it has not retained a person to solicit or secure a City contract (upon an agreement or understanding for a commission , percentage , brokerage , or contingent fee) except for retention of bona fide employee or bona fide established commercial selling agencies for the purpose of securing business .
During the Quotation process there may be changes to the Quotation documents, which would require an issuance of an addendum or addenda. City disclaims any and all liability for loss, or damage to any Bidder who does not receive any addendum issued by City in connection with this RFQ. Any Bidder in submitting a Quotation is deemed to waive any and all claims and demands Bidder may have against City on account of the failure of delivery of any such addendum to Bidder. Any and all addenda issued by City shall be deemed included in this RFQ, and the provisions and instructions therein contained shall be incorporated to any Quotation submitted by Bidder.
To assure that all Bidders have received each addendum , the acknowledgme nt and sign-off is required via the City's eProcurement system. Failure to acknowledge receipt of addendum/addenda may be considered an irregularity in the Quotation .
The firm and individuals listed below, certify that: they do not and in the performance of this contract they will not discriminate in employment of any person because of race, skin color, gender, age, religion, d1sab1hty, national origin, ancestry , sexual orientation, housing status, marital status, familial status, weight or height of such person; and further certify that they are in compliance with all Federal, State and local directives and executive orders regarding nondiscrimination in employment .
Signature must be the same signature as appears in Bidder Bid Pages:
Or,
Officer•
Joy Burris~=~-a.
"'' o- r.im,.•:••1-'-'Ur
(Signature)
Joy Bums
(Printed name of signatory)
Business Director
(Title of signatory)
The undersigned certifies that the Bidder is not a corporation, and is not subject to the requirements of California Corporations code, and hereby agrees to, and accepts the terms and conditions of this RFQ.
(Signature)
(Printed name of signatory)
(Title of signatory)
CITY OF PALO AL TO RFQ 188055
Rev. 12/02/10
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Finance Company LLC,
Pioneer Americas LLC
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CITY OF PALO ALTO RFQ 188055 PAGE 6
Rev. 12/02/10
Bidder Information
Provide the information requested below or indicate “not applicable”, if appropriate:
A. Name and Address of Bidder (Company)
_____________________________________
_____________________________________
_____________________________________
_____________________________________
REMIT TO (If Different from Above):
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Telephone Number: _____________________
Facsimile number: _______________________
E-Mail: ________________________________
Website: _______________________________
B. Bidder is a:
□ California Corporation
□ Corporation organized under the laws of the State of ________________________. with head offices located at __________________________________________, and offices in California at _____________________________________________. □ Limited Liability Company
List name of managing member(s):
___________________________________________________________________ □ Sole Proprietorship _____________________________________________ □ Partnership
□ Limited Liability Partnership
List names of general partners; state which partner or partners are managing partner(s)
___________________________________________________________________ ___________________________________________________________________ □ Other (attach Addendum with explanatory details)
Pioneer Americas LLC is a wholly subsidiary of Olin Corporation 490 Stuart Road, NE
Cleveland, TN 37312
Pioneer Americas LLC
Lock Box 10728
540 W. Madison St. 4th Floor
Chicago, IL 60661
(423) 336-4421
(423) 336-4682
[email protected]
www.olin.com
x Virginia
490 Stuart Road, NE, Cleveland, TN 37312
11600 Pike Street, Santa Fe Springs, CA 90670
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Finance Company LLC,
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C Have you (or your firm) previously worked for the City of Palo Alto? 1K) Yes. or O No (1f "Yes· . 11st below , or 1r necessary, provide 1nformat1on on additional sheets 1f needed) Current suooher of sodium hypochlonte
D Contractors license, number/type (1f required): ---"N~/.i:.:A'-------------- E The Bidder represents that 1t has not retained a person to solicit or secure a City contract (upon an agreement or understanding for a commission. percentage. brokerage . or contingent fee) except for relent.ion of bona fide employee or bona fide established commeretal selling agencies for the purpose of securing business.
F Dunng the Quotation process there may be changes to the Quolat1on documents , which would require an issuance of an addendum or addenda. City disclaims any and all liability for loss, or damage to any Bidder who does not receive any addendum issued by City m connection with this RFQ. Any Bidder in submitting a Quotation is deemed to waive any and all claims and demands Bidder may have against City on account of the failure of delivery of any such addendum to Bidder. Any and all addenda issued by City shall be deemed include d in this RFQ. and the provisions and instructions therein contained shall be incorporated to any Quotation submitted by Bidder.
To assure that all Bidders have received each addendum. the following acknowledgment and sign-off 1s required Failure to acknowledge receipt of addendum/addenda may be considered an 1rregulanty in the Bid
Addendum number(s) received: 01 . 0 2; 0 3; 0 4; 0 S: 0 6, 0 7; 0 8, 0 9 Or, (ii( ._W1\.J _No Addendum/Addenda Were Received (check and fnlt~-
G The firm and 1nd1V1duals hsted below, certify that lhey do not and In the performance or this contract they will not d1scnm1nale in employment of any person because of race skin color gender , age. rehg1on, d1sabIhty, nal1onal ong1n. ancestry, sexual onentahon. housing status marital status, fam1hal staJus, weight or he1ghl of such person. and further cer11fy that they are In compliance with all Federal, Stale and local d1recI1ves and executive orders regarding nond1scnmInat1on 1n employment
Signature must be the same signature as appears In Btddor Biel Pogos Officer'
Or,
Joy Burris ~~·..:- ••
:: ·····-
(Signatu re)
Jo~ Rums
(Prinled name of signatory)
Business Director
(Title of s1gnatory)
CITY OF PALO ALTO RFO 188055
Re• 12/02110
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Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
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CITY OF PALO ALTO RFQ 188055 PAGE 8
Rev. 12/02/10
The undersigned certifies that the Bidder is not a corporation, and is not subje ct to the requirements of California Corporations code, and hereby agrees to, and accepts th e terms and conditions of this RFQ.
________________________________________
(Signature)
________________________________________
(Printed name of signatory)
________________________________________
(Title of signatory)
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Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
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CITY OF PALO ALTO RFQ 188055 PAGE 14
Rev. 12/02/10
SECTION III
RFQ 188055 – 12.5% BULK SODIUM HYPOCHLORITE AND DELIVERY
SPECIFICATIONS/SCOPE OF WORK
The City of Palo Alto, Regional Water Quality Control Plant (RWQCP) is seeking quotations for the procurement and delivery of 12.5% Bulk Sodium Hypochlorite.
1. Packaging
1.1. This specifications/scope of work covers the procurement and deliveries of 12.5% Bulk Sodium Hypochlorite.
1.2. The quantity specified under this contract is approximate and may be increased or decreased in any amount to conform to the needs of the Palo Alto Regional Water Quality Control Plant (RWQCP). The plant estimates usage of sodium hypochlorite to be approximately 120,000 gallons per year. Consumption rates will be higher during wet- weather than during dry-weather.
1.3. There are two separate delivery points for sodium hypochlorite within the RWQCP. The DMF location includes one 6,000-gallon tank. The Chlorine Building location includes two 6,000-gallon tanks. The supplier shall assume all deliveries will be split between the two locations. The supplier shall budget the additional time to split the onsite delivery into their unit price.
2. Supply
2.1. The supply of sodium hypochlorite furnished under this contract shall be a 12.5% strength solution. The supplied sodium hypochlorite shall conform to American Water Works Association (AWWA) standard number B-300-18, or latest edition, entitled AWWA Standard for Hypochlorites.
2.2. The supplier shall provide a Safety Data Sheet (SDS) from the original manufacturer of the chemical two weeks prior to their first delivery and whenever the original manufacturer changes.
2.3. The supplier shall provide a weight scale certificate, bill of lading, and certificate of analysis with each shipment. The plant reserves the right to independently verify the percent available chlorine.
3. Deliveries
3.1. All deliveries will be made with vehicles safely equipped to handle sodium hypochlorite.
Drivers shall be qualified and trained to safely handle, transport, load, and unload the chemical that they are delivering. Drivers shall be qualified and trained to respond to leaks of the chemical.
3.2. Delivery shall be made within 48 hours of any order placed by phone or email during the period of the contract. Delivery address and contact is:
City of Palo Alto
Water Quality Control Plant
Attn: Operations Supervisor or Senior Operator
2501 Embarcadero Way
Palo Alto, CA 94303
650-329-2598
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Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
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CITY OF PALO ALTO RFQ 188055 PAGE 15
Rev. 12/02/10
3.3. Deliveries shall be according to the Regional Water Quality Control Plant’s 12.5% Sodium Hypochlorite (SH): Receiving / Off-Loading Authorization Form, which is attached to this specification as Exhibit 1. The supplier shall verify that the delivery driver is trained and prepared to follow the authorization form.
3.4. The supplier shall provide the phone number and contact name for scheduling deliveries. A 24-hour phone number shall also be provided.
3.5. The delivery and product transfer shall conform to the requirements of the Chlorine Institute Pamphlet 96, Sodium Hypochlorite Manual, Edition 5.
3.6. The supplier shall provide a qualified person per the United States Department of Transportation (USDOT) regulations to attend the unloading at all times.
3.7. If air padding is used to transfer the chemical, then the air must be clean and oil-free. The supplier must provide their own air compressor.
3.8. The supplier’s quotation must include their Standard Operating Procedures (SOP) for unloading and a general description of the method used to unload the truck.
3.9. The City will attempt to order 5,000 gallons per order, but the City will not guarantee that the maximum amount will be ordered each time. The unit price shall remain the same regardless of the amount ordered.
4. Miscellaneous
4.1. If in the event a “Force Majeure” action becomes effective during the term of the contract, the City shall have the option of purchasing sodium hypochlorite from another source until such time as the supplier again fulfills the City’s requirements.
4.2. Specific insurance requirements are listed in the Request for Quotation and must be kept current throughout the term of the contract.
4.3. The supplier shall provide four (4) half-hour training sessions prior to unloading their first deliveries. Two (2) of the training sessions shall be provided for the night shifts, those who work between 6:00 p.m. and 6:00 a.m. Two (2) of the training sessions shall be for the day shifts, those who work 6:00 a.m. to 6:00 p.m. The training sessions shall cover health and safety issues, delivery procedures, scheduling procedures, and chemical characteristics of the delivered chemical. Each training session will include approximately 5 to 10 operators.
The cost of training shall be at no charge to the City and shall be inclusive to the prices quoted.
5. Safety
5.1. The supplier will abide by the RWQCP’s safety procedures for safe unloading at all times.
The supplier’s safety performance may be evaluated for compliance. A safety review includes the right to review injury and illness logs and documentation of training and maintenance.
5.2. The supplier shall furnish all services which are required at each and every filling of the storage tank to comply with applicable regulations and normal good practice.
5.3. Any intended change to delivery and/or unloading should be brought to the attention of the Plant Manager (or Plant Manager’s designee) for consideration well in advance of the change.
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Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
Item 8: Staff Report
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CITY OF PALO ALTO RFQ 188055 PAGE 16
Rev. 12/02/10
5.4. The chemical supplier shall follow the latest federal, state, and local laws and regulations.
6. Term and Bid Price
6.1. The term of the contract shall be for one year with the option to renew the contract annually up to a three-year term. The contractor’s unit prices included in their bid will be increased or decreased every twelve months based on the CPI-U (Consumer Price Index for Urban Wage Earners and Clerical Workers in the San Francisco-Oakland-San Jose, CA area).
6.2. The contractor shall include the following bid items in their quotation:
6.2.1. Quantity 120,000, unit price of $ / gallon
6.2.2. Manufacturing location of the chlorine used in production of sodium hypochlorite
6.2.3. Location where chlorine is converted into sodium hypochlorite Item 8
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Finance Company LLC,
Pioneer Americas LLC
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Exhibit 1
12.5% Sodium Hypochlorite (SH) Date
Receiving / Off-Loading Authorization Form
Make copies of this form, weight scale certificate, signed bill of lading, and certificate of analysis WQCP A/P Admin Associate II’s Copies OPS Copies
ORIGINAL Bill of Lading, Weight Certificate, Certificate of Analysis COPY Bill of Lading, Weight Certificate, Certificate of Analysis COPY Sodium Hypochlorite Receiving Form ORIGINAL Sodium Hypochlorite Receiving Form During Off-Loading Time Delivery Started
10. Check all connections for leaks. Are connections leak-free? • If no, stop immediately and safely secure the leaks before proceeding. □ Yes □ No
11. Maintain vigilance while observing all lines, hoses, and valves for leaks.
DOT regulations require an attendant to remain within 25’ during the unloading process □ Yes □ No
12. Have you stopped the unloading between the FULL and SPILL labels? □ Yes □ No After Off Loading Time Delivery Stopped
13. Are there any noticeable spills?
• If yes, review and follow WQCP procedures to begin spill cleanup □ Yes □ No
14. Inspect off-loading area. Secure receiving port using proper lockout/tagout device. □ Yes □ No
15. Collect all safety gear. and return it, clean and serviceable to storage cabinet. Lock Cabinet. □ Yes □ No Printed Name Signature
WQCP Senior/Supervisor/Operator TPOII
Printed Name Signature
Delivery Driver
This form must be completed in full by both a qualified City of Palo Alto employee and the Sodium Hypochlorite delivery person prior to unloading. Failure to follow the precautions provided in the form will result in disciplinary action up to and including termination and/or the suspension of the business relationship with the supplier. More importantly, failure to follow these precautions may result in personal injury to yourself or others in the work area. Authorization to proceed is not possible if any questions are answered as “NO”. However, if “NO” is an appropriate answer because other safeguards have been put in place, the Supervisor in charge or their designee must make a hand-written note to that affect and attach it to this form. If the Material Sa fety Data Sheets (MSDS) are not available, approval to proceed will not be given under any circumstances.
Prior to Off-Loading
1. Delivery being split requiring driver to make multiple connections If Yes, Start with Tank 3. Finish with Tanks 1 & 2. Tractor Trailer turnaround at DMF is best with empty tank. □ Yes □ No
2. Barricades placed around chemical receiving area and delivery truck □ Yes □ No
3. Driver shown location of
1) Safety Shower 2) Eyewash Station 3) Chemical Spill Response Cabinet □ Yes □ No
4. Driver familiarized WQCP personnel with delivery tank Emergency Shutoff □ Yes □ No
5. Driver provided the Bill of Lading, Certificate of Analysis and Weight Certificate □ Yes □ No
6. WQCP personnel verified that chemical being received is Sodium Hypochlorite,12.5% □ Yes □ No
7. PPE donned by driver. Splash proof goggles or face shield, boots, gloves, hard hat □ Yes □ No
8. PPE donned by WQCP personnel
Chemical Face Shield w/chin guard, boots, neoprene gloves, hard hat □ Yes □ No
9. Receiving tank (s) can accommodate the amount of chemical being delivered SAFETY: Maintain 10% tank volume. MAX Tank Volume = 5,000gals □ Yes □ No BEFORE
gals
1 3 4
Ft
AFTER
galsFt
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Submitted Bid, Olin
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CITY OF PALO ALTO RFQ 188055 PAGE 18
Rev. 12/02/10
BIDDER BID PAGES
Bidder’s Response and Acceptance
In response to this Request for Quotations (RFQ), the undersigned, as Bidder, declares that the only persons or parties interested in t his Bid as principals are those named herein; that this Bid is made without collusion with any other p erson, firm or corporation; that the Bidder has carefully ex amined the specifications herein referred to; and the Bidder proposes and agrees, if this Bid is accepted, that the Bidder will contract with the City of Palo Alto (City), to provide all necessary materials, and furnish the specified requirements in this RFQ, in the manner herein prescribed and at the prices stated. The quantities specified are based upon the best estimates available and are subject to increase or decrease.
Project Title: 12.5% Bulk Sodium Hypochlorite
Request for Quotations (RFQ) number 188055
Quotation Due Date: 3:00 P.M., TUESDAY, MAY 30, 2023
Please furnish us wit h a price and availability on the items listed below. No charges of any kind will be allowed unless specified on this sheet. The City reserves the right to reject any or all quotations.
ITEM ESTIMATED
QTY.
UNIT DESCRIPTION UNIT PRICE TOTAL PRICE
01 120,000 GAL 12.5% Bulk Sodium Hypochlorite (Per the
attached specifications/scope of work)
$ $
Total, item 01, including 9.13% sales tax (if applicable):
(Total in words _____________________________________________________________) $ Prices quoted above shall remain firm for t he initial peri od and s hall include all applicable taxes, regulatory fees, and all transportation and delivery charges as necessa ry to perform the requirements of this RFQ. Pricing shall also include an allowance for fuel price increase during the contract period. Requests for price adjustments during the initial contract period will not be allowed.
Quantities: Material quantities as specified are approximate based on previous year’s usage, and no guarantee is implied that the exact amount will be purchased.
Delivery: Delivery terms shall be F.O.B. Destination, Freight Prepaid in accordance with the attached terms and conditions.
PAYMENT TERMS: City of Palo Alto’s Payment terms for this contract will be: N30 Note: If any price increase or decrease is anticipated during the second and third year of this contract, the increase or decrease every twelve months shall be based on the CPI-U (Consumer Price Index for Urban Wage Earners and Clerical Workers in the San Francisco-Oakland-San Jose, CA area).
2.419 290,280.00
290,280.00Two hundred ninety thousand, two hundred eighty dollars and zero cents **Pricing is subject to a US environmental excise tax of $0.004/gal ** Item 8
Attachment A - RFQ
Submitted Bid, Olin
Finance Company LLC,
Pioneer Americas LLC
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: May 19, 2025
Report #:2501-4063
TITLE
Approval of a Lease Agreement with Embarcadero Way Property Owner, LP, c/o BioScience Properties, Inc. for Laboratory and Office Space at 2470 Embarcadero Way for a Period of 20 Years, at an Initial Annual Lease Amount of $1.11 Million Per Year plus Common Area Expenses, and $4.5 million in Tenant Improvements; CEQA Status – Exempt Under CEQA Guidelines Section 15301
RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager or their designee to execute the Lease Agreement with Embarcadero Way Property Owner, LP, c/o BioScience Properties for Laboratory and Office Space at 2470 Embarcadero Way for a period of 20 years, with an option to extend for an additional 10 years, at an initial annual lease amount of $1.11 million per year plus common area expenses, and $4.5 million in tenant improvements.
EXECUTIVE SUMMARY
The City’s Regional Water Quality Control Plant (RWQCP) is undergoing a series of significant Capital Improvement Program (CIP) projects to implement the RWQCP’s Long-Range Facilities Plan (LRFP), which was accepted by the City Council in 2012.1 Among these projects is a new Laboratory and Environmental Services Building. Identifying larger and safer spaces for the RWQCP’s Laboratory and Engineering groups is an effort that has been underway for over a decade.
The Laboratory Group consists of nine staff members. The existing laboratory is 55-years old.
The building’s infrastructure is failing and it has inadequate space to conduct the increased analytic testing required under current regulations. The Engineering Group consists of five staff members who currently work out of a temporary trailer at the RWQCP. 1City Council, July 2, 2012; SR# 2914
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A 13,946 square-foot building at 2470 Embarcadero Way, located across the street from the RWQCP, has been available for lease for over two years. The building’s owner recently completed a full renovation to a research and development space to attract tenants in the life sciences industry. The building’s location and layout offer an ideal solution for addressing the need for a new laboratory and office space. Staff proposes that the City lease this building for a term of 20 years, with an option for an additional 10 years, at an estimated annual lease amount of $1.5 million per year, plus common area maintenance costs. The Total Lease Amount over the 20-year term is estimated to be $38.7 million. The lease will commence after substantial completion of the required tenant improvements, which are expected to cost approximately $4.5 million. These tenant improvements (TIs) will ensure the space meets the new state testing requirements for drinking and wastewater laboratories. The annual lease amount and required tenant improvements will be budgeted in the Wastewater Treatment Fund, and the cost will be shared among the RWQCP’s six partners.
BACKGROUND
The RWQCP treats wastewater from Palo Alto and five other neighboring communities, including Mountain View, Los Altos, Los Altos Hills, East Palo Alto, and Stanford University.
Significant portions of the RWQCP were built 55 years ago. In 2012, the Public Works – Environmental Services division prepared the LRFP to address the plant’s aging infrastructure and evolving regulations. One of the projects included in the 2012 LRFP was a new staff building. Initially, the City explored constructing a new building on the RWQCP grounds. Staff recommended, and the Council decided, against this approach for several reasons. First, the RWQCP site is severely space limited. Second, the preliminary design estimate for the building was $60 million, and determined to be cost-prohibitive. Third, the time required to design and build a new building would delay the necessary improvements and compete with other high priority treatment process projects. Rather than committing to a single, consolidated building, staff is exploring a dynamic, campus-wide strategy that offers greater flexibility and adaptability for future needs. This approach enables leasing and potentially purchasing smaller adjacent properties as part of the ongoing planning for workspace needs.
Council previously approved a consultant agreement for the design of a new, consolidated staff and laboratory building at the RWQCP.2 Given the estimated cost in 2021 for a new building (approximately $60 million), Council authorized staff to explore the purchase of one or more properties adjacent to the RWQCP as an alternative, in addition to relocating some workgroups 2 City Council, June 14, 2023; Agenda Item #44; SR# 2305-1396 https://portal.laserfiche.com/Portal/DocView.aspx?id=66157&repo=r-704298fc&searchid=11881fbf-e38e-4e8d- 9e44-a2abfe9a184e
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to an adjacent parcel via a lease.3 Exploring long-term lease options was authorized as an alternative option.4
Staff is currently in the process of updating the LRFP, which includes an advanced workspace planning analysis to evaluate opportunities for future space needs at the RWQCP. This effort is exploring several possibilities including rehabilitating and repurposing current Operations and Administration buildings, procurement possibilities for supplemental real estate, lease options and a new on-site building to house several different combinations of workgroups, and providing a new laboratory.5 The LRFP Update is expected to be completed in 2026. Identifying where Laboratory and Engineering Groups will be located for the next 20 years will inform space planning needs in the LRFP update; narrowing these options through this lease will allow a more focused evaluation of space planning needs at the RWQCP.
Over the next 15 years, the number of treatment process facilities that will be rebuilt and the RWQCP’s relatively small parcel size pose a significant challenge in terms of sequencing projects, staging, and finding space for contractors to work and park. Relocating staff to nearby buildings frees up parking and staging areas on-site for future construction projects. Listed below are the current capital projects at the RWQCP:
Table #1: Current Capital Projects at the Regional Water Quality Control Plant Project Status Planned Total
Expense (million) Primary Financing
Primary Sedimentation Tanks Rehabilitation
and Equipment Room Electrical Upgrade
Project
Substantially Complete $16.5 Debt (State Revolving
Fund)
12kV Loop Upgrades, Phase 1 Substantially Complete $6.7 Pay-as-you-go (minor capital)
Secondary Treatment Upgrades In Construction
(approx.30% Complete) $193.0 Debt (State Revolving
Fund)
Joint Interceptor Sewer Rehabilitation, Phase
1 In Construction
(approx. 30%
Complete)
$8.9 Pay-as-you-go
(minor capital)
12kV Loop Upgrades, Phase 2
In Construction
(Awarded in 10/2024,
<10% complete)
$6.8 Pay-as-you-go
(minor capital)
3 City Council, June 22, 2021; Agenda Item #2; SR #11543 https://portal.laserfiche.com/Portal/DocView.aspx?id=55806&repo=r-704298fc&searchid=f77aeef9-1375-48dc- 98cd-73252d2d8786
4 City Council, August 21, 2023; Agenda Item #7;SR #2304-1389 https://portal.laserfiche.com/Portal/DocView.aspx?id=67189&repo=r-704298fc&searchid=4d59af23-ecd7-44cc- a758-51f7679b117e
5City Council, June 10, 2024; Agenda Item #6; SR# 2405-2993 https://portal.laserfiche.com/Portal/DocView.aspx?id=72805&repo=r-704298fc&searchid=8188b562-870a-42de- 9d7a-1d0e531fbb6a
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Table #1: Current Capital Projects at the Regional Water Quality Control Plant Project Status Planned Total
Expense (million) Primary Financing
Advanced Water Purification System Bidding for
Construction $59.9*
Debt (State Revolving
Fund) + Various Grant
Programs
New and Rehabilitated Outfall Pipelines
In Design
(Paused at 90%
Complete)
$17.8** Debt (Bond)
Headworks Facility In Advanced Planning
$55.3***
(Partner forecast
assumes $100M)
Debt (assumed Bond +
State Revolving Fund)
Long Range Facilities Plan Update In Planning $2.5 Pay-as-you-go (minor capital)
* Bids received. Awaiting approval by Mountain View and Palo Alto City Councils ** Estimated amount based on latest pricing from 2018 (likely closer to $20M) *** Anticipating a significantly higher construction estimate cost this spring (2-3x) To support capital projects, the RWQCP’s Engineering Group, which is responsible for implementing the CIP projects, has grown over the years from a one-person to a five-person team. Since 2015, the Engineering Group has been housed in a temporary trailer, which was intended to be a short-term solution. As the scope of the RWQCP’s capital projects has expanded, the current trailer no longer provides enough space for the growing team. In addition, with two additional large capital projects starting in the next five years, the area where the trailer is located would be better utilized for construction management and contractor laydown needs.
The Laboratory plays a crucial role in the health and safety of Palo Alto and neighboring communities by conducting essential tests on drinking water and performing analyses to ensure compliance with wastewater regulations. The existing 55-year-old facility does not provide adequate space for current testing requirements or to house the laboratory staff. The Laboratory building systems continue to deteriorate and fall short in following established best practices in safety, electrical standards, air quality, and analytical methodology. Annually, the Laboratory is audited by the Environmental Laboratory Accreditation Program to ensure that all the equipment meets state required standards.
ANALYSIS
Leasing the building at 2470 Embarcadero Way provides an immediate and efficient solution for the Laboratory and Engineering Groups. The alternative, which is purchasing land/property, coupled with the necessary renovations or new construction required for a new Laboratory, would delay this important improvement for at least five years. The building at 2470 Embarcadero Way is located directly across the street from the RWQCP and is designed for laboratory and office space, making it ideal for both the Laboratory and Engineering Groups.
Establishing a 20-year lease effectively meets the primary need outlined in the LRFP’s capital project, New Laboratory And Environmental Services Building Project (WQ-14002).
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Campus-Wide Approach for Workspace Planning
In addition to leasing 2470 Embarcadero Way, staff will continue to explore purchasing or leasing additional properties in the vicinity as part of a broader, campus-wide approach to meet the evolving space needs of the RWQCP’s workgroups. In 2021, City Council authorized a lease at 1900 Embarcadero Way and the Watershed Protection Team, RWQCP Plant Manager, and RWQCP administrative staff were moved to this space.7
Staff is strategically exploring commercial property options due to the ongoing market changes resulting from the COVID-19 pandemic and the shift to remote and hybrid work models. A combination of new laboratory space completions and commercial property tenants vacating their existing space results in higher available supply, presenting an opportunity to secure additional properties. Staff is currently in discussions with nearby property owners to explore lease and purchase options. Identifying a location for the Laboratory and Engineering Groups allows for a more focused evaluation of space planning needs at and around the RWQCP.
According to the 2025 Silicon Valley Index published by Joint Venture Silicon Valley, new laboratory space development completion reached over 4.0 million square feet in 2024, representing 58% of new commercial space completed and the highest amount in more than two decades. Statistical inventory includes laboratory buildings above 30,000 square feet in Santa Clara County (plus Fremont and Newark) and 20,000 square feet in San Mateo County. In 2024, 2.9 million square feet of laboratory space was leased, representing an increase of 619% since 2010. The average vacancy rate for Silicon Valley laboratory space was 26% in 2024, which is nearly seven times higher than just two years ago, due to a combination of new laboratory completions and tenants vacating their existing space. While inflation-adjusted rates for laboratory space have nearly doubled in the past decade to $6.44, the 5% year-over-year decline in 2024 could represent an opportunity to secure laboratory space at a more favorable rate before the trend reverses.
Lease Agreement
Table #2: Key Terms of the Lease Agreement
Commencement Date Upon Substantial Completion of the TIs Expiration Date 20 Years After the Commencement Date, with option for 10 additional years.
Premises to be Leased 2470 Embarcadero Way (entire building) Rentable Area of Premises 13,946 square feet
Basic Rent $6.65 Per Square Foot, Per Month, Triple Net, Subject to Annual 3% Increases
7 City Council, June 22, 2021; SR #11543
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2025 Common Area Maintenance Charge $1.94 Per Square Foot, Per Month (2025 estimate) Commencement of Rent Upon Substantial Completion of the TIs Basic Rent Reduction 50% Reduction Months 2 Thru 15
Parking Spaces 42
Warranty of Building Systems For 12 Months After the Commencement Date Tenant Improvement Allowance from Landlord $100,000
The proposed lease is a triple net lease, in which the City will pay a base rent, as well as a pro rata share of the common area operating expenses, insurance, and property taxes. Triple net leases are typical for laboratory/R&D spaces. Basic Rent for the first year of payments is estimated to be $1,112,891 prior to the rent reduction of 50% for months 2 through 15.
Payment of rent does not commence until substantial completion of the construction of tenant improvements. The Basic Rent will escalate at 3% per year. The total estimated cost of the Basic Rent over the 20-year lease term is estimated to be $30 million.
In addition to Basic Rent, the City is responsible for its prorata share of the project’s Common Area Maintenance charge, which is estimated at $1.94 per square foot per month for 2025. This charge will be paid monthly based on an annual Estimated Statement, provided by the landlord, and reconciled annually based on actual expenses. Certain controllable expenses are limited to a maximum annual increase of 7%. The City will also be responsible for the building’s operating costs, which includes costs related to maintenance and repair (excluding structural and foundation), janitorial service, and utilities.
Finally, the landlord will be responsible for construction of tenant improvements designed by an architect to meet the City’s specific operational needs, including preferred floorplan layout and the location of key functions such as laboratory processing areas, sample receiving, and storage. The current estimated cost of the tenant improvements is $4.5 million. Approximately $1 million of the $4.5 million in tenant improvement costs will be used to replace aging laboratory equipment, much of which is already due for replacement due to its condition and age.
FISCAL/RESOURCE IMPACT
The total estimated cost of the Basic Rent is $30 million over the 20-year lease term, with the initial lease amount of $1.11 million increasing by 3% annually. In accordance with the Lease Agreement, the rent for months two through 15 will be 50% of the total annual rent for that year.
The RWQCP will not be required to start the annual rent payments until substantial completion of the construction of the tenant improvements. The total cost for the tenant improvements is estimated to be $4.5 million, with completion anticipated in FY 2027. The TIs will utilize part of Item 9
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the budget allocated for the Wastewater Treatment Fund Capital Improvement New Laboratory and Environmental Services Building Project (WQ-14002). This capital project budget is a component of the Wastewater Treatment Fund and is proportionally funded by partner revenue, as included in the forecast provided for FY 2026.
In addition to Basic Rent and the TIs costs, it will be necessary to allocate additional funding for Common Area Maintenance charges and all other building operating costs, including insurance, maintenance, and repairs. Common Area Maintenance charges and building operating costs will be funded through the Wastewater Treatment Fund's operating budget. For 2025, the Common Area Maintenance charge is estimated at $1.94 per square foot per month, or approximately $8.7 million over the 20-year lease term, assuming a 3% escalator.
The projected cost of the new lease, including Basic Rent, and Common Area Maintenance is approximately $38.7 million, with additional costs for the TIs estimated at $4.5 million.
Table #3: Fiscal Impact Summary
Estimated Total Cost Estimated Palo Alto Share* Basic Rent (20-year term) Approximately $30 million Approximately $11.1 million Common Area Maintenance
(20-year term) Approximately $8.7 million Approximately $3.2 million Tenant Improvements (TIs) Approximately $4.5 million Approximately $1.7 million Total: $43 million $16 million
*estimate since it is based on flow share
Because the laboratory and office space is part of the wastewater treatment operation, the costs of the lease will be shared among the City, Mountain View, Los Altos, East Palo Alto, and Stanford University. Palo Alto’s share of the rent is approximately 37%, and the other five agencies’ share is approximately 63%. The total cost of the new lease is estimated at about $1.34 per month for Palo Alto residential ratepayers, which is approximately equivalent to a 2% wastewater rate increase. The wastewater collection rate includes the lease expenses within the proposed rates. This additional budget allocation will be subject to Council approval as part of the annual budget appropriation process.
STAKEHOLDER ENGAGEMENT
Leasing this space will not impact neighbors or Baylands visitors, as no activities producing noise or emissions will be transferred to the new location. Further, the external appearance of the adjacent building will not change. Therefore, a formal outreach program was not conducted. However, the immediate neighbors were notified. The proposed lease expenses, which are approximately 5% of the RWQCP’s estimated annual operating expenses, were shared with the RWQCP partners at a Partners Meeting that included review of FY 2026 Item 9
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expense forecasts. The Partner agency representatives did not express concern with or opposition to the proposed lease.
ENVIRONMENTAL REVIEW
Approval of the Lease Agreement is exempt from review under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guideline Section 15301, Existing Facilities, involving negligible expansion of existing or former use because the proposed lease would move laboratory and engineering operations from the RWQCP to an already-existing building on an adjacent parcel.
ATTACHMENTS
Attachment A: Lease Agreement for 2470 Embarcadero Way
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
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LEASE AGREEMENT
BETWEEN
EMBARCADERO WAY PROPERTY OWNER, LP,
a Delaware limited partnership
(LANDLORD)
AND
CITY OF PALO ALTO,
a California chartered municipal corporation
(TENANT)
_____________, 2025
2470 EMBARCADERO WAY
PALO ALTO, CALIFORNIA
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TABLE OF CONTENTS
Page
-i-
ARTICLE 1 TERMS AND DEFINITIONS ................................................................................................. 1
1.1 Landlord ................................................................................................................................... 1
1.2 Landlord’s Address .................................................................................................................. 1
1.3 Tenant ...................................................................................................................................... 1
1.4 Tenant’s Address ...................................................................................................................... 1
1.5 Building ................................................................................................................................... 1
1.6 Premises ................................................................................................................................... 1
1.7 Initial Term............................................................................................................................... 1
1.8 Tenant’s Vehicle Parking Spaces .............................................................................................. 1
1.9 Tenant Improvement Allowance .............................................................................................. 1
1.10 Scheduled Commencement Date ............................................................................................. 1
1.11 Commencement Date ............................................................................................................... 2
1.12 Basic Rent ................................................................................................................................ 2
1.13 Tenant’s Percentage ................................................................................................................. 2
1.14 Security Deposit ....................................................................................................................... 2
1.15 Broker(s) .................................................................................................................................. 2
1.16 Permitted Use ........................................................................................................................... 2
1.17 Project Area.............................................................................................................................. 2 ARTICLE 2 PREMISES AND COMMON AREAS ................................................................................... 3
2.1 Premises ................................................................................................................................... 3
2.2 Rentable Area ........................................................................................................................... 3
2.3 Common Areas ........................................................................................................................ 3
2.4 Landlord’s Reservation of Rights ............................................................................................ 3 ARTICLE 3 TERM ...................................................................................................................................... 3
3.1 Initial Term............................................................................................................................... 3
3.2 Option Term ............................................................................................................................. 4 ARTICLE 4 DELIVERY .............................................................................................................................. 5 ARTICLE 5 RENT ....................................................................................................................................... 5
5.1 Basic Rent ................................................................................................................................ 5
5.2 Additional Rent ........................................................................................................................ 6
5.3 Late Payment ........................................................................................................................... 6
5.4 Additional Late Payment Remedies ......................................................................................... 6 ARTICLE 6 RENT ADJUSTMENT ............................................................................................................ 6
6.1 Definitions ............................................................................................................................... 6
6.2 Calculation Methods and Adjustments .................................................................................... 9
6.3 Payment of Tenant’s Percentage of Operating Expenses and Real Property Taxes ................. 9
6.4 Review of Annual Reconciliation .......................................................................................... 10 ARTICLE 7 SECURITY DEPOSIT ........................................................................................................... 11
7.1 Security Deposit ..................................................................................................................... 11
7.2 Reserved ................................................................................................................................. 12 ARTICLE 8 USE ........................................................................................................................................ 12
8.1 General ................................................................................................................................... 12 Item 9
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8.2 Laws/CC&&R’s ..................................................................................................................... 12
8.3 Hazardous Materials .............................................................................................................. 13
8.4 Odors and Exhaust ................................................................................................................. 15 ARTICLE 9 MOLD .................................................................................................................................... 16 ARTICLE 10 NOTICES .............................................................................................................................. 16
10.1 Method of Delivery ................................................................................................................ 16
10.2 Receipt of Notices .................................................................................................................. 17
10.3 Statutory Service of Notice .................................................................................................... 17 ARTICLE 11 BROKERS ............................................................................................................................. 17 ARTICLE 12 HOLDING OVER ................................................................................................................. 17 ARTICLE 13 TAXES ON TENANT’S PROPERTY .................................................................................. 17
13.1 Personal Property and Fixtures .............................................................................................. 17
13.2 Tenant Improvements ............................................................................................................. 18
13.3 Additional Taxes .................................................................................................................... 18 ARTICLE 14 CONDITION OF PREMISES ............................................................................................... 18 ARTICLE 15 ALTERATIONS ..................................................................................................................... 18
15.1 Alterations and Major Alterations .......................................................................................... 18
15.2 Removal of Alterations and Tenant’s Personal Property ........................................................ 19 ARTICLE 16 REPAIRS ............................................................................................................................... 20
16.1 Tenant Obligations ................................................................................................................. 20
16.2 Landlord Obligations ............................................................................................................. 20 ARTICLE 17 LIENS .................................................................................................................................... 21 ARTICLE 18 ENTRY BY LANDLORD ..................................................................................................... 21 ARTICLE 19 UTILITIES AND SERVICES ............................................................................................... 21
19.1 Premises Utilities ................................................................................................................... 21
19.2 Janitorial Service .................................................................................................................... 22
19.3 Landlord Exculpation............................................................................................................. 22
19.4 Limitations on Tenant’s Utilities ............................................................................................ 22
19.5 Common Area Water .............................................................................................................. 22
19.6 Energy Tracking ..................................................................................................................... 22
19.7 Reservation of Rights ............................................................................................................. 23
19.8 Abatement of Rent ................................................................................................................. 23 ARTICLE 20 INDEMNIFICATION AND EXCULPATION OF LANDLORD ........................................ 23
20.2 Indemnification of Tenant ...................................................................................................... 24 ARTICLE 21 DAMAGE TO TENANT’S PROPERTY .............................................................................. 24 Item 9
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ARTICLE 22 INSURANCE......................................................................................................................... 25
22.1 Tenant’s Insurance ................................................................................................................. 25
22.2 Standard of Insurance ............................................................................................................ 27
22.3 Landlord Insurance ................................................................................................................ 27
22.4 Subrogation Waivers .............................................................................................................. 27 ARTICLE 23 DAMAGE OR DESTRUCTION ........................................................................................... 28
23.1 Damages ................................................................................................................................ 28
23.2 Termination of Lease ............................................................................................................. 28
23.3 Rent Abatement ...................................................................................................................... 29
23.4 Damage Near End of Term .................................................................................................... 29
23.5 Waiver of Statute .................................................................................................................... 29 ARTICLE 24 EMINENT DOMAIN ............................................................................................................ 29
24.1 Permanent Taking .................................................................................................................. 29
24.2 Temporary Taking .................................................................................................................. 29
24.3 Waiver of Statute .................................................................................................................... 29 ARTICLE 25 DEFAULTS AND REMEDIES............................................................................................. 30
25.1 Tenant Default ........................................................................................................................ 30
25.2 Landlord Remedies ................................................................................................................ 30
25.3 Additional Remedies .............................................................................................................. 31
25.4 Notice of Default ................................................................................................................... 31
25.5 Landlord’s Right to Cure ....................................................................................................... 32
25.6 Waiver of Redemption ........................................................................................................... 32
25.7 Landlord’s Default ................................................................................................................. 32
25.8 Tenant’s Right to Cure ........................................................................................................... 32 ARTICLE 26 NO WAIVER ......................................................................................................................... 33 ARTICLE 27 ASSIGNMENT AND SUBLETTING ................................................................................... 33
27.1 Transfer .................................................................................................................................. 33
27.2 Transfer Procedure ................................................................................................................. 33
27.3 Recapture ............................................................................................................................... 34
27.4 Landlord’s Consent; Consent Standards; No Release ............................................................ 34
27.5 Landlord’s Costs; Transfer Premiums .................................................................................... 35
27.6 Rights Not Transferable ......................................................................................................... 35 ARTICLE 28 SUBORDINATION ............................................................................................................... 36 ARTICLE 29 ESTOPPEL CERTIFICATE ................................................................................................... 36
29.1 Tenant Estoppel Certificate .................................................................................................... 36
29.2 Failure to Deliver ................................................................................................................... 36 ARTICLE 30 INTENTIONALLY OMITTED ............................................................................................ 37 ARTICLE 31 SURRENDER OF PREMISES .............................................................................................. 37 Item 9
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ARTICLE 32 PERFORMANCE BY TENANT........................................................................................... 37 ARTICLE 33 PARKING .............................................................................................................................. 37 ARTICLE 34 LIMITATION ON LIABILITY ............................................................................................. 38
34.1 Landlord’s Liability ............................................................................................................... 38 ARTICLE 35 CONFIDENTIALITY............................................................................................................ 38 ARTICLE 36 MISCELLANEOUS .............................................................................................................. 39
36.1 Rules and Regulations............................................................................................................ 39
36.2 Conflict of Laws .................................................................................................................... 39
36.3 Successors and Assigns .......................................................................................................... 39
36.4 Professional Fees ................................................................................................................... 39
36.5 Mortgagee Protection ............................................................................................................. 39
36.6 Definition of Landlord ........................................................................................................... 39
36.7 Identification of Tenant .......................................................................................................... 39
36.8 Force Majeure ........................................................................................................................ 40
36.9 Terms and Headings ............................................................................................................... 40
36.10 Examination of Lease ............................................................................................................ 40
36.11 Time ....................................................................................................................................... 40
36.12 Prior Agreement; Amendments .............................................................................................. 40
36.13 Severability ............................................................................................................................ 40
36.14 Recording ............................................................................................................................... 40
36.15 Modification for Lenders ....................................................................................................... 40
36.16 Financial Statements .............................................................................................................. 40
36.17 Quiet Enjoyment .................................................................................................................... 40
36.18 Tenant as Corporation, Partnership or Limited Liability Company ....................................... 41
36.19 CASp Disclosure .................................................................................................................... 41 ARTICLE 37 SIGNAGE .............................................................................................................................. 41 ARTICLE 38 EXECUTIVE ORDER 13224 ................................................................................................ 42 ARTICLE 39 WAIVER OF JURY TRIAL ................................................................................................... 42 ARTICLE 40 TENANT REPRESENTATIONS.......................................................................................... 42 ARTICLE 41 ADDITIONAL PROVISIONS .............................................................................................. 43
41.1 Environmental Assessments ................................................................................................... 43
41.2 Early Access .......................................................................................................................... 43
41.3 Early Parking ......................................................................................................................... 44
41.4 Additional EV Spaces ............................................................................................................ 44 Item 9
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LIST OF EXHIBITS
EXHIBIT SECTION REFERENCE
A-I - Outline of Premises 2.1
A-II - Project Site Plan 2.1
B - Work Letter Agreement 2.1
C - Form of Memorandum of Lease Terms 3
D - Reserved --
E - Form of Tenant Estoppel Certificate 29
F - Rules and Regulations 31
G - Parking Rules and Regulations 40
H - Outdoor Equipment Locations 1.8
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LEASE AGREEMENT
THIS LEASE AGREEMENT (this “Lease”) is made as of ___________, 2025 (“Effective Date”), by and between EMBARCADERO WAY PROPERTY OWNER, LP, a Delaware limited partnership (“Landlord”), and CITY OF PALO ALTO, a California chartered municipal corporation (“Tenant”). The parties hereto agree that this Lease is upon and subject to the terms, covenants and conditions herein set forth. Each of Landlord and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions by it to be kept and performed.
ARTICLE 1
TERMS AND DEFINITIONS
For the purposes of this Lease, the following terms shall have the following definitions and meanings:
1.1 Landlord: Embarcadero Way Property Owner, LP, a Delaware limited partnership
1.2 Landlord’s Address:
Embarcadero Way Property Owner, LP
c/o Bioscience Properties, Inc.
514 Via De La Valle, Suite 300A
Solana Beach, CA 92075
Attention: Steve Bollert
Email: [email protected]
1.3 Tenant: City of Palo Alto, a California chartered municipal corporation
1.4 Tenant’s Address:
City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: Real Property Manager
1.5 Building: That certain building located at 2470 Embarcadero Way, Palo Alto, California 94303.
The Building is one of four buildings in the project located at 2438-2478 Embarcadero Way, Palo Alto, California 94303, which buildings, together with the land upon which they are located, the Parking Area and all other Common Areas, are collectively referred to herein as the “Project.”
1.6 Premises: The premises (“Premises”) shall consist of the entire Building consisting of approximately 13,946 rentable square feet of area (“Rentable Square Feet”).
1.7 Initial Term: Two hundred and forty (240) months.
1.8 Tenant’s Vehicle Parking Spaces: Forty-two (42) unreserved parking spaces within the Parking Area (defined in Article 33 below) at no additional charge during the Initial Term, subject to the terms and conditions of Article 33 below. Tenant shall be permitted to store certain equipment in a portion of Tenant’s Vehicle Parking Spaces, as more particularly set forth on Exhibit “H” attached hereto and incorporated herein by this reference, and in no event shall Tenant be entitled to additional parking spaces as a result thereof. All such storage shall be at Tenant’s sole cost, risk and expense.
1.9 Tenant Improvement Allowance : Up to One Hundred Thousand and 00/100 Dollars ($100,000.00) to be contributed by Landlord toward the cost of constructing the Tenant Improvements pursuant to the Work Letter Agreement described in Section 2.1 below.
1.10 Scheduled Commencement Date: The date set forth in the Work Schedule (as that term is defined in the Work Letter Agreement) as the date on which the Tenant Improvements are expected to be Substantially Complete pursuant to the terms and conditions of, and as those terms are defined in, the Work Letter Agreement.
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1.11 Commencement Date: The earlier to occur of (i) the date upon which Tenant first commences to conduct business in the Premises, and (ii) the Scheduled Commencement Date.
1.12 Basic Rent:
Months of
Initial Term
Basic Rent per Rentable
Square Foot ($/mo)
Monthly Installments of
Basic Rent ($/mo)
Annual
Basic Rent ($/yr)
1-12 $6.65 $92,740.90 $1,112,890.80
13-24 $6.85 $95,523.13 $1,146,277.56
25-36 $7.05 $98,388.82 $1,180,665.84
37-48 $7.27 $101,340.48 $1,216,085.76
49-60 $7.48 $104,380.69 $1,252,568.28
61-72 $7.71 $107,512.11 $1,290,145.32
73-84 $7.94 $110,737.47 $1,328,849.64
85-96 $8.18 $114,059.59 $1,368,715.08
97-108 $8.42 $117,481.38 $1,409,776.56
109-120 $8.68 $121,005.82 $1,452,069.84
121-132 $8.94 $124,635.99 $1,495,631.88
133-144 $9.21 $128,375.07 $1,540,500.84
145-156 $9.48 $132,226.32 $1,586,715.84
157-168 $9.77 $136,193.11 $1,634,317.32
169-180 $10.06 $140,278.90 $1,683,346.80
181-192 $10.36 $144,487.27 $1,733,847.24
193-204 $10.67 $148,821.89 $1,785,862.68
205-216 $10.99 $153,286.55 $1,839,438.60
217-228 $11.32 $157,885.15 $1,894,621.80
229-240 $11.66 $162,621.70 $1,951,460.40
*Provided that Tenant is not in default under this Lease beyond any applicable notice and cure period, monthly installments of Basic Rent shall be abated by fifty percent (50%) for months two (2) (referring to the second full month of the Initial Term) through fifteen (15) of the Initial Term pursuant to the terms and conditions of Section 5.1 below.
1.13 Tenant’s Percentage: 25.20%.
1.14 Security Deposit: $119,935.60.
1.15 Broker(s): CBRE, Inc., representing Landlord.
1.16 Permitted Use: Office, laboratory and research and development, and any other related use, subject to compliance with all applicable Laws (defined below).
1.17 Project Area: 55,339 Rentable Square Feet.
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ARTICLE 2
PREMISES AND COMMON AREAS
2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises outlined on the Floor Plan attached hereto, marked Exhibit “A-I”, and incorporated herein by this reference (“Outline of Premises”). The Premises are located in the Building, which, together with the Parking Area, is located on the parcel or parcels of real property (“Project Site”) outlined on the Project Site Plan attached hereto, marked as Exhibit “A-II”, and incorporated herein by this reference (“Project Site Plan”) (all of which, together with the Project Common Areas, as hereinafter defined, are collectively referred to as the “Project”). The Premises are leased in their “AS-IS” condition in accordance with Article 14; provided however, the Premises will be improved by Landlord with the Tenant Improvements described in the Work Letter Agreement, a copy of which is attached hereto, marked as Exhibit “B” and incorporated herein by this reference (“Work Letter Agreement”). The Premises are agreed, for the purposes of this Lease, to have approximately the number of Rentable Square Feet designated in Section 1.6.
2.2 Rentable Area. Landlord and Tenant stipulate and agree that the Rentable Square Feet of the Premises is as specified in Section 1.6 and the Rentable Square Feet of the Project is as specified in Section 1.17.
2.3 Common Areas. Tenant and its employees, invitees and agents shall have the nonexclusive right to use in common with Landlord and other tenants or occupants of the Project and their respective employees, invitees and agents, subject to the Rules and Regulations referred to in Section 36.1 below and all covenants, conditions and restrictions affecting the Project, any of the following areas which may be appurtenant to the Premises: the Parking Area and any loading and unloading areas, trash areas, service areas, parking areas, roadways, sidewalks, walkways, plazas, parkways, driveways, landscaped areas and similar areas and facilities from time to time situated within the Project (collectively, “Project Common Areas” or “Common Areas”).
2.4 Landlord’s Reservation of Rights. Landlord reserves for itself, and for the owner(s) and operator(s) of the Project or any portion thereof, the right from time to time without material interference with Tenant’s Permitted Use:
2.4.1. to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas of the Premises, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment which are located in the Premises or elsewhere, and to expand the Parking Area ;
2.4.2. to make changes in its sole and absolute discretion to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas and walkways;
2.4.3. to close temporarily any of the Common Areas for maintenance purposes and to avoid claims of prescriptive rights so long as reasonable access to the Premises remains available;
2.4.4. to designate other land outside the boundaries of the Building or the Project to be a part of the Project Common Areas;
2.4.5. to add additional buildings and improvements to the Project Common Areas;
2.4.6. to use the Common Areas while engaged in making additional improvements, repairs or alterations to the Building, the Parking Area or the Project, or any portion thereof; and
2.4.7. to do and perform such other acts and make such other changes in, to or with respect to the Project or any portion thereof as Landlord and/or the owner(s) and/or operator(s) thereof may deem to be appropriate, provided such acts or changes do not materially interfere with Tenant’s Permitted Use.
ARTICLE 3
TERM
3.1 Initial Term. The “Initial Term” of this Lease shall be for the period designated in Section 1.7, commencing on the Commencement Date and ending on the last day of the month in which the expiration of such Item 9
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period occurs, unless sooner terminated as hereinafter provided; provided that if the Commencement Date occurs on a day other than the first day of any calendar month, for purposes of calculating the date (“Expiration Date”) on which the Term is scheduled to expire and the timing of all scheduled increases in Basic Rent during the Term, the Commencement Date shall be deemed to be the first day of the calendar month following the Commencement Date.
The Commencement Date, the date upon which the Initial Term of this Lease shall end unless sooner terminated pursuant to the provisions hereof, and any other matters which require confirmation shall be specified in a Memorandum of Lease Terms, which shall be in substantially the form of Exhibit “C”, attached hereto and incorporated herein by this reference (“Memorandum of Lease Terms”), and shall be executed by Tenant as soon as practicable after the Commencement Date but in no event later than ten (10) business days after the Commencement Date. If such Memorandum of Lease Terms is not executed by Tenant within such ten (10) business day period, the terms contained therein, as provided by Landlord, shall be deemed accepted. As used herein, “Term” shall refer to the Initial Term as it may be extended by written agreement of Landlord and Tenant, including, without limitation, as a result of Tenant’s proper and timely exercise of the Option in accordance with Section 3.2 below.
3.2 Option Term. Tenant shall have the right and option (“Option”) to extend the Term of this Lease for one (1) additional period of ten (10) years (“Option Term”). The Option Term shall commence on the day immediately succeeding the expiration date of the Initial Term and shall end on the day immediately preceding the tenth (10th) anniversary of the first day of such Option Term. Notwithstanding any provision of this Section 3.2 to the contrary, the Option shall be personal to the original Tenant named herein (i.e., City of Palo Alto) (“Original Tenant”).
3.2.1. Tenant shall exercise the Option by giving written notice to Landlord of its election to do so not earlier than fifteen (15) months and not later than nine (9) months prior to the expiration of the Initial Term.
The giving of such notice of extension by Tenant shall automatically extend the Term of this Lease for such Option Term, and no instrument of renewal or extension need be executed. In the event that Tenant fails to give timely notice to Landlord, this Lease shall automatically terminate at the end of the Initial Term and Tenant shall have no further option to extend the Term of this Lease. The Option shall be exercisable by Tenant only on the express condition that at the time of the exercise, and at all times prior to the commencement of the Option Term, Tenant shall not be in Default under any of the provisions of this Lease beyond the applicable notice and cure period.
3.2.2. The Option Term shall be on all the terms and conditions of this Lease, except that: (i) Tenant shall have no further right or option to extend the Term as provided by this Section 3.2 and (ii) the Basic Rent for the Option Term shall be equal to the lesser of (a) ninety-five percent (95%) of the Fair Market Rental Value of the Premises for such Option Term, determined pursuant to Subsection 3.2.3 below, or (b) one hundred three percent (103%) of the Basic Rent payable during the last month of the Initial Term. If Tenant subleases greater than fifty percent (50%) of the Premises or assigns or otherwise transfers any interest under this Lease, the Option shall lapse.
If Tenant subleases any portion of the Premises or assigns or otherwise transfers any interest of Tenant under this Lease to any person or entity after the exercise of the Option but prior to the commencement of the Option Term (whether with or without Landlord’s consent), the Option shall lapse and the Term of this Lease shall expire as if the Option was not exercised.
3.2.3. For the purposes hereof, “Fair Market Rental Value” of the Premises shall mean the prevailing annual market rental value (which rental value determination may include increases in Rent during the Option Term) for comparable office and laboratory/research and development space of comparable size, quality and location in comparable first-class office and laboratory/research and development buildings located in the Palo Alto, Mountain View, San Carlos and Redwood City, California markets as of the date of commencement of the Option Term (“Comparable Transactions”), taking into consideration the amenities offered in or near the Project and the amount, availability and cost of parking.
3.2.4. Within thirty (30) days after receiving Tenant’s notice of its election to exercise the Option to extend the Term of this Lease, Landlord shall provide Tenant with Landlord’s good faith estimate of the Fair Market Rental Value of the Premises for the Option Term (“Landlord’s Fair Market Rental Value Notice”) with at least three (3) Comparable Transactions. In the event that Tenant objects to Landlord’s determination of the Fair Market Rental Value within ten (10) business days following Tenant’s receipt of Landlord’s Fair Market Rental Value Notice, Landlord and Tenant shall attempt to agree upon the Fair Market Rental Value using their best good faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) business days following Tenant’s objection to the Fair Market Rental Value (“Outside Agreement Date”), then each party shall make a separate determination of the Fair Item 9
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Market Rental Value within five (5) business days after the Outside Agreement Date, and such determinations shall be submitted to arbitration in accordance with Subsection 3.2.4(A) through Subsection 3.2.4(G) below. (A) Landlord and Tenant shall each appoint one arbitrator who shall be an independent MAI designated real estate appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the appraising of properties in Comparable Transactions. Each such arbitrator shall be appointed within fifteen (15) days after the applicable Outside Agreement Date. (B) The two (2) arbitrators so appointed shall within ten (10) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) arbitrators. (C) The three (3) arbitrators shall within thirty (30) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Fair Market Rental Value and shall notify Landlord and Tenant thereof.
(D) The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Rental Value is the closest to the actual Fair Market Rental Value, as determined by the arbitrators, taking into account the requirements of Subsection 3.2.3. The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant. (E) If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the applicable Outside Agreement Date, then the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof and such arbitrator’s decision shall be binding upon Landlord and Tenant. (F) If the two (2) arbitrators fail to agree upon and appoint a third arbitrator, or if both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this Subsection 3.2.4. (G) The cost of the arbitration shall be paid by Landlord and Tenant equally.
ARTICLE 4
DELIVERY
Landlord will endeavor to tender possession of the Premises to Tenant with the Tenant Improvements Substantially Complete on or before the Scheduled Commencement Date; provided, that if the date on which Landlord actually tenders possession of the Premises to Tenant in such condition does not occur on or before the Scheduled Commencement Date, this Lease shall not be void or voidable, the Term of this Lease shall not be extended, and Landlord shall not be liable to Tenant for any loss or damage resulting therefrom; provided further that Landlord shall use commercially reasonable efforts to tender to Tenant delivery of possession of the Premises in such condition as soon as reasonably possibly after the Scheduled Commencement Date.
ARTICLE 5
RENT
5.1 Basic Rent. Tenant shall pay Landlord as consideration for the use and enjoyment of the Premises the Basic Rent designated in Section 1.11 (subject to proration as hereinafter provided) in equal monthly installments, each in advance on the first day of each calendar month during the Term commencing on the Commencement Date, except that the first month’s Rent (inclusive of Basic Rent and Tenant’s Percentage of Operating Expenses and Real Property Taxes) shall be paid to Landlord upon delivery to Landlord of a copy of this Lease, executed by Tenant. If the Term of this Lease commences on a day other than the first day of a calendar month or ends on a day other than the last day of a calendar month, then the Rent for such period shall be prorated on the basis of the actual number of days in the month. Notwithstanding the foregoing, and provided that Tenant is not in default under this Lease beyond any applicable notice and cure period, the monthly installment of Basic Rent for the Premises shall be abated by fifty percent (50%) during months two (2) (referring to the second full month of the Initial Term) through fifteen (15) of the Initial Term (“Abatement Period”). If at any time during the Term Tenant defaults under this Lease beyond Item 9
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applicable notice and cure periods and such default results in a termination of this Lease, all unamortized previously abated Basic Rent, amortized over the Initial Term, shall immediately become due and payable. All other terms and provisions of this Lease (including, without limitation, the obligation to pay Additional Rent) shall apply to the Premises both during the Abatement Period and thereafter.
5.2 Additional Rent. In addition to the Basic Rent, Tenant agrees to pay as Additional Rent (defined below) the amount of Rent adjustments and other charges required by this Lease less any credits which may be expressly set forth in this Lease. Other charges to be paid by Tenant hereunder, including, without limitation, payments for Operating Expenses, Real Property Taxes, insurance, insurance deductibles and repairs shall be considered “Additional Rent” for purposes of this Lease. The term “Rent” as used in this Lease shall mean Basic Rent and Additional Rent and all other amounts payable by Tenant pursuant to this Lease. When no other time is stated herein for payment, payment of any amount due from Tenant to Landlord hereunder shall be made within thirty (30) days after Tenant’s receipt of Landlord’s invoice or statement therefor. All Rent shall be paid to Landlord, without prior demand and without any deduction or offset except as specified herein, in lawful money of the United States of America, via Automated Clearing House (ACH) or to such other person or at such other place as Landlord may from time to time designate in writing.
5.3 Late Payment. If Tenant fails to pay any installment of Rent when due or in the event Tenant fails to make any other payment for which Tenant is obligated under this Lease when due, such late amount shall accrue interest and Tenant shall pay Landlord as Additional Rent interest on such amount at an annual rate (“Default Rate”) equal to the lesser of: (a) the then prevailing prime rate of Bank of America NT & SA (“Prime Rate”) plus six (6) percentage points or (b) the maximum rate permitted by law from the date such amount became due until such amount is paid. If the format or components of the Prime Rate are materially changed, or if the Prime Rate ceases to exist, Landlord shall substitute a prime rate or alternative base rate of interest that is maintained by the Bank of America NT & SA or similar financial institution which Landlord determines in its reasonable business judgment. In addition to said interest, Tenant shall pay to Landlord concurrently with any installment of Rent, or other payment, not paid within five (5) days of the date upon which it is due, and Landlord may demand same from Tenant, as Additional Rent, a late charge equal to five percent (5%) of the late amount to compensate Landlord for the extra costs incurred as a result of such late payment. THE PARTIES AGREE THAT ANY SUCH LATE PAYMENT MAY CAUSE LANDLORD TO
INCUR ADMINISTRATIVE COSTS AND OTHER DAMAGE, THE EXACT AMOUNT OF WHICH WOULD BE
IMPRACTICABLE OR EXTREMELY DIFFICULT TO ASCERTAIN, AND THAT SUCH INTEREST AND LATE
CHARGE REPRESENT A FAIR AND REASONABLE ESTIMATE OF THE DETRIMENT THAT LANDLORD WILL SUFFER BY REASON OF LATE PAYMENT BY TENANT. Acceptance of any such interest and late charge shall not constitute a waiver of any Tenant Default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord hereunder or at law. Notwithstanding the foregoing, Landlord hereby agrees to waive the interest and late fee on the first late payment made during any twelve (12) month period provided that such payment is made in full within five (5) days after Landlord delivers written notice to Tenant that such amount is past due.
5.4 Additional Late Payment Remedies . Any payment returned to Landlord shall be subject to a handling charge of $50.00.
ARTICLE 6
RENT ADJUSTMENT
6.1 Definitions. For the purposes of this Lease, the following terms shall be defined as follows:
6.1.1. Operating Expenses : “Operating Expenses” shall consist of all costs of operation, management, ownership, insurance, maintenance and repair of the Project, including without limitation the Building, the Common Areas and all other portions of the Project, including any expansions thereof by Landlord or by the owner(s) and/or the operator(s) thereof. Operating Expenses shall include, without limitation, the following: (a) any and all non-tax assessments payable by Landlord for, or costs or expenses incurred by Landlord in connection with, the Building or the Project pursuant to any covenants, conditions or restrictions, reciprocal easement agreements, tenancy-in-common agreements or similar restrictions and agreements affecting the Building or the Project; (b) assessments and any taxes or assessments hereafter imposed in lieu thereof; (c) Rent taxes and gross receipts taxes (whether assessed against Landlord or assessed against Tenant and paid by Landlord, or both), except to the extent already included in Real Estate Taxes ; (d) water and sewer charges; (e) accounting, legal and other consulting fees Item 9
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reasonably incurred by Landlord in connection with the operation, management, ownership, insurance, maintenance, and repair of the Project or any portion thereof; (f) the net cost and expense of insurance premiums, and any associated insurance deductibles, for which Landlord and/or the owner(s) and/or the operator(s) of the Project is (are) responsible or any first mortgagee with a lien affecting the Premises reasonably deems necessary in connection with the operation of the Building or the Project; (g) the cost of providing utilities to the Project that are not separately metered and paid for by Tenant, including, but not limited to, any and all costs and fees associated with the installation, maintenance, repair, or replacement of intrabuilding network telephone and data cable; (h) janitorial services, security, labor, utilities surcharges or any other costs levied, assessed or imposed by, or at the direction of, or resulting from statutes, including, but not limited to, the Americans with Disabilities Act (42 U.S.C. Section 12101 et seq.), or regulations or interpretations thereof promulgated by, any federal, state, regional, local or municipal governmental authority, agency or subdivision (each, a “Governmental Authority”) in connection with the use or occupancy of the Project or any portion thereof; (i) costs and expenses incurred or suffered by Landlord in connection with transportation or energy management programs; (j) the cost (amortized over such period as is customar y under sound institutional real estate property management procedures (“Institutional Owner Practices”), together with interest at a rate (“Interest Rate”) equal to the Prime Rate plus two (2) percentage points on the enumerated balance): (i) of any capital improvements or replacements intended as labor-saving devices or to effect other economies in the maintenance or operation of, or stability of services to, the Building or the Project Common Areas by Landlord or by the owner(s) and/or the operator(s) thereof, or (ii) of replacing any equipment, systems or materials needed to operate the Project or any portion thereof at the same quality levels as prior to the improvement or replacement or as mandated by revisions or governmental interpretations of any applicable Laws (defined below) or (iii) which are designed to reduce Operating Expenses or to comply with Laws; (k) costs incurred in the management of the Project, including supplies, materials, equipment, on-site management office rent, wages and salaries of employees used in the management, operation and maintenance thereof, payroll taxes and similar governmental charges with respect thereto, and a Project management fee (not to exceed three percent (3%) of gross receipts, grossed up to reflect ninety-five percent (95%) occupancy); (l) all costs and expenses for air-conditioning, waste disposal, heating, ventilating, elevator repair and maintenance, supplies, materials, equipment, and tools incurred in connection with the Project or any portion thereof (except as the same is payable to Landlord by tenants of the Project under their leases for space in the Project); ( m) repair and maintenance of the roof and structural portions of the Building and the Common Areas, including the plumbing, heating, ventilating, air conditioning and electrical systems installed or furnished by Landlord; ( n) maintenance costs of the Building, the Common Areas and the Project or any portion thereof, including utilities, rent of personal property used in maintenance and all other upkeep and wages, salaries, and other compensation and benefits of all persons engaged in the operation, maintenance, or security of the Project, plus employer’s Social Security taxes, unemployment taxes, insurance, and any other taxes imposed on Landlord that may be levied on those wages, salaries, and other compensation and benefits. If any of Landlord’s employees provide services for more than one building of Landlord, only the prorated portion of those employees’ wages, salaries, other compensation and benefits, and taxes reflecting the percentage of their working time devoted to the Project shall be included in Operating Expenses ; (o) costs and expenses of gardening and landscapin g the Project or any portion thereof; (p) maintenance of signs located in or about the Project (other than Tenant’s signs or the signs of other tenants or occupants of the Building who are responsible to maintain their own signs); ( q) personal property taxes levied on or attributable to personal property of Landlord or the owner(s) and/or operator(s) of the Project used in connection with the Project; ( r) reasonable audit or verification fees incurred in con nection with the Project; and (s ) the costs and expenses of repairs (including latent defects), resurfacing, maintenance, painting, lighting, cleaning, refuse removal, security and similar items incurred with respect to the Project, including appropriate reserves.
6.1.2. Operating Expenses shall not include: (A) depreciation on the Building or equipment therein; (B) Landlord’s costs associated with: (1) operation of the business of the ownership of the Project or entity that constitutes Landlord or Landlord’s property manager, as distinguished from the cost of Building operations, including the costs of partnership or corporate accounting and legal matters (2) Landlord’s general corporate or partnership overhead and general administrative expenses, including the salaries of management personnel who are not directly related to the Building and not primarily engaged in the operation, maintenance, and repair of the Project ; (C) real estate broker’s commissions; (D) legal fees and disbursements incurred for collection of tenant accounts or negotiation of leases, or relating to disputes between Landlord and other tenants and occupants of the Building or Project; (E) the cost of any capital improvements unless specifically permitted by this Section 6.1.1, parts (a) through (s), inclusive; (F) amounts received by Landlord on account of proceeds of insurance to the extent the proceeds are reimbursement for expenses which were previously included in Operating Expenses; ( G) payments of principal and interest on Item 9
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any mortgages upon the Project or Building; ( H) payments of ground rent pursuant to any ground lease covering the Project or Building; (I) the costs of gas, steam or other fuel; operation of elevators and security systems; heating, cooling, air conditioning and ventilating; chilled water, hot and cold domestic water, sewer and other utilities or any other service work or facility, or level or amount thereof, provided to any other tenant or occupant in the Project which either (x) is not required to be supplied or furnished by Landlord to Tenant under the provisions of this Lease or (y) is supplied or furnished to Tenant pursuant to the terms of this Lease with separate or additional charge; and ( J) any cost that is expressly excluded from Operating Expenses in an express provision contained in this Lease ; (K) real estate brokers’ leasing commissions: (L) costs of providing any service(s) directly to and paid directly by any tenant ; (M) interest, principal, depreciation, attorney fees, costs of environmental investigations or reports, points, fees, or other lender costs and closing costs on any mortgage or mortgages or other debt instrument encumbering the Project ; (N) Landlord’s costs of electricity and other utilities, items, benefits, and services that are sold or provided to other tenants or occupants but that are not offered or provided to Tenant ; (O) interest or penalties resulting from late payment of any operating expenses by Landlord due to Landlord’s negligence or willful misconduct (unless Landlord in good faith disputes a charge and subsequently loses or settles that dispute) or any amount payable by Landlord to any tenant resulting solely from Landlord’s default in it obligations to that tenant; (P) Expenses, costs, and disbursements relating to, or arising directly or indirectly from, the testing for or analysis, handling, removal, treatment, disposal, remediation, or replacement of asbestos or asbestos- containing materials in, on, around, beneath, or from the Building ; (Q) Costs incurred because the Project violates any applicable building code, regulation, or law in effect and as interpreted by government authorities before the date on which this Lease is signed. This exclusion from Operating Expenses shall include fines, penalties, interest, and the costs of repairs, replacements, alterations, or improvements necessary to make the Project comply with applicable past laws in effect and as interpreted by government authorities before the date on which this Lease is signed, such as sprinkler installation or requirements under the Americans with Disabilities Act of 1990 ; (R) Costs of (1) initial construction of the Building, (2) reconstruction of the Building, except to the extent of any insurance deductibles, or (3) modification, alteration, or repair of any portion of the Building due to faulty construction (other than by Tenant) or latent defects in construction.
6.1.3. Real Property Taxes : “Real Property Taxes” shall mean and include any form of assessment, re-assessment, commercial rent tax, levy, charge, tax or similar imposition, imposed by any authority having the direct power to tax, including any Governmental Authority, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, as against any legal or equitable interest of Landlord in the Building, the Premises or the Project, including but not limited to the following:
(A) any assessment, tax, fee, levy or charge in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real estate tax, including but not limited to, any assessments, taxes, fees, levies and charges that may be imposed by any Governmental Authority for such services as fire protection, street, sidewalk or road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, it being the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies and charges be included within the definition of “Real Property Taxes” for the purposes of this Lease; (B) any assessment, tax, fee, levy or charge allocable to or measured by the area of any premises in the Project or the Rent payable hereunder and under any other leases for premises in the Building, the Parking Area or the Project, including without limitation any gross income tax or excise tax levied by any Governmental Authority or any political subdivision thereof, with respect to the receipt of such Rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by tenants of their premises in the Project, or any portion thereof; and (C) any assessment, tax, fee, levy or charge upon this transaction or any document creating or transferring an interest or an estate in the Project or any portion thereof, or based upon a reassessment of the Project or any portion thereof by virtue of a “change in ownership”, and as a result thereof, and to the extent that in connection therewith, the Building is reassessed for real estate tax purposes by the appropriate Governmental Authority pursuant to the terms of Proposition 13 (as adopted by the voters of the State of California in the June, 1978 election, or any successor statute).
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Notwithstanding any provision of this Section 6.1.2 expressed or implied to the contrary, “Real Property Taxes” shall not include Landlord’s federal or state income, franchise, inheritance or estate taxes. If and to the extent that Landlord receives a tax exemption as a result of Tenant being a governmental entity (whether such tax exemption applies to items within the definition of “Real Property Taxes” or “Operating Expenses”), then Tenant shall be the sole beneficiary of such tax exemption and Landlord shall pass the savings realized by Landlord as a result of such tax exemption directly on to Tenant.
6.1.4. Tenant’s Percentage. “Tenant’s Percentage” means the percentage set forth in Section
1.13 (that numeric figure obtained by dividing the Rentable Square Feet of the Premises by the total Rentable Square Feet of the Project).
6.2 Calculation Methods and Adjustments.
6.2.1. Subject to the provisions of this Section 6.2, all calculations, determinations, allocations and decisions to be made hereunder with respect to Operating Expenses and Real Property Taxes shall be made on a triple net basis in accordance with the good faith determination of Landlord applying sound accounting and property management principles consistently applied which are consistent with Institutional Owner Practices. If the Project is not at least one hundred percent (100%) occupied during all or a portion of the any year, Landlord shall make an appropriate adjustment to the components of Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Project been ninety- five percent (95%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year. Landlord shall have the right to equitably allocate some or all Operating Expenses. All discounts, reimbursements, rebates, refunds, or credits (collectively, “Reimbursements”) attributable to Operating Expenses or Real Property Taxes received by Landlord in a particular year shall be deducted from Operating Expenses or Real Property Taxes, as applicable, in the year the same are received; provided, however, if such practice is consistent with Institutional Owner Practices, Landlord may treat Reimbursements generally (or under particular circumstances) on a different basis.
6.2.2. As of the date of this Lease, Tenant shall pay Additional Rent under this Article 6 based on the Operating Expenses and Real Property Taxes for the Project. If the Project at any time contains more than one building, Landlord shall have the right, from time to time, to equitably allocate some or all of the Operating Expenses and/or Real Property Taxes for the buildings comprising the Project among the Building and some or all of the other buildings of the Project. In such event, Landlord shall reasonably determine a method of allocating such Operating Expenses and/or Real Property Taxes attributable to the Building and/or such other building(s) of the Project to the Building and/or such other building(s) and Tenant shall be responsible for paying its proportionate share of such expense(s) which are allocated to the Building. Landlord shall also have the right, from time to time, to require Tenant to pay Tenant’s Percentage of Operating Expenses and Real Property Taxes based solely on the Operating Expenses and Real Property Taxes for the Building.
6.2.3. For the sole purpose of calculating Tenant’s Percentage of Operating Expenses, the Controllable Operating Expenses (as defined below) for each calendar year after the first full year of the Term shall not increase by more than seven percent (7%) over the maximum permitted Controllable Operating Expenses for the immediately preceding calendar year (i.e., on a cumulative, compounding basis and regardless of the actual Controllable Operating Expenses incurred for such preceding year); provided, however, that if the actual Controllable Operating Expenses for any calendar year are greater than the maximum amount permitted to be charged to Tenant hereunder, then the difference shall be added to the actual Controllable Operating Expenses for succeeding years of the Term until exhausted. (For example, if the amount of the Controllable Operating Expenses increases by 10% in year 2 and 3% in year 3, then the increase in Tenant’s obligation to pay Controllable Operating Expenses for year 3 over Controllable Operating Expenses for year 2 shall be billed at 6%.) The term “Controllable Operating Expenses” shall mean the wages and salaries of Landlord’s or the Property Manager’s employees used in the management, operation and maintenance of the Project and the Project management fee. In addition, Landlord agrees to use commercially reasonable efforts to competitively bid those Operating Expenses for which more than one qualified option is reasonably available, but such Operating Expenses shall not be deemed controllable for purposes of this Section. There shall be no limitation on the amount of increase from year to year on Operating Expenses which are not Controllable Operating Expenses.
6.3 Payment of Tenant’s Percentage of Operating Expenses and Real Property Taxes. This shall be a triple net Lease and Basic Rent shall be paid to Landlord absolutely net of all costs and expenses, except as specifically provided to the contrary in this Lease. The provisions for payment of Tenant’s Percentage of Operating Item 9
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Expenses and Tenant’s Percentage of Real Property Taxes are intended to pass on to Tenant, and reimburse Landlord for, all costs and expenses of the nature described in Section 6.1 incurred in connection with the ownership, operation, management, insurance, maintenance and repair of the Project. For each calendar year of the Term, Tenant shall pay Tenant’s Percentage of the Operating Expenses and Tenant’s Percentage of the Real Property Taxes paid or incurred by Landlord for such year as Additional Rent. Tenant shall pay such amounts as follows:
6.3.1. Estimate of Annual Operating Expenses and Real Property Taxes. At the beginning of each calendar year, or as soon thereafter as practicable, Landlord shall deliver to Tenant a reasonable estimate (“Estimated Statement”) of Tenant's Percentage of Operating Expenses and Tenant's Percentage of Real Property Taxes for the then current calendar year. Landlord may revise its estimates of Tenant's Percentage of Operating Expenses and Tenant's Percentage of Real Property Taxes for any year from time to time in its reasonable discretion, and upon receipt of a revised Estimated Statement, Tenant shall begin making payments under this Section 6.3.1 in accordance with such revised estimates. For each calendar year during the Term of this Lease, or portion thereof, Tenant shall pay to Landlord the estimated Tenant’s Percentage of Operating Expenses and the estimated Tenant's Percentage of Real Property Taxes, as specified in the Estimated Statement. These estimated amounts shall be divided into twelve (12) equal monthly installments. Tenant shall pay to Landlord, concurrently with the regular monthly Basic Rent payment next due following the receipt of such an Estimated Statement, an amount equal to one monthly installment multiplied by the number of months from the commencement of the calendar year for which such estimates were prepared to the month of such payment, both months inclusive, less any amounts paid under this Section 6.3.1 after commencement of such calendar year based on the last Estimated Statement delivered by Landlord. Subsequent payments under this Section 6.3.1 shall be payable concurrently with the regular monthly Rent payments for the balance of that calendar year and shall continue until the next Estimated Statement is delivered by Landlord. Failure of Landlord to deliver an Estimated Statement for any calendar year shall not relieve Tenant of its obligation to make estimated payments of Tenant's Percentage of Operating Expenses and Tenant's Percentage of Real Property Taxes under this Section 6.3.1.
6.3.2. Annual Reconciliation . At the end of each calendar year or as soon thereafter as practicable Landlord shall deliver to Tenant a statement (“Annual Reconciliation”) of (a) the actual annual Operating Expenses and Tenant’s Percentage of Operating Expenses for the preceding year, and (b) the actual annual Real Property Taxes and Tenant’s Percentage of Real Property Taxes for the preceding year. If for any year, the sum of Tenant’s Percentage of Operating Expenses and Tenant’s Percentage of Real Property Taxes (as specified in the Annual Reconciliation) is less than the total amount of the estimated payments made by Tenant under Section 6.3.1 above for such year, then any such overpayment, or overpayments, shall be credited toward the monthly Rent next falling due after determination by Landlord of such overpayment or overpayments and shall be paid to Tenant in a lump sum for periods after the expiration of the Term. Similarly, if for any year, the sum of Tenant’s Percentage of Operating Expenses and Tenant’s Percentage of Real Property Taxes (as specified in the Annual Reconciliation) is more than the total amount of the estimated payments made by Tenant under Section 6.3.1 above for such year, then any such underpayment, or underpayments, shall be paid by Tenant to Landlord concurrently with the next regular monthly Basic Rent payment coming due after Tenant’s receipt of the Annual Reconciliation (or if the Term shall have expired or terminated, within thirty (30) days following Tenant’s receipt of such Annual Reconciliation).
6.3.3. Survival of Reconciliation. Even though the Term shall have expired and Tenant shall have vacated the Premises, when the final determination of Tenant’s Percentage of actual annual Operating Expenses, and/or of Tenant’s Percentage of actual annual Real Property Taxes, for the year in which this Lease terminates is delivered to Tenant, (a) Tenant shall promptly pay any amounts payable to Landlord under Section 6.3.2 above (as a result of any underpayments by Tenant under Section 6.3.1 above), and/or (b) conversely, Landlord shall promptly rebate any amounts payable to Tenant under Section 6.3.2 (as a result of any overpayments under Section 6.3.1 above) provided that no Tenant Default existed at the expiration or earlier termination of this Lease.
6.4 Review of Annual Reconciliation . Provided that Tenant is not then in default with respect to its obligations under this Lease and provided further that Tenant strictly complies with the provisions of this Section 6.4, Tenant shall have the right, at Tenant’s sole cost and expense and upon thirty (30) days prior Notice (“Review Notice”) to Landlord delivered no later than one hundred twenty (120) days after an Annual Reconciliation is delivered to Tenant, to reasonably review or audit Landlord’s supporting books and records (provided through an electronic data room or similar) for any portion of the Operating Expenses or Real Property Taxes for the particular year covered by such Annual Reconciliation, in accordance with the procedures set forth in this Section 6.4. To the extent that any amounts specified in such Annual Reconciliation were not previously paid, Tenant shall pay all such amounts to Item 9
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Landlord simultaneously with Tenant’s delivery the Review Notice. Any review or audit of records under this Section
6.4 shall be at the sole expense of Tenant, shall be conducted by independent certified public accountants of reputable standing which are not compensated on a contingency fee or similar basis relating to the results of such review or audit and shall be completed within sixty (60) days after Landlord provides Tenant with access to Landlord’s supporting books and records. Tenant shall, within thirty (30) days after completion of any such review or audit, deliver Notice to Landlord specifying the items described in the Annual Reconciliation that are claimed to be incorrect by such review or audit (“Dispute Notice”). The right of Tenant under this Section 6.4 may only be exercised once for each year covered by any Annual Reconciliation, and if Tenant fails to deliver a Review Notice within the one hundred twenty (120) day period described above or a Dispute Notice within the thirty (30) day period described above, or if Tenant fails to meet any of the other above conditions of exercise of such right, the right of Tenant to review or audit a particular Annual Reconciliation (and all of Tenant’s rights to make any claim relating thereto) under this Section 6.4 shall automatically be deemed waived by Tenant. Tenant acknowledges and agrees that any records of Landlord reviewed or audited under this Section 6.4 (and the information contained therein) constitute confidential information of Landlord, which shall not be disclosed other than to Tenant’s accountants performing the review or audit and principals of Tenant who receive the results of the review or audit. If Landlord disagrees with Tenant’s contention that an error exists with respect to the Annual Reconciliation in dispute, Landlord shall have the right, at its sole cost and expense, to cause another review or audit of that portion of the Annual Reconciliation to be made by a firm of independent certified public accountants of national standing selected by Landlord (“Landlord’s Accountant”). In the event that it is finally determined pursuant to this Section 6.4 that a particular Annual Reconciliation overstated amounts payable by Tenant under this Article 6 with respect to the applicable year by more than five percent (5%), Landlord shall reimburse Tenant for the reasonable costs of Tenant’s accountant and Landlord shall be liable for the costs of Landlord’s Accountant. In all other cases, Tenant shall reimburse Landlord for the reasonable costs of Landlord’s Accountant. If the parties are unable to resolve the disagreement within 90 days after completion of the review or audit by Landlord’s Accountant, then Tenant shall have the right to submit the dispute to arbitration; this right shall be exercised, if at all, by delivering a written notice of election to arbitrate to Landlord not later than the last day of the 90 day period. Landlord and Tenant shall agree, within 15 days after Tenant’s delivery of the written notice of election to arbitrate, to retain an arbitrator who shall be an unaffiliated real estate attorney with at least ten (10) years of experience representing landlords and tenants in the leasing of office or laboratory space in the Santa Clara County. This arbitrator shall have the right to retain, as an expert to consult regarding the dispute, an unaffiliated, reputable certified public accountant who is a member of an independent nationally or regionally recognized certified public accounting firm and who has experience in reviewing financial operating records of office building landlords. The arbitration shall be limited to determining the appropriate amount of Operating Expenses, regarding the dispute, for the particular Annual Reconciliation in dispute. The arbitrator’s decision shall be delivered simultaneously to Landlord and Tenant and shall be final and binding on Landlord and Tenant. If the arbitrator determines that the amount of Operating Expenses billed to Tenant was overstated was incorrect, the appropriate party shall pay to the other party the deficiency or overpayment, as applicable, within 30 days following the delivery of the arbitrator’s decision, without interest. All costs and expenses of the arbitration shall be paid by Tenant unless the final determination in the arbitration is that Landlord overstated Operating expenses for the particular Annual Reconciliation by more than five percent (5%) of the originally reported Operating Expenses allocated to Tenant, in which case Landlord shall pay all costs and expenses of the arbitration.
ARTICLE 7
SECURITY DEPOSIT
7.1 Security Deposit. Tenant shall deposit with Landlord, upon delivery to Landlord of a copy of this Lease executed by Tenant, the Security Deposit designated in Section 1.14. Said sum shall be held by Landlord as security for the full and faithful performance by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by Tenant during the Term hereof and any extension hereof. Landlord shall have the right, but not the obligation, to apply all or any portion of the Security Deposit for the payment of Rent or any other sum due hereunder, to cure any default by Tenant of its obligations with respect to the restoration and surrender of the Premises or to cure any Tenant Default at any time, in which event Tenant shall be obligated to restore the Security Deposit to its original amount within 30 days after written notice from Landlord, and Tenant’s failure to do so shall be deemed to be a Default under this Lease. Tenant hereby irrevocably waives and relinquishes any and all rights, benefits, or protections, if any, Tenant now has, or in the future may have, under Section 1950.7 of the California Civil Code, any successor statute, and all other provisions of law, now or hereafter in effect, including, but not limited to, any provision Item 9
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of law which: (a) establishes the time frame by which a landlord must refund a security deposit under a lease, or (b) provides that a landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by a tenant, or to clean the subject premises. Tenant acknowledges and agrees that: (i) any statutory time frames for the return of a security deposit are superseded by the express period identified in this Section 7.1 and (ii) rather than be so limited, Landlord may claim from the Security Deposit: (A) any and all sums expressly identified in this Section 7.1, and (B) any additional sums reasonably necessary to compensate Landlord for any and all losses or damages caused by Tenant’s default of this Lease, including, but not limited to, all damages or Rent due upon termination of this Lease pursuant to Section 1951.2 of the California Civil Code, as amended and recodified from time to time. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such Security Deposit. Within thirty (30) days following the expiration of the Term, Landlord shall (provided that Tenant is not in Default under this Lease) return the Security Deposit to Tenant, less such portion as Landlord shall have applied in accordance with this Section
7.1. Should Landlord sell its interest in the Premises during the Term hereof and if Landlord deposits with (or gives a credit to) the purchaser thereof the then balance of the Security Deposit held by Landlord, Landlord shall be released from any further liability with respect to the Security Deposit.
7.2 Reserved.
ARTICLE 8
USE
8.1 General. Tenant shall use the Premises for the Permitted Use set forth in Section 1.16 above, and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed, or conditioned. Nothing contained herein shall be deemed to give Tenant any exclusive right to such use in the Project or any portion thereof (excluding only the Premises).
8.2 Laws/CC&R’s.
8.2.1. Tenant shall not use or occupy the Premises in violation of any applicable laws, regulations, rules, orders, statutes or ordinances of any Governmental Authority, office, board or private entity in effect on or after the Effective Date and applicable to the Project or the use or occupancy of the Project, including, without limitation, the rules, regulations and requirements of the Pacific Fire Rating Bureau, and of any similar body, the Americans with Disabilities Act (42 U.S.C. Section 12101 et seq.) (“ADA”) and Hazardous Material Laws (as defined in Section 8.3.7 below) (collectively, “Laws”) or in violation of any government-issued permit for the Building or Project or any of the Rules and Regulations (as defined below), and shall, upon Notice from Landlord, discontinue any use of the Premises which is declared by any Governmental Authority having jurisdiction to be a violation of any Laws, or of any government-issued permit for the Building or Project. Landlord shall not knowingly permit the Project to be used or occupied in violation of any applicable Laws and, if at any time Landlord discovers that the Project is being used or occupied in violation of applicable Laws, Landlord shall use commercially reasonable efforts to terminate or mitigate such use, provided, however, that Landlord shall have no obligation (but may elect) to pursue litigation or any other specific measures in connection therewith. Tenant shall cause the Premises to comply with all applicable Laws and shall comply with any direction of any Governmental Authority having jurisdiction which shall, by reason of the nature of Tenant’s use or occupancy of the Premises, impose any obligation (including, but not limited to, any obligation imposed pursuant to the ADA), upon Tenant or Landlord with respect to the Premises or with respect to the use or occupancy thereof; provided, however, unless resulting from an Alteration performed by Tenant or by Tenant’s specific use of the Premises (as opposed to general office and laboratory/research and development use), Tenant shall not be responsible for any obligation imposed by the ADA after completion of the initial Tenant Improvements with respect to the Common Areas of the Building and the Premises (except its prorata share of compliance costs included in Operating Expenses). Tenant shall comply with all rules, orders, regulations and requirements of the Pacific Fire Rating Bureau or any other organization performing a similar function. Tenant shall not do or permit to be done in or about the Premises anything which causes the insurance on the Premises, the Building or the Project or any portion thereof to be canceled or the cost thereof increased. Tenant shall promptly, upon demand, reimburse Landlord for any additional premium charged for any insurance policy by reason of Tenant’s failure to comply with the provisions of this Section 8.2. In determining whether increased premiums are a result of Tenant’s use of the Premises, a schedule issued by the organization computing the insurance rate on the Project or the Tenant Improvements showing the various components of such rate shall be conclusive evidence of the several items and charges which make up such Item 9
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rate. Tenant shall promptly comply with all reasonable requirements of the insurance authority or any present or future insurer relating to the Premises. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of Landlord or other tenants or occupants of the Building, the Parking Area or the Project, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in or about the Premises or the Project. Tenant shall comply with all restrictive covenants and obligations created by private contracts that affect the use and operation of the Premises, the Building, the Common Areas or any other portion of the Project.
Tenant shall not commit or suffer to be committed any waste in or upon the Premises or the Project and shall keep the Premises in first class repair and appearance. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant’s business in the Premises, Tenant, at its expense, shall procure, maintain and comply with the terms and conditions of each such license or permit.
Without limiting the generality of the foregoing:
(A) Landlord and Tenant agree to cooperate, and Tenant shall use its commercially reasonable efforts to participate in governmentally mandated regulations or voluntary traffic management programs applicable to businesses located in the area or to the Project, and, initially, shall encourage and support the use of van and car pooling and transit systems by employees and shall encourage and support staggered and flexible working hours for employees to the fullest extent permitted by the requirements of Tenant’s business. Neither this Section
8.2.1(A) nor any other provision of this Lease, however, is intended to or shall create any rights or benefits in any other person, firm, company, Governmental Authority or the public. (B) Landlord and Tenant agree to cooperate and comply with any and all guidelines or controls imposed upon either Landlord or Tenant by any Governmental Authority or by any energy conservation association to which Landlord is a party concerning energy management. (C) All costs, fees, assessments and other charges paid by Landlord to any Governmental Authority in connection with any program of the types described in Sections 8.2.1(A) and 8.2.1(B) above which is governmentally mandated, and all costs and fees paid by Landlord to any Governmental Authority or third party pursuant to or to effect such program, shall be included in Operating Expenses for the purposes of Article 6, whether or not specifically listed in such Article 6. (D) Tenant shall be liable for all penalties, noncompliance costs or other losses, costs or expenses incurred by Landlord primarily as a result of Tenant’s failure to comply with any of the provisions of Sections 8.2.1(A) through 8.2.1(C) above. Any such amount shall be payable by Tenant to Landlord within 30 days after Landlord’s demand therefor as Additional Rent. Failure of Tenant to pay any amount due pursuant to this Section 8.2.1(D) when due shall be deemed a Tenant Default pursuant to this Lease.
8.2.2. Tenant shall be responsible for all structural engineering required to determine structural load for any of Tenant’s furniture, fixtures, equipment, other personal property, Alterations and Tenant Improvements.
8.3 Hazardous Materials.
8.3.1. Tenant shall not cause or permit any Hazardous Materials (as defined in Section 8.3.7 below) to be brought upon, kept or used in or about the Premises, the Building or the Project in violation of applicable Laws by Tenant or any of its employees, agents, representatives, contractors or invitees (collectively with Tenant, each a “Tenant Party”). If (a) Tenant breaches such obligation, (b) the presence of Hazardous Materials as a result of such a breach results in contamination of the Project, any portion thereof, or any adjacent property, (c) contamination of the Premises otherwise occurs during the Term or any extension or renewal hereof or holding over hereunder or (d) contamination of the Project occurs as a result of Hazardous Materials that are placed on or under or are released into the Project by a Tenant Party, then Tenant shall indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnified Parties (as defined in Section 22.1.2 below) harmless from and against any and all Claims (as defined in Article 20 below) of any kind or nature, including (i) diminution in value of the Project or any portion thereof, (ii) damages for the loss or restriction on use of rentable or usable space or of any amenity of the Project, (iii) damages arising from any adverse impact on marketing of space in the Project or any portion thereof and (iv) sums paid in settlement of Claims that arise before, during or after the Term as a result of such breach or contamination. This indemnification by Tenant includes costs incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work required by any Item 9
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Governmental Authority because of Hazardous Materials present in the air, soil or groundwater above, on, under or about the Project. Without limiting the foregoing, if the presence of any Hazardous Materials in, on, under or about the Project, any portion thereof or any adjacent property caused or permitted by any Tenant Party results in any contamination of the Project, any portion thereof or any adjacent property, then Tenant shall promptly take all actions at its sole cost and expense as are necessary to return the Project, any portion thereof or any adjacent property to its respective condition existing prior to the time of such contamination; provided that Landlord’s written approval of such action shall first be obtained, which approval Landlord shall not unreasonably withhold, delay, or condition; and provided, further, that it shall be reasonable for Landlord to withhold its consent if such actions could have a material adverse long-term or short-term effect on the Project, any portion thereof or any adjacent property. Tenant’s obligations under this Section shall not be affected, reduced or limited by any limitation on the amount or type of damages, compensation or benefits payable by or for Tenant under workers’ compensation acts, disability benefit acts, employee benefit acts or similar legislation.
8.3.2. Landlord acknowledges that it is not the intent of this Article to prohibit Tenant from operating its business for the Permitted Use. Tenant may operate its business according to the custom of Tenant’s industry so long as the use or presence of Hazardous Materials is strictly and properly monitored in accordance with applicable Laws. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord (a) a list identifying each type of Hazardous Material to be present at the Premises that is subject to regulation under any environmental applicable Laws (other than customary quantities of typical office and cleaning supplies, provided no permits or approvals from, and no notice or disclosure to, any Governmental Authorities is required in connection with the presence of such supplies at the Premises), (b) a list of any and all approvals or permits from Governmental Authorities required in connection with the presence of such Hazardous Material at the Premises and (c) correct and complete copies of (i) notices of violations of applicable Laws related to Hazardous Materials and (ii) plans relating to the installation of any storage tanks to be installed in, on, under or about the Project (provided that installation of storage tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent Landlord may withhold in its sole and absolute discretion) and closure plans or any other documents required by any and all Governmental Authorities for any storage tanks installed in, on, under or about the Project for the closure of any such storage tanks (collectively, “Hazardous Materials Documents”). Tenant shall deliver to Landlord updated Hazardous Materials Documents, within fourteen (14) days after receipt of a written request therefor from Landlord, not more often than once per year, unless (m) there are any changes to the Hazardous Materials Documents or (n) Tenant initiates any Alterations or changes its business, in either case in a way that involves any material increase in the types or amounts of Hazardous Materials. For each type of Hazardous Material listed, the Hazardous Materials Documents shall include (t) the chemical name, (u) the material state (e.g., solid, liquid, gas or cryogen), (v) the concentration, (w) the storage amount and storage condition (e.g., in cabinets or not in cabinets), (x) the use amount and use condition (e.g., open use or closed use), (y) the location (e.g., room number or other identification) and (z) if known, the chemical abstract service number. Notwithstanding anything in this Section to the contrary, Tenant shall not be required to provide Landlord with any Hazardous Materials Documents containing information of a proprietary nature, which Hazardous Materials Documents, in and of themselves, do not contain a reference to any Hazardous Materials or activities related to Hazardous Materials.
Landlord may, at Landlord’s expense, cause the Hazardous Materials Documents to be reviewed by a person or firm qualified to analyze Hazardous Materials to confirm compliance with the provisions of this Lease and with applicable Laws. In the event that a review of the Hazardous Materials Documents indicates non-compliance with this Lease or applicable Laws, Tenant shall, at its expense, diligently take steps to bring its storage and use of Hazardous Materials into compliance. Notwithstanding anything in this Lease to the contrary or Landlord’s review into Tenant’s Hazardous Materials Documents or use or disposal of hazardous materials, however, Landlord shall not have and expressly disclaims any liability related to Tenant’s or other tenants’ use or disposal of Hazardous Materials, it being acknowledged by Tenant that Tenant is best suited to evaluate the safety and efficacy of its Hazardous Materials usage and procedures.
8.3.3. At any time, and from time to time, Landlord shall have the right to conduct appropriate tests of the Project or any portion thereof to demonstrate that Hazardous Materials are present or that contamination has occurred due to the acts or omissions of a Tenant Party. Tenant shall pay all reasonable costs of such tests if such tests reveal that Hazardous Materials exist at the Project in violation of Tenant’s obligations under this Lease.
8.3.4. Tenant shall not install or utilize any underground or other storage tanks storing Hazardous Materials on the Premises without Landlord’s prior written consent, which consent may be withheld in Landlord’s sole and absolute discretion. Subject to the foregoing, if underground or other storage tanks storing Hazardous Item 9
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Materials installed or utilized by Tenant are located on the Premises, or are hereafter placed on the Premises by Tenant (or by any other party, if such storage tanks are utilized by Tenant), then Tenant shall monitor the storage tanks, maintain appropriate records, implement reporting procedures, properly close any underground storage tanks, and take or cause to be taken all other steps necessary or required under the applicable Laws.
8.3.5. Tenant shall promptly report to Landlord any actual or suspected presence of mold or water intrusion at the Premises.
8.3.6. Tenant’s obligations under this Section 8.3 shall survive the expiration or earlier termination of the Lease. During any period of time needed by Tenant or Landlord after the termination of this Lease to complete the removal from the Premises of any Hazardous Materials, Tenant shall be deemed a holdover tenant and subject to the provisions of Section 8.3.
8.3.7. As used in this Lease, the term “Hazardous Material” means any toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous substance, material or waste that is or becomes regulated by applicable Laws or any Governmental Authority, and the term “Hazardous Material Laws” means and includes all now and hereafter existing statutes, laws, ordinances, codes, regulations, rules, rulings, orders, decrees, directives, policies and requirements by any federal, state or local governmental authority regulating, relating to, or imposing liability or standards of conduct concerning public health and safety, the environment or any Hazardous Material, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), and California Health and Safety Code (Sections 25100, 25249.5, 25316 and 39000, et seq. in each case).
8.3.8. Notwithstanding anything to the contrary in this Lease, Landlord shall have sole control over the equitable allocation of control areas (as defined in the California Building Standards Code) within the Project for the storage of Hazardous Materials. Without limiting the foregoing, if the use of Hazardous Materials by Tenant is such that Tenant utilizes fire control areas in the Project in excess of Tenant’s Percentage, then Tenant shall, at its sole cost and expense and upon Landlord’s written request, establish and maintain a separate area of the Premises classified by the California Building Standards Code as a “Group H” occupancy area for the use and storage of Hazardous Materials, or take such other action as is necessary to ensure that its share of the fire control areas of the Building and the Project is not greater than Tenant’s Percentage. Notwithstanding anything in this Lease to the contrary, Landlord shall not have and expressly disclaims any liability related to Tenant’s or other tenants’ use or disposal of fire control areas, it being acknowledged by Tenant that Tenant and other tenants are best suited to evaluate the safety and efficacy of its Hazardous Materials usage and procedures.
8.4 Odors and Exhaust . Tenant acknowledges that Landlord would not enter into this Lease with Tenant unless Tenant assured Landlord that under no circumstances will any other occupants of the Building or the Project (including persons legally present in any outdoor areas of the Project) be subjected to odors or fumes (whether or not noxious), and that the Building and the Project will not be damaged by any exhaust, in each case from Tenant’s operations. Landlord and Tenant therefore agree as follows:
8.4.1. Tenant shall not cause or permit (or conduct any activities that would cause) any release of any odors or fumes of any kind from the Premises.
8.4.2. If the Building has a ventilation system that, in Landlord’s judgment, is adequate, suitable, and appropriate to vent the Premises in a manner that does not release odors affecting any indoor or outdoor part of the Project, Tenant shall vent the Premises through such system. If Landlord at any time determines that any existing ventilation system is inadequate, or if no ventilation system exists, Tenant shall in compliance with applicable Laws vent all fumes and odors from the Premises (and remove odors from Tenant’s exhaust stream) as Landlord requires.
The placement and configuration of all ventilation exhaust pipes, louvers and other equipment shall be subject to Landlord’s approval. Tenant acknowledges Landlord’s legitimate desire to maintain the Project (indoor and outdoor areas) in an odor-free manner, and Landlord may require Tenant to abate and remove all odors in a manner that goes beyond the requirements of applicable Laws.
8.4.3. Tenant shall, at Tenant’s sole cost and expense, provide odor eliminators and other devices (such as filters, air cleaners, scrubbers and whatever other equipment may in Landlord’s judgment be necessary or appropriate from time to time) to reasonably remove, eliminate and abate any odors, fumes or other substances in Item 9
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Tenant’s exhaust stream that, in Landlord’s judgment, emanate from Tenant’s Premises. Any work Tenant performs under this Section shall constitute Alterations.
8.4.4. Tenant’s responsibility to remove, eliminate and abate odors, fumes and exhaust shall continue throughout the Term. Landlord’s construction of the Tenant Improvements shall not preclude Landlord from requiring additional measures to eliminate odors, fumes and other adverse impacts of Tenant’s exhaust stream (as Landlord may designate in Landlord’s discretion). Tenant shall install additional equipment as Landlord requires from time to time under the preceding sentence. Such installations shall constitute Alterations.
8.4.5. If Tenant fails to install satisfactory odor control equipment within ten (10) business days after Landlord’s demand made at any time, then Landlord may, without limiting Landlord’s other rights and remedies, require Tenant to cease and suspend any operations in the Premises that, in Landlord’s determination, cause odors, fumes or exhaust. For example, if Landlord determines that Tenant’s production of a certain type of product causes odors, fumes or exhaust, and Tenant does not install satisfactory odor control equipment within ten (10) business days after Landlord’s request, then Landlord may require Tenant to stop producing such type of product in the Premises unless and until Tenant has installed odor control equipment satisfactory to Landlord.
ARTICLE 9
MOLD
Tenant agrees to maintain the Premises in a manner that prevents the occurrence of an infestation of mold, mildew, microbial growths, and any associated mycotoxins in the Premises, and shall comply, at a minimum, with the following: (a) Tenant agrees to immediately fix/abate any water intrusion in the Premises; (b) Tenant agrees to use all reasonable care to close all windows and other openings in the Premises to prevent outdoor water from penetrating into the interior unit; (c) Tenant agrees to clean and dry any visible moisture on windows, walls, and other surfaces, including personal property, as soon as reasonably possible; (d) Tenant agrees to keep the Premises free of dirt and debris that can harbor mold; (e) Tenant agrees to regularly clean and sanit ize kitchens and other surfaces within the Premises where water, moisture condensation, and mold can collect; (f) Tenant agrees not to interfere with regular air flow and circulation throughout the Premises; (g) Tenant agrees to limit the indoor watering of plants; (h) Tenant agrees to prevent the overflow or release of water from bathrooms or kitchens, including but not limited to toilets, sinks, kitchen appliances, and other receptacles of water; (i) Tenant agrees not to obstruct fresh air supply to furna ce, air conditioner or heater ducts; (j) Tenant agrees to maintain and not obstruct ventilation at all locations in the Premises; (k) Tenant agrees to prevent the clogging of all plumbing within the Premises; (l) Tenant agrees not to engage in any conduct that promotes or creates mold growth; (m) Tenant agrees to report within forty-eight (48) hours the following to Landlord: (i) any non-working fan, heater, air conditioner or ventilation system; (ii) plumbing leaks, drips, sweating pipes, wet spots; (iii) overflows from bathroom, kitchen, or other facilities, including, but not limited to, tubs, showers, shower enclosures, toilets, sinks, kitchen appliances, or other receptacles of water, especially in cases where the overflow may have permeated walls, floors, ceilings or fixtures; (iv) water intrusion of any kind; (v) any mold or black or brown spots or moisture on surfaces inside the Premises; (vi) broken plumbing systems or standing water near structures within the Premises; and (vii) any odors consisten t with mold growth within the Premises. Tenant agrees not to commence any mold investigation, testing, remediation or repair without first obtaining the prior written consent of Landlord. If Landlord consents to any mold investigation, remediation or repair by Tenant, Tenant agrees to not use any methods of mold investigation, testing, remediation and repair that are speculative and not generally accepted within the scientific community, and Landlord reserves the right to approve any and all third parties retained by Tenant to conduct any such mold investigation, testing, remediation and repair. As of the Effective Date such speculative and generally unaccepted methods of investigation, testing, remediation and repair include: (A) any use of settled dust vacuum sampling; (B) any use of interior wall cavity air sampling; (C) Tenant’s use of do -it-yourself mold investigation kits; and (D) use of any other methods that have not been peer reviewed and generally accepted within the scientific community.
ARTICLE 10
NOTICES
10.1 Method of Delivery. Any notice, consent, approval or objection required or permitted by this Lease (a “Notice”) shall be in writing and may be delivered: (a) in person (by hand or by messenger or courier service) or (b) by certified or registered mail or United States Postal Service Express Mail, with postage prepaid, or (c) by a Item 9
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nationally recognized overnight delivery service that provides delivery verification, or (d) by email transmission, addressed to Tenant and to Landlord at each of the addresses designated in Section 1.2, and shall be deemed sufficiently given if served in a manner specified in this Article 10. Either party may specify a different address for Notice purposes by Notice to the other.
10.2 Receipt of Notices. Any Notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. Notices delivered by United States Postal Service Express Mail or overnight delivery service that guarantees next day delivery shall be deemed given on the next business day after delivery of the same to the United States Postal Service or overnight delivery service. If any Notice is transmitted by email transmission or similar means, the same shall be deemed served or delivered upon the transmission thereof, provided that, unless the receiving party acknowledges receipt of the email transmission, a copy is also delivered promptly thereafter via one of the methods in Section 10.1(a)-(c) above. If any Notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.
10.3 Statutory Service of Notice. When a statute permits, or requires, service of a notice in a particular manner, service of that notice (or a similar Notice permitted, or required, by this Lease) in the manner permitted, or required, by this Article 10 shall replace and satisfy the statutory service-of-notice procedures, including, but not limited to, those required by California Code of Civil Procedure Section 1162, or any similar or successor statute.
ARTICLE 11
BROKERS
Tenant and Landlord warrants that it has had no dealings with any real estate broker, finder or agent in connection with the negotiation of this Lease except for the broker(s) whose name(s) is (are) set forth in Section 1.15, whose commission shall be payable by Landlord pursuant to one or more separate agreements, and that it knows of no other real estate broker, finder or agent who is or might be entitled to a commission in connection with this Lease.
Each party shall be solely responsible for the payment of any fee due to any other broker, finder, agent or other party claiming under the party, and shall hold the other party free and harmless against any liability in respect thereto, including attorneys’ fees and costs incurred by the party in connection therewith.
ARTICLE 12
HOLDING OVER
If Tenant holds over after the expiration or earlier termination of the Term hereof without the express written consent of Landlord, Tenant shall become a Tenant at sufferance, at a Basic Rent equal to one hundred ten percent (110%) of the Basic Rent payable during the last month of the Term for the first two (2) months of such holdover and one hundred fifty percent (150%) of the Basic Rent payable during the last month of the Term thereafter, and otherwise subject to the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of Rent after such expiration or earlier termination without Landlord’s prior written consent shall not waive Landlord’s right to evict Tenant without thirty (30) days prior written notice. The foregoing provisions of this Article 12 are in addition to and do not affect Landlord’s right of reentry or any rights of Landlord hereunder or as otherwise provided by law.
If Tenant fails to surrender the Premises upon the expiration or earlier termination of this Lease, Tenant shall indemnify, defend and hold Landlord harmless from all Claims, including, without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender, lost profits and other consequential damages, and any and all attorneys’ fees and costs incurred by Landlord in connection Tenant’s failure to surrender the Premises in accordance with the provisions of this Lease on the expiration or earlier termination of this Lease.
ARTICLE 13
TAXES ON TENANT’S PROPERTY
13.1 Personal Property and Fixtures. Tenant shall be liable for and shall pay, before delinquency, all taxes levied against any of Tenant’s Personal Property (defined below) placed by Tenant or any Tenant Party in or about the Premises. If any such taxes on Tenant’s Personal Property are levied against Landlord or Landlord’s property, or if the assessed value of the Premises, Building or Project is increased by the inclusion therein of a value Item 9
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placed upon such Tenant’s Personal Property, and if Landlord, after Notice to Tenant, pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof (but only under proper protest if so requested by Tenant), Tenant shall, upon demand, repay to Landlord the taxes so levied against Landlord, or the portion of such taxes resulting from such increase in the assessment.
13.2 Tenant Improvements. If any Alterations installed in the Premises by or on behalf of Tenant are assessed for real property tax purposes at a valuation higher than the valuation at which the initial Tenant Improvements are assessed, then the real property taxes and assessments levied against the Building or Project by reason of such excess assessed valuation shall be deemed to be taxes levied against Tenant’s Personal Property and shall be governed by the provisions of Section 13.1 above. If the records of the County Assessor are available and sufficiently detailed to serve as a basis for determining whether the Alterations are assessed at a higher valuation than the Tenant Improvements, such records shall be binding on both Landlord and Tenant. If the records of the County Assessor are not available or sufficiently detailed to serve as a basis for making said determination, the actual cost of construction shall be used.
13.3 Additional Taxes. Tenant shall pay to Landlord, within 30 days of Landlord’s demand therefor, and in such manner and at such times as Landlord shall direct from time to time by written notice to Tenant, any excise, sales, privilege or other tax, assessment or other charge (other than income or franchise taxes) imposed, assessed or levied by any Governmental Authority upon Landlord on account of: (a) the Rent payable by Tenant hereunder (or any other benefit received by Landlord hereunder), including, without limitation, any gross receipts tax, license fee or excise tax levied by any Governmental Authority, (b) this Lease, Landlord’s business as a lessor hereunder, and the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of any portion of the Premises (including, without limitation, any applicable possessory interest taxes), (c) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises, or (d) otherwise in respect of or as a result of the agreement or relationship of Landlord and Tenant hereunder.
ARTICLE 14
CONDITION OF PREMISES
Tenant acknowledges and agrees that: (a) Tenant has inspected the Project, the Building and the Premises and accepts them in their “AS IS, WHERE IS” condition, (b) neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building, the Parking Area or any other portion of the Project or with respect to the condition thereof or the suitability of the same for the conduct of Tenant’s business, (c) except as expressly provided in the Work Letter Agreement and Section 16.2 below, Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, or any portion of the Building or Project and (d) except as expressly provided in this Lease, Landlord shall have no obligation to provide Tenant with any allowance, rent credit or abatement in connection with Tenant’s entering into this Lease. The taking of possession of the Premises by Tenant shall conclusively establish that the Project, the Building and the Premises were at such time in good order and clean condition and that Landlord shall have discharged all of its obligations under the Work Letter Agreement, and the execution of this Lease by Tenant shall conclusively establish that the Premises, the Building, the Project and the Parking Area were in good and sanitary order, condition and repair at such time, except for latent defects, if any. Without limiting the foregoing, Tenant’s execution of the Memorandum of Terms shall constitute a specific acknowledgment and acceptance of the various start-up inconveniences that may be associated with the use of the Building, the Parking Area and other portions of the Project, such as certain construction obstacles (e.g., scaffolding), delays in use of freight elevator service, unavailability of certain elevators for Tenant’s use, uneven air-conditioning services and other typical conditions incident to recently constructed (or recently modified) office and laboratory/research and development buildings. Tenant (for itself and all other claiming through Tenant) hereby irrevocably waives and releases its right to terminate this Lease under Section 1932(l) of the California Civil Code.
ARTICLE 15
ALTERATIONS
15.1 Alterations and Major Alterations . Except for Permitted Alterations, Tenant shall make no alterations, additions, or improvements in or to the Premises (collectively, the “Alterations”) without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed for all Alterations other than Major Alterations (which shall be granted in Landlord’s sole discretion), and then only by licensed contractors or Item 9
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mechanics approved by Landlord in writing, which approval shall not be unreasonably withheld, conditioned or delayed (provided that any contractors performing any Major Alterations shall be subject to approval by Landlord in its sole and absolute discretion). Tenant shall submit to Landlord plans and specifications for any proposed Alterations to the Premises, and may not make such Alterations until Landlord has approved such plans and specifications and the contractor performing any Alterations in writing. Tenant shall construct such Alterations in accordance with the plans and specifications approved by Landlord and in compliance with all applicable Laws, and shall not amend or modify such plans and specifications without Landlord’s prior written consent. If any proposed Alterations require the consent or approval of any lessor of a superior lease or the holder of a mortgage encumbering the Premises, Tenant acknowledges that such consent or approval must be secured prior to the construction of such Alterations ; provided, however, that such consent or approval shall not be unreasonably withheld, conditioned or delayed, and Landlord shall use commercially reasonable efforts to assist Tenant in obtaining such consent or approval in a timely manner. Tenant agrees not to construct or erect partitions or other obstructions that might interfere with Landlord’s free access to mechanical installations or service facilities of the Building or interfere with the moving of Landlord’s equipment to or from the enclosures containing said installations or facilities. All Alterations shall be done at such times and in such manner as Landlord may from time to time reasonably designate. Tenant will pay the entire cost and expense of all Alterations, including, without limitation, for any painting, restoring or repairing of the Premises or the Building necessitated by the Alterations, and Landlord’s actual out-of-pocket third party review and Landlord’s supervision fee in an amount not to exceed five percent (5%) of the cost of the Alterations in question (except for Permitted Alterations). Tenant will also obtain and/or require: (a) builder’s “all-risk” insurance (or the equivalent thereof) in an amount at least equal to the replacement value of the Alterations; (b) liabili ty insurance insuring Tenant and each of Tenant’s contractors against construction related risks in at least the form, amounts and coverage required of Tenant under Article 22; and (c) if requested by Landlord, demolition (if applicable) and payment and pe rformance bonds in an amount not less than the full cost of the Alterations. The insurance policies described in clause (b) of this Section
15.1 must name Landlord, Landlord’s lender (if any), Bioscience Properties, Inc. (“Property Manager”) and other parties reasonably requested by Landlord as additional insureds, specifically including completed operations. Tenant covenants and agrees that all Alterations done by Tenant shall be performed in full compliance with all Laws. If any Governmental Authority requires any alterations or modifications to the Building or the Premises as a result of Tenant’s Permitted Use of the Premises or as a result of any Alteration to the Premises made by or on behalf of Tenant, Tenant will pay the cost of all such alterations or modifications. If any such Alterations involve any modifications to (i) the structural portions of the Building, (ii) the mechanical, electrical, plumbing, fire/life safety or heating, ventilating and air conditioning systems of the Building (collectively, “Building Systems”) or (iii) any portion of the Building outside of the interior of the Premises (a “Major Alteration”), it shall be reasonable for Landlord to withhold its consent to any such Major Alterations and it shall be reasonable for Landlord to condition its consent to any Major Alterations on Landlord making the Major Alterations, provided that Landlord may first require Tenant to deposit with Landlord an amount sufficient to pay the cost of the Major Alterations (including, without limitation, reasonable overhead, administrative costs and profit). Before commencing any work, Tenant shall give Landlord at least thirty (30) days’ prior Notice of the proposed commencement of such work and shall, if required by Landlord, deliver a copy of the completion and payment bond required by Landlord in form, substance and amount satisfactory to Landlord. “Permitted Alterations” means only usual and customary maintenance and repairs of Leasehold Improvements if and to the extent that such maintenance and repairs: (A) are of a type and extent which are customarily permitted to be made without consent by landlords acting consistently with Institutional Owner Practices leasing similar space for similar uses to similar tenants, (B) are in compliance with the Rules and Regulations and all applicable Laws, (C) are not Major Alterations, and (D) do not cost more than Fifty Thousand and 00/100 Dollars ($50,000.00) in each instance (which amount shall be subject to annual increases pursuant to the applicable Consumer Price Index).
15.2 Removal of Alterations and Tenant’s Personal Property. The Tenant Improvements together with all Alterations upon the Premises made by Tenant after the Commencement Date, including, without limitation, all wall coverings, built-in cabinet work, paneling and the like (collectively, “Leasehold Improvements”), shall, at Landlord’s election, either be removed by Tenant or shall become the property of Landlord and shall remain upon, and be surrendered with, the Premises at the end of the Term hereof; provided, however, that if Landlord, by 180 days Notice to Tenant, requires Tenant to remove any such Leasehold Improvements, Tenant shall repair all damage resulting from such removal or, at Landlord’s option, shall pay to Landlord the cost of such removal, as reasonably estimated by Landlord, prior to the expiration of the Term of this Lease. Notwithstanding the foregoing, Tenant shall have no obligation to remove the initial Tenant Improvements (as described in the Work Letter Agreement) unless Landlord, at the time of its approval of the Space Plan and/or Construction Documents (as those terms are defined in the Work Letter Agreement), notifies Tenant in writing of any items thereof which Tenant shall be required to remove Item 9
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upon the expiration or earlier termination of this Lease. All articles of personal property and all business and trade fixtures, cabling, machinery and equipment, furniture and movable partitions owned by Tenant or any other Tenant Party or that are installed by or for Tenant or any other Tenant Party at its expense in the Premises (collectively, “Tenant’s Personal Property”) shall be and remain the property of Tenant and shall be removed by Tenant prior to the expiration of the Term, and Tenant shall repair all damage to the Premises, if any, resulting from such removal. If Tenant shall fail to remove any of the foregoing from the Premises prior to termination of this Lease for any cause whatsoever, Tenant shall be deemed to be holding over in the Premises without the consent of Landlord and Landlord may, at its option, remove the same in any manner that Landlord shall choose, and store the same without liability to Tenant for loss thereof. In such event, Tenant agrees to pay to Landlord upon demand, any and all expenses incurred in such removal (including court costs and attorneys’ fees) and storage charges thereon, for any length of time that the same shall be in Landlord’s possession or control. Landlord may, at its option, without Notice, sell such property, or any of the same, at a private sale and without legal process, for such price as Landlord may obtain and apply the proceeds of such sale to any amounts due under this Lease from Tenant to Landlord and/or to all expenses, including attorneys’ fees and costs, incident to the removal and/or sale thereof.
ARTICLE 16
REPAIRS
16.1 Tenant Obligations. Except as expressly set forth in Section 16.2 below, Tenant shall, when and if needed, at Tenant’s sole cost and expense and subject to Article 15 above, make all repairs to the Premises and every part thereof to maintain the Premises in the condition and repair that existed as of the Commencement Date, reasonable wear and tear excepted, and free from any Hazardous Materials. Tenant may request, in writing, that Landlord perform certain repairs to the Premises on Tenant’s behalf, and if Landlord agrees to make such repairs, Tenant shall reimburse Landlord for the costs and expenses of such repairs, plus an administrative fee of five percent (5%), within ten (10) business days of delivery of an invoice therefor. All Supplemental Equipment and all Building Systems shall be maintained, repaired and replaced as needed by Tenant at Tenant’s sole cost and expense and Landlord shall have no liability for the operation, repair, maintenance or replacement of any Supplemental Equipment, nor shall Landlord have any liability for the operation, repair or maintenance of any Building Systems, except as expressly set forth in Paragraph 14 of the Work Letter. “Supplemental Equipment” means any items that are installed within the Premises by or at the direction of Tenant or that exclusively serve the Premises (other than standard Building Systems), including, without limitation: (A) any supplemental, specialty or non-Building standard electrical (including lighting), mechanical, plumbing, heating, ventilation and air conditioning systems, fixtures and equipment; (B) any supplemental, specialty or non-Building standard fire, life, safety or security systems, fixtures and equipment; and (C) all video, audio, communications or computer systems, fixtures and equipment (including cabling). Without limiting the foregoing, Tenant shall maintain, at its sole cost and expense, a contract for the quarterly and annual maintenance and repair of the heating, ventilation and air conditioning systems, fixtures and equipment located at the Premises ; such maintenance and repair shall be performed only by a reputable, California-licensed and insured contractor that specializes in such maintenance and repair, and copies of all service reports and documentation related to such contractor’s recommended and completed repairs shall be provided to Landlord annually and upon Landlord’s request.
16.2 Landlord Obligations. Landlord shall maintain, repair and replace the structural portions of the Building (including, without limitation, the roof structure, slab and exterior walls) outside of the Premises and the Parking Area, and the costs incurred by Landlord in performing such maintenance, repairs and replacements shall be included in Operating Expenses (except to the extent expressly excluded pursuant to Section 6.1 above). In addition, any repairs or replacements of the structural portions of the Building (including, without limitation, the roof structure (but excluding the roof membrane), slab and exterior walls) or the foundation of the Building shall be at Landlord’s sole cost and expense and not included in Operating Expenses, unless such repairs or replacements are required as a result any work done by, on behalf of, or requested by, Tenant. For purposes of clarification, Landlord shall have no obligation to repair, maintain or replace any part of the Premises, any Building Systems or any Supplemental Equipment. Landlord shall not be liable for any failure to make any repairs or replacements or to perform any maintenance to the extent that the need for such repairs, replacements or maintenance is caused by the negligence or willful misconduct of any Tenant Party. Except as provided in Articles 23 and 24 hereof, there shall be no abatement of Rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations, improvements or replacements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant waives the right to make repairs and replacements at Landlord’s expense under any Law now or hereafter in effect including Section 1941 and 1942 of the California Item 9
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Civil Code (as the same may be amended from time to time) and any successor statute and similar Law now or hereafter in effect.
ARTICLE 17
LIENS
Tenant shall not cause or permit to be filed against the Premises, the Building or the Project or of any portion thereof or against Tenant’s leasehold interest in the Premises any mechanics’, materialmen’s or other liens, including without limitation any state, federal or local “superfund” or Hazardous Materials cleanup lien imposed as a result of the presence of Hazardous Materials in, on or about the Premises, the Building or any other portion of the Project.
Landlord shall have the right at all reasonable times to post and keep posted on the Premises any notices that it deems necessary for protection from such liens. Tenant shall discharge any lien filed against the Premises or against the Building for work claimed to have been done for, or materials claimed to have been furnished to, Tenant, by bond or otherwise, within ten (10) business days after the filing thereof, at the cost and expense of Tenant. If any such liens are filed and Tenant fails to discharge them pursuant to the foregoing sentence, Landlord may, without waiving its rights and remedies based on such breach of Tenant and without releasing Tenant from any of its obligations hereunder, cause such lien(s) to be released by any means it shall deem proper, including payments in satisfaction of the claim giving rise to such lien or by obtaining a corporate statutory mechanic’s lien release bond in an amount equal to one hundred fifty percent (150%) of such lien claim. Tenant shall: (a) pay to Landlord, immediately upon Notice from Landlord, any cost or expense, including, without limitation, attorneys’ fees and costs, incurred by Landlord by reason of Tenant’s failure to discharge any such lien, together with interest thereon at the maximum rate per annum permitted by Law from the date of such payment by Landlord and (b) shall indemnify, defend and hold the Landlord Indemnified Parties harmless from and against any liens.
ARTICLE 18
ENTRY BY LANDLORD
Landlord reserves and shall at any and all reasonable times and upon at least twenty-four (24) hours prior notice to Tenant on a business day (except in the case of an emergency) have the right to enter the Premises to supply any service to be provided by Landlord to Tenant hereunder, to inspect the same, to show the Premises to prospective purchasers, lenders, or investors and during the last twelve (12) months of the Term or following a default by Tenant to prospective tenants, to post notices of non-responsibility, to alter, improve or repair the Premises or any other portion of the Building and/or the Project, as provided in Section 2.4 above, or for any other reasonable purpose, all without being deemed guilty of any eviction of Tenant and without abatement of Rent. Landlord may, in order to carry out such purposes, erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, provided that the business of Tenant shall be interfered with as little as is reasonably practicable.
Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant’s business, for any loss of occupancy or quiet enjoyment of the Premises and for any other loss in, upon and about the Premises, the Building or the Project on account of Landlord’s entry or work permitted by this Article 18 or by Section 2.4 above, except to the extent arising from the gross negligence or willful misconduct of Landlord. Landlord shall at all times have and retain a key with which to unlock all doors in the Premises, excluding Tenant’s vaults and safes.
Landlord shall have the right to use any and all means that Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises. Any entry to the Premises obtained by Landlord by any of said means, or otherwise, shall not be construed or deemed to be a forcible or unlawful entry into the Premises, or an eviction of Tenant from the Premises or any portion thereof.
ARTICLE 19
UTILITIES AND SERVICES
19.1 Premises Utilities. Notwithstanding anything to the contrary in this Lease, Tenant shall pay for the cost of all water (including the cost to service, repair and replace reverse osmosis, de-ionized and other treated water), electricity, gas, heating, ventilation and air-conditioning (“HV AC”), light, power, telephone, internet service, cable television, other telecommunications and other utilities supplied to the Premises, together with any fees, surcharges and taxes thereon. All such utilities and services provided to the Premises are separately metered and shall be paid by Tenant directly to the supplier of such utilities or services. In the event that the Building or Project is less than fully Item 9
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occupied during a calendar year, Tenant acknowledges that Landlord may extrapolate Common Area utility usage that varies depending on the occupancy of the Project to equal Landlord’s reasonable estimate of what such utility usage would have been had the Project, as applicable, been one hundred percent (100%) occupied during such calendar year; provided, however, that Landlord shall not recover more than one hundred percent (100%) of the cost of such utilities.
Landlord may, in Landlord’s sole and absolute discretion, at any time and from time to time, contract, or require Tenant to contract, for utility services (including generation, transmission, or delivery of the utility service) with a utility service provider(s) of Landlord’s choosing. Tenant shall fully cooperate with Landlord and any utility service provider selected by Landlord. Tenant shall permit Landlord and the utility service provider to have reasonable access to the Premises and the utility equipment serving the Premises, including lines, feeders, risers, wiring, pipes, and meters.
19.2 Janitorial Service. Tenant, at its sole cost and expense, shall enter into an agreement for regular janitorial services for the Premises with a company which is fully bonded and insured and approved by Landlord in its reasonable discretion. Tenant shall keep the Premises at all times in a clean and orderly condition, at Tenant’s expense and to the reasonable satisfaction of Landlord. Unless otherwise agreed to by Landlord, no one other than persons approved by Landlord shall be permitted to enter the Premises for the purpose of providing janitorial or cleaning service.
19.3 Landlord Exculpation. Landlord shall not be responsible or liable for any loss, damage, or expense that Tenant may incur as a result of any change of utility service, including any change that makes the utility supplied less suitable for Tenant’s needs, or for any failure, interruption, stoppage, or defect in any utility service. In addition, Tenant shall not be entitled to any abatement or reduction of Rent (except as expressly set forth in Section 19.8 below), no eviction of Tenant shall result from and Tenant shall not be relieved from the performance of any covenant or agreement in this Lease by reason of any such change, failure, interruption, stoppage or defect. In the event of any such failure, interruption, stoppage or defect of a service which Landlord is required to provide hereunder, Landlord shall diligently attempt to cause service to be resumed promptly.
19.4 Limitations on Tenant’s Utilities. Tenant shall not, without Landlord’s prior written consent, use any device in the Premises (including data processing machines) that will in any way (a) increase the amount of ventilation, air exchange, gas, steam, electricity or water required or consumed in the Premises based upon Tenant’s Percentage of the Building or Project (as applicable) beyond the existing capacity of the Building or the Project usually furnished or supplied for the Permitted Use or (b) exceed Tenant’s Percentage of the Building’s or Project’s (as applicable) capacity to provide such utilities or services. If Tenant shall require utilities or services in excess of those usually furnished or supplied for tenants in similar spaces in the Building or the Project by reason of Tenant’s equipment or extended hours of business operations, then Tenant shall first procure Landlord’s consent for the use thereof, which consent shall not be unreasonably withheld, conditioned or delayed (except that Landlord may condition such consent upon the availability of such excess utilities or services), and Tenant shall pay as Additional Rent an amount equal to the cost of providing such excess utilities and services.
19.5 Common Area Water . Landlord shall provide water in the Common Area for, to the extent applicable, lavatory and landscaping purposes only, which water shall be from the local municipal or similar source; provided, however, that if Landlord reasonably determines that Tenant requires, uses or consumes water provided to the Common Area for any purpose other than ordinary lavatory purposes, Landlord may install a water meter (“Tenant Water Meter”) and thereby measure Tenant’s water consumption for all purposes. Upon such determination by Landlord, Tenant shall pay Landlord for the costs of any Tenant Water Meter and the installation and maintenance thereof during the Term. If Landlord installs a Tenant Water Meter, Tenant shall pay for water consumed, as shown on such meter, as and when bills are rendered. If Tenant fails to timely make such payments, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurred or payments made by Landlord for any of the reasons or purposes stated in this Section shall be deemed to be Additional Rent payable by Tenant and collectible by Landlord as such.
19.6 Energy Tracking. Within 30 days following Landlord’s written request therefor, Tenant shall deliver to Landlord copies of any invoices for utility services provided to the Premises and related information reasonably requested by Landlord in connection with the requirements of California Public Resources Code Section 25402.10, the corresponding regulations adopted by the California Energy Commission and provided in California Code of Regulations, Title 20, Division 2, Chapter 4, Article 9, Sections 1680-1684, and any supplemental and/or successor statute or regulations concerning the reporting of energy usage and efficiency relative to commercial buildings. Tenant acknowledges that any utility information for the Premises, the Building and the Project may be Item 9
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shared with third parties, including Landlord’s consultants and Governmental Authorities. In the event that Tenant fails to comply with this Section, Tenant hereby authorizes Landlord to collect utility usage information directly from the applicable utility providers. In addition to the foregoing, Tenant shall comply with all applicable Laws related to the disclosure and tracking of energy consumption at the Premises. The provisions of this Section shall survive the expiration or earlier termination of this Lease.
19.7 Reservation of Rights. Landlord reserves the right to stop service of the plumbing, ventilation, air conditioning and utility systems, when Landlord deems necessary or desirable, due to accident, emergency or the need to make repairs, alterations or improvements, until such repairs, alterations or improvements shall have been completed, and Landlord shall further have no responsibility or liability for failure to supply plumbing, ventilation, air conditioning or utility service when prevented from doing so by Force Majeure (as defined in Section 36.8 below) or, to the extent permitted by applicable Law, Landlord’s negligence. Without limiting the foregoing, it is expressly understood and agreed that any covenants on Landlord’s part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by virtue of Force Majeure or, to the extent permitted by applicable Law, Landlord’s negligence.
19.8 Abatement of Rent. In the event that Tenant is prevented from using, and does not use, the Premises or any material portion thereof for more than five (5) consecutive business days as a result of a failure to provide any utilities to the Premises which Landlord is required to provide under this Lease, to the extent within Landlord’s reasonable control (an “Abatement Event”), then Tenant shall give Landlord Notice of such Abatement Event, and if such Abatement Event continues for an additional five (5) consecutive business days after Landlord’s receipt of any such Notice (“Eligibility Period”) and Landlord does not diligently commence and pursue to completion the remedy of such Abatement Event, then, except to the extent covered by business interruption or similar insurance carried or required to be carried by Tenant hereunder, Basic Rent shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total rentable area of the Premises. If, however, Tenant reoccupies any portion of the Premises during such period, the Basic Rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date Tenant reoccupies such portion of the Premises. Such right to abate Basic Rent shall be Tenant’s sole and exclusive remedy at law or in equity for an Abatement Event. Except as expressly provided in this Section 19.8, nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder.
ARTICLE 20
INDEMNIFICATION AND EXCULPATION OF LANDLORD
20.1 Indemnification of Landlord . Tenant shall indemnify, defend and hold harmless the Landlord Indemnified Parties (as defined in Section 22.1.2 below) from and against any and all claims, demands, penalties, fines, liabilities, actions (including, without limitation, informal proceedings, such as arbitration and mediation), settlements, judgments, damages, losses, costs and expenses (including attorneys’ fees and costs) of whatever kind or nature, known or unknown, contingent or otherwise, incurred or suffered by or asserted against such Landlord Indemnified Party (collectively, “Claims”) arising from or in connection with, directly or indirectly, (a) any cause whatsoever in the Premises (including, but not limited to, Claims resulting in whole or in part from the negligence of the Landlord Indemnified Party), except to the extent directly caused by the gross negligence or intentional misconduct of such Landlord Indemnified Party, (b) the presence at or use or occupancy of the Premises or Project by a Tenant Party, (c) any act, neglect, fault or omission on the part of any Tenant Party, or (d) a breach or default by Tenant in the performance of any of its obligations hereunder. Payment shall not be a condition precedent to enforcement of the foregoing indemnity and duty to defend. In case any action or proceeding shall be brought against any Landlord Indemnified Party by reason of any such Claim, at such Landlord Indemnified Party’s option, upon Notice from Landlord, Tenant shall defend the same at Tenant’s expense by counsel selected by Landlord in its sole discretion.
Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property (including, without limitation, any damage to personal property or scientific research, including loss of records kept by Tenant within the Premises (in each case, regardless of whether such damage is foreseeable)) or injury to Tenant or any other Tenant Parties in, upon or about the Premises, the Building, the Parking Area or the Project from any cause whatsoever Item 9
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and hereby waives all Claims (including consequential damages and claims for injury to Tenant’s business or loss of income arising out of any loss of use of the Premises, the Building, the Parking Area or the Project or any equipment or facilities therein, or relating to any such damage or destruction of personal property as described in this Section) in respect thereof against each Landlord Indemnified Party, except that which is solely caused by, or solely the result of:
(i) any Landlord Default (defined below), (ii) the grossly negligent acts of such Landlord Indemnified Party, or (iii) the willful misconduct of such Landlord Indemnified Party. Landlord shall not be liable for any damages arising from any act, omission or neglect of any other tenant in the Building or the Project, or of any other third party. Without limitation on other obligations of Tenant that survive the expiration of the Term, the clauses of this Section 20.1 shall survive the expiration or earlier termination of this Lease until all Claims against the Landlord Indemnified Parties involving any of the indemnified matters are fully, finally, and absolutely barred by the applicable statutes of limitations.
20.2 Indemnification of Tenant . Subject to the provisions of Section 22.4 below, Landlord shall indemnify, defend and hold harmless Tenant from and against any and all third-party claims, demands, penalties, fines, liabilities, actions (including, without limitation, informal proceedings, such as arbitration and mediation), settlements, judgments, damages, losses, costs and expenses (including reasonable attorneys’ fees and costs) of whatever kind or nature, known or unknown, contingent or otherwise, incurred or suffered by or asserted against Tenant to the extent arising from the gross negligence or willful misconduct of Landlord in connection with Landlord’s activities on or about the Building or Project.
ARTICLE 21
DAMAGE TO TENANT’S PROPERTY
Notwithstanding the provisions of Article 20 or anything to the contrary in this Lease, no Landlord Indemnified Party shall be liable for loss or damage to any property by theft or any other cause whatsoever, any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, electrical or electronic emanations or disturbance, water, rain or leaks from any part of the Building or from the pipes, or caused by dampness, vandalism, malicious mischief or by any other cause of whatever nature, unless caused by or due to the gross negligence of such Landlord Indemnified Party, and then only after (i) reasonable prior Notice to Landlord of the condition claimed to constitute gross negligence and (ii) the expiration of a reasonable time after such Notice has been received by Landlord without such Landlord Indemnified Party having taken all reasonable and practicable means to cure or correct such condition; and pending such cure or correction by such Landlord Indemnifi ed Party, Tenant shall take all reasonably prudent temporary measures and safeguards to prevent any injury, loss or damage to persons or property. In no event shall any Landlord Indemnified Party be liable for any loss, the risk of which is covered by Tenant’s insurance or is required to be so covered by this Lease; nor shall any Landlord Indemnified Party be liable for any such damage caused by other persons in the Building or caused by operations in construction of any private, public, or quasi-public wo rk; nor shall any Landlord Indemnified Party be liable for any latent defect in the Premises or in the Building. Tenant shall immediately give Notice to Landlord in case of the occurrence of any fire or accidents in or about the Premises, the Building or any other portion of the Project, or the discovery of any defects therein (including, without limitation, any latent defect in the Premises) or in any fixtures or equipment that are the property of Landlord or Tenant.
Without limiting the foregoing, Tenant acknowledges that safety and access control devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. Landlord shall not be liable for injuries or losses caused by criminal acts of third parties, and the risk that any safety or access control device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant’s property and interests, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in Article 22. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Law.
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ARTICLE 22
INSURANCE
22.1 Tenant’s Insurance. Tenant shall, during the Term hereof (and during any period that Tenant may enter, occupy and/or use the Premises prior to the Commencement Date and any holdover period), at its sole cost and expense, keep in full force and effect the following insurance:
22.1.1. Property insurance insuring against any perils included within the classification “All Risk,” including, without limitation, fire, windstorm, cyclone, tornado, hail, explosion, riot, riot attending a strike, civil commotion, aircraft, vehicle, smoke damage, vandalism, malicious mischief and sprinkler leakage (and earthquake sprinkler leakage). Such insurance shall insure all property owned by Tenant or any other Tenant Party, for which Tenant or any other Tenant Party is legally liable or that was installed at the expense of Tenant or any other Tenant Party, and which is located in the Building, including, without limitation, furniture, furnishings, installations, fixtures and equipment, any other personal property, and in addition, all improvements and betterments to the Premises, including all Leasehold Improvements, in an amount not less than one hundred percent (100%) of the full replacement cost thereof. For the purposes of this Section 22.1.1, the Premises shall consist of the floor area shown in the Outline of Premises, consisting of the cubic space spanning from the floor slab to the bottom surface of the floor slab of the floor immediately above the Premises (“Upper Slab”), without any offsets or deductions that are included for the Permitted Use of Tenant. Such cubic space shall include the plenum space which is bounded by the lower surface of the Upper Slab and the suspended ceiling of the Premises. Such policy shall name Landlord, any mortgagees of Landlord and any other additional parties designated by Landlord as loss payees, as their respective interests may appear.
22.1.2. Commercial General Liability Insurance insuring Tenant on the current ISO CG 00 01 occurrence form or any equivalent reasonably acceptable to Landlord against any liability arising out of the lease, use, occupancy or maintenance of the Premises, the Building or the Project, or any portion of the foregoing. Such insurance shall be in the following minimum limits: $2,000,000 per occurrence and $2,000,000 in the aggregate and shall be endorsed to have the aggregate apply on a per location/per project basis and shall cover injury (including mental anguish) to or death of one or more persons and damage to tangible property (including loss of use) including blanket contractual liability, broad form property damage (including coverage for explosion, collapse and underground hazards), $1,000,000 personal & advertising injury, and $2,000,000 Products Completed Operations. The policy shall not include any exclusions or limitations other than those incorporated in the standard form, those set forth in the Authority for California Cities Excess Liability effective July 1, 2024 to July 1, 2025 (“Memorandum of Coverage”) provided by Tenant to Landlord on April 9, 2025, or as otherwise approved by Landlord in writing. The policy shall insure the hazards of the Premises and Tenant’s operations thereon, Tenant’s independent contractors and Tenant’s contractual liability (including, without limitation, the indemnity contained in Article 20 hereof) and shall: (i) name Landlord (Embarcadero Way Property Owner, LP); HSRE-BPI II GP, LLC; SB Embarcadero Way Investors, LLC ; the Property Manager; any Holder (as defined below) ; and their respective partners, parents, affiliates, divisions and subsidiaries, and each of their respective directors, officers, principals, partners, shareholders, members, managing members, agents, employees, successors and assigns (together with Landlord, collectively, “Landlord Indemnified Parties”) as additional insureds; and (ii) include coverage for cross liability claims between Named Insureds (i.e., “Named Insured vs. Named Insured” Cross Liability Coverage Endorsement if required for coverage and no exclusion for cross liability claims between Named Insureds). Such insurance shall indicate that defense costs shall be outside of the policy limits, and shall not contain any exclusions or restrictions applicable to operations of the type contemplated by this Lease. In addition to any insurance required of Tenant, Tenant shall secure, pay for and maintain or cause Tenant’s contractors and sub-contractors to secure, pay for and maintain insurance during any construction or work to the Premises performed by or on behalf of Tenant at a minimum equal to the limits of liability required by Tenant. Tenant’s contractors’ and subcontractors’ products and completed operations insurance shall be maintained for a minimum period equal to the greater of (i) the period under which a claim can be asserted under any applicable statutes of limitations and/or repose or (ii) three (3) years after Substantial Completion of the Tenant Improvements.
Tenant’s contractual liability insurance shall include coverage sufficient to meet the indemnity obligations included herein.
22.1.3. Worker’s Compensation Insurance in compliance with statutory requirements of the state(s) in which the employee resides, is hired and in which this Lease takes place, which insurance shall apply to all Item 9
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persons employed by Tenant, and Employer’s Liability insurance in amounts not less than $1,000,000 per accident, $1,000,000 per disease, and $1,000,000 disease-policy limit.
22.1.4. Business interruption insurance and extra expense coverage on ISO coverage form CP 00 30 or equivalent reasonably acceptable to Landlord, which shall cover Tenant’s monetary obligations under this Lease and any direct or indirect loss of earnings attributable to perils insured against in Section 22.1.1 above for a period of at least twelve (12) months. If Tenant fails to obtain business interruption insurance, it is understood and agreed upon that Tenant is fully responsible for its own business interruption exposure whether insured or not.
22.1.5. Comprehensive Automobile Liability Insurance including coverage for all owned, leased, hired and non-owned vehicles with a minimum combined single limit of $1,000,000 per occurrence for bodily injury and property damage liability.
22.1.6. Umbrella/Excess Liability Insurance policy with a per occurrence and annual aggregate limit of $5,000,000 per location/project. The limits of liability required in Section 22.1.2 above for Commercial General Liability can be provided in a combination of a Commercial General Liability policy and an Umbrella Liability policy. Coverage shall be in excess of Commercial General Liability, Auto Liability and Employers’ Liability insurance with such coverage being on a follow form basis, concurrent to and not more restrictive than underlying insurance. Tenant shall cause the coverage afforded to the Landlord Indemnified Parties thereunder to be first tier umbrella/excess coverage above the primary coverage afforded to the Landlord Indemnified Parties as set forth in this Lease and not concurrent with or excess to any other valid and collectible insurance available to the Landlord Indemnified Parties whether provided on a primary or excess basis. It is the specific intent of the parties that Tenant procure the excess carriers’ agreement to waive and/or forego any viable “horizontal exhaustion” rights it might have in regard to any insurance any Landlord Indemnified Party might carry for its own benefit or on behalf of any other Landlord Indemnified Party.
22.1.7. If Tenant sells or dispenses alcoholic beverages, Liquor Liability Insurance with limits of not less than $5,000,000 per occurrence.
22.1.8. Medical malpractice insurance at limits of not less than $1,000,000 each claim during such periods, if any, that Tenant engages in the practice of medicine at the Premises.
22.1.9. Pollution Legal Liability insurance if Tenant stores, handles, generates or treats Hazardous Materials, as determined solely by Landlord, on or about the Premises. Such coverage shall include bodily injury, sickness, disease, death or mental anguish or shock sustained by any person; property damage including physical injury to or destruction of tangible property including the resulting loss of use thereof, clean-up costs, and the loss of use of tangible property that has not been physically injured or dest royed; and defense costs, charges and expenses incurred in the investigation, adjustment or defense of claims for such compensatory damages. Coverage shall apply to both sudden and non-sudden pollution conditions including the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water. Claims-made coverage is permitted, provided the policy retroactive date is continuously maintained prior to the Commencement Date (or such earlier date that Tenant has access to the Premises), and coverage is continuously maintained during all periods in which Tenant occupies the Premises. Coverage shall be maintained with limits of not less than $1,000,000 per incident with a $2,000,000 policy aggregate.
22.1.10. Any other form or forms of insurance as Tenant or Landlord or any mortgagees of Landlord may reasonably require from time to time in form, in amounts and for insurance risks against which a prudent tenant would protect itself.
22.1.11. Tenant may place all or any of the foregoing insurance coverages under blanket insurance policies carried by Tenant provided that no other loss which may also be insured by such blanket insurance shall affect the insurance coverages required hereby and so long as such policy complies with the amount of coverage required hereunder and otherwise provides the same protection as would a separate policy insuring only Tenant’s insurance obligations in compliance with the provisions of Section 22.1 hereof. In addition, Tenant shall deliver to Landlord a certificate specifically stating that such coverages apply to Landlord, the Premises, the Building and the Project.
22.1.12. If Tenant shall hire or bring a vendor or contractor onto the Premises to perform any alterations, work or improvements, Tenant agrees to have a written agreement with such vendor or contractor whereby Item 9
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such vendor or contractor will be required to carry the same insurance coverages for Commercial General Liability, Auto and Worker’s Compensation, Employer’s Liability and Pollution Legal Liability insurance as required of Tenant herein. Tenant shall also require that such vendor’s or contractor’s insurance meet the same additional terms as required of Tenant herein with regards to adding the Landlord Indemnified Parties and all mortgagees as additional insureds, maintaining primary and non-contributory coverage, waiving all rights of recovery and subrogation, and making certificates of insurance available as evidence of all policies during the term of their work and in advance of all applicable renewals. Tenant shall not allow any vendors or contractors to begin work prior to obtaining certificates evidencing all insurance requirements contained herein.
22.2 Standard of Insurance . All policies shall be written in a form satisfactory to Landlord, and the Commercial General Liability, Comprehensive Automobile Liability, Umbrella/Excess Liability, Liquor Liability (if applicable) and Pollution Legal Liability policies required under Section 22.1 shall name all Landlord Indemnified Parties as additional insureds on a primary and non-contributory basis. In addition, if Tenant places any such required coverages under a blanket insurance policy as set forth in Section 22.1.11, the blanket policy shall name all Landlord Indemnified Parties as additional insureds on a primary and non-contributory basis. All insurance policies required under Section 22.1 shall be issued by companies authorized to do business in the State of California with an A.M.
Best’s Rating of at least A-/VIII. No deductibles or Self-Insured Retention (“SIR”) of Tenant shall exceed $25,000 without Landlord’s prior written approval; provided, however, that such limit is hereby waived so long as the original Tenant (the City of Palo Alto) remains the Tenant under this Lease. All deductibles and SIR are the responsibility of Tenant and must be shown on the certificate of insurance. On or before the date which is ten (10) days after the execution of this Lease, and within thirty (30) days of the renewal of such policies thereafter, Tenant shall deliver to Landlord copies of policies or certificates evidencing the existence of the amounts and forms of coverage satisfactory to Landlord. No such policy shall be cancelable or reducible in coverage except after thirty (30) days prior Notice to Landlord. Any insurance limits required by this Lease are minimum limits only and not intended to restrict the liability imposed on any Tenant for liability under this Lease. Tenant shall, upon written request, furnish Landlord with renewals or “binders” thereof, or Landlord may order such insurance and charge the cost thereof to Tenant as Additional Rent. If Landlord obtains any insurance that is the responsibility of Tenant under this Article 22, Landlord shall deliver to Tenant a written statement setting forth the cost of any such insurance and showing in reasonable detail the manner in which it has been computed and Tenant shall remit said amount to Landlord within ten (10) business days.
22.3 Landlord Insurance.
22.3.1. During the Term of this Lease, Landlord shall insure the Building and the Parking Areas (to the extent Landlord is the owner thereof) (excluding any property which Tenant is obligated to insure under Sections 22.1 and 22.2 hereof) against damage with All-Risk insurance (which may, but shall not be required to, insure against earthquake damage) and public liability insurance, all in such amounts and with such deductibles as Landlord considers appropriate. Landlord may, but shall not be obligated to, obtain and carry any other form or forms of insurance as Landlord or Landlord’s mortgagees may determine advisable. Notwithstanding any contribution by Tenant to the cost of insurance premiums, as provided herein, Tenant acknowledges that it has no right to receive any proceeds from any insurance policies carried by Landlord.
22.3.2. If any of Landlord’s insurance policies shall be canceled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced in any way because of Tenant’s specific use of the Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or by anyone Tenant permits on the Premises and, if Tenant fails to remedy the condition giving rise to such cancellation, threatened cancellation, reduction of coverage, threatened reduction of coverage, increase in premiums, or threatened increase in premiums, within forty-eight (48) hours after Notice thereof, Landlord may, at its option, but without any obligation so to do, enter upon the Premises and attempt to remedy such condition, and Tenant shall promptly pay the cost thereof to Landlord as Additional Rent.
22.4 Subrogation Waivers.
22.4.1. Subrogation Waiver – Policies Other than Property Insurance. Tenant hereby waives all rights against the Landlord Indemnified Parties, Landlord’s contractors (and their subcontractors of every tier), and their respective employees and agents, for any claims that arise from Tenant’s work or activities and for recovery of damages under Tenant’s insurance policies required under Section 22.1 or any other insurance policy carried by Tenant related to the Premises or this Lease (excluding Tenant’s property insurance, which is addressed hereunder in Section Item 9
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22.4.2). Tenant shall obtain an endorsement effecting, or otherwise cause its policies to include, the foregoing waiver with respect to its workers compensation and employers liability insurance. If any other policy implicated by the waiver in this Section 22.4.1 does not allow Tenant to waive rights of recovery against others prior to a loss, Tenant shall obtain an endorsement effecting the applicable waiver.
22.4.2. Subrogation Waiver – Property Insurance. Landlord and Tenant waive all rights against each other for damages caused by fire or other causes of loss occurring on and after the date on which this Lease is executed to the extent such damages are covered (or are required to be covered) by any property insurance required under this Article 22 (including business income and loss of rent insurance) or otherwise carried by such party in relation to the Premises, the Building or the Project, regardless of whether such insurance is specifically required under this Lease. Tenant’s waiver in this Section 22.4.2 also extends to the Landlord Indemnified Parties. Each party shall obtain an endorsement pursuant to which its insurers waive their subrogation rights against the parties specified in this Section 22.4.2. If a property insurance policy implicated by the waiver in this Section 22.4.2 does not allow the insured to waive rights of recovery against others prior to a loss, the insured shall cause the policy to be endorsed to provide for such waiver. The waivers in this Section 22.4.2 will be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, did not pay the insurance premium directly or indirectly, or did not have an insurable interest in the property damaged. To the extent that either party self-insures for its insurance obligations under this Lease (e.g., maintains a deductible amount), such party shall be treated as an independent insurer with full waiver of subrogation.
ARTICLE 23
DAMAGE OR DESTRUCTION
23.1 Damages. If the Building and/or the Premises are damaged by fire or other perils covered by Landlord’s insurance, Landlord shall:
23.1.1. In the event of one hundred percent (100%) destruction of the Premises (“Total Destruction”), at Landlord’s option, as soon as reasonably possible thereafter, commence repair, reconstruction and restoration of the Building and/or the Premises and prosecute the same diligently to completion, in which event this Lease shall remain in full force a nd effect; provided, however, that if within sixty (60) days after the occurrence of such damage, Landlord shall by Notice to Tenant elect not to so repair, reconstruct or restore the Building and/or the Premises, this Lease shall terminate as of the date of such Total Destruction.
23.1.2. In the event of a partial destruction of the Building and/or the Premises and if the damage thereto is such that the Building and/or the Premises is capable of being repaired, reconstructed or restored within a period of ninety (90) days from the date of Landlord’s discovery of such damage, and if Landlord will receive insurance proceeds sufficient to cover the total cost of such repairs, reconstruction or restoration (unless Landlord elects not to file an insurance claim), Landlord shall commence and proceed diligently with the work of repairs, reconstruction and restoration of the Building and/or the Premises or both, as the case may be, and this Lease shall continue in full force and effect. If such work of repair, reconstruction and restoration shall require a period longer than one hundred eighty (180) days or exceeds fifty percent (50%) of the full replacement cost of the Building and/or the Premises, or both, as the case may be, or if insurance proceeds will not be sufficient to cover the cost of such repairs, reconstruction and restoration, then Landlord either may elect to so repair, reconstruct or restore and this Lease shall continue in full force and effect or may elect not to repair, reconstruct or restore and this Lease shall then terminate as of the date of such partial destruction. Under any of the conditions of this Section 23.1.2, Landlord shall give Notice to Tenant of its intention regarding repairs within ninety (90) days of Landlord’s discovery of such damage.
If damage is due to any cause other than fire or other peril covered by extended coverage insurance, Landlord may elect to terminate this Lease.
23.1.3. In any case where Landlord elects to repair, restore or reconstruct the Premises following the occurrence of any damage to which this Article 23 applies, then Tenant shall assign to Landlord the proceeds of its property insurance attributable to the Leasehold Improvements. If the cost of restoring the Leasehold Improvements exceeds the amount of the proceeds of Tenant’s property insurance that are received by Landlord, Tenant shall promptly pay the amount of such deficiency to Landlord upon demand.
23.2 Termination of Lease . Upon any termination of this Lease under any of the provisions of this Article 23, the parties shall be released without further obligation to the other from the date possession of the Premises Item 9
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is surrendered to Landlord except for items which have therefore accrued and/or are then unpaid or items which expressly survive the expiration or sooner termination of this Lease.
23.3 Rent Abatement. In the event of any casualty, the Rent payable under this Lease shall be abated proportionately with the degree to which Tenant’s Permitted Use of the Premises is impaired (or as may be covered by Landlord’s business interruption insurance, whichever is greater) either during the period of such repair, reconstruction or restoration or until termination of the Lease pursuant to this Article 23. Notwithstanding the foregoing, there shall be no abatement of Rent if such damage is caused by the willful misconduct or intentional wrongdoing of Tenant or any Tenant Party. Tenant shall not be entitled to any compensation or damages for loss in the use of the whole or any part of the Premises and/or any inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration. If Landlord is obligated to or elects to repair or restore as herein provided, Landlord shall be obligated to repair or restore only those portions of the Building and the Premises which were originally provided at Landlord’s expense, and the repair and restoration of items not provided at Landlord’s expense shall be the obligation of Tenant.
23.4 Damage Near End of Term. Notwithstanding anything to the contrary contained in this Article 23, if material damage to the Premises occurs during the last eighteen (18) months of the Term, either party may elect, no earlier than sixty (60) days after the date of the damage and not later than ninety (90) days after the date of such damage, to terminate this Lease by written notice to the other effective as of the date specified in the notice, which date shall not be less than ten (10) business days nor more than sixty (60) days after the date such notice is given.
23.5 Waiver of Statute. In the event of damage to the Premises and/or the Building, Tenant shall not be released from any of its obligations under this Lease except to the extent and upon the conditions expressly stated in this Article 23. Tenant hereby waives the provisions of California Civil Code Section 1932, Subsection 2, and Section 1933, Subsection 4, and any other statute or court decision relating to the abatement or termination of a lease upon destruction of the Premises and the provisions of this Article 23 shall govern in case of such destruction.
ARTICLE 24
EMINENT DOMAIN
24.1 Permanent Taking. If all of the Premises, or such part thereof as shall substantially interfere with Tenant’s Permitted Use and occupancy thereof, shall be taken for any public or quasi-public purpose by any lawful power or authority by exercise of the right of appropriation, condemnation or eminent domain, or sold to prevent such taking (a “Taking”), either party shall have the right to terminate this Lease by Notice to the other effective as of the date possession is required to be surrendered to said authority. Tenant shall not assert any claim against Landlord or the taking authority for any compensation because of such Taking, and Landlord shall be entitled to receive the entire amount of any award without deduction for any estate or interest of Tenant. If the amount of property or the type of estate taken shall not substantially interfere with the conduct of Tenant’s business, Landlord shall be entitled to the entire amount of the award without deduction for any estate or interest of Tenant, Landlord shall restore the Premises to substantially their same condition prior to such partial Taking, and Basic Rent shall be reduced, effective as of the date the condemning authority takes possession, in the same proportion which the Rentable Square Feet of the portion of the Premises so taken bears to the Rentable Square Feet of the entire Premises before the Taking. Nothing contained in this Section 24.1 shall be deemed to give Landlord any interest in any award made to Tenant for the taking of personal property and fixtures belonging to Tenant or for relocation costs and expenses.
24.2 Temporary Taking. Notwithstanding anything to the contrary in Section 24.1 above, in the event of Taking of the Premises or any part thereof for temporary use, (a) this Lease shall be and remain unaffected thereby and Rent shall not abate, and (b) Tenant shall be entitled to receive for itself such portion or portions of any award made for such use with respect to the period of the Taking which is within the Term, provided that if such Taking shall remain in force at the expiration or earlier termination of this Lease, Tenant shall then pay to Landlord a sum equal to the reasonable cost of performing Tenant’s obligations under Section 15.2 above and Article 31 below with respect to surrender of the Premises and, upon such payment, shall be excused from such obligations. For purpose of this Article 24, a “temporary” Taking shall be defined as a Taking for a period of two hundred seventy (270) days or less and a “permanent” Taking shall be defined as a Taking for a period of more than two hundred seventy (270) days.
24.3 Waiver of Statute. Tenant (for itself and all others claiming through Tenant) hereby irrevocably waives and releases its rights under Section 1265.130 of the California Code of Civil Procedure.
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ARTICLE 25
DEFAULTS AND REMEDIES
25.1 Tenant Default. The occurrence of any one or more of the following events, upon the expiration of any applicable time period, shall constitute a default hereunder by Tenant (“Tenant Default”):
25.1.1. Abandonment of the Premises by Tenant. Notwithstanding the provisions of California Civil Code Section 1951.3, “Abandonment” is defined to include, but not limited to, any absence by Tenant from the Premises for thirty (30) days or longer while in default pursuant to this Section 25.1 ;
25.1.2. The failure by Tenant to make any payment of Rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of three (3) business days after Landlord’s delivery of Notice thereof;
25.1.3. The failure by Tenant to obtain and keep in force at all times any insurance Tenant is required to obtain and keep in force under Article 22 where such failure is not cured within two (2) business days after Landlord’s delivery of Notice of such failure;
25.1.4. Hypothecation, assignment or other transfer of this Lease or subletting of the Premises, or attempts of such actions in violation of Article 27 of this Lease;
25.1.5. The failure by Tenant to deliver any certificate, instrument or statement that is required to be delivered by Tenant under Article 28, Article 29 or Section 36.16 within the time frames required in Article 28, Article 29 or Section 36.16, as applicable, which Tenant fails to cure within five (5) business days after Landlord’s delivery of Notice thereof;
25.1.6. The failure by Tenant to observe or perform any of the express or implied covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified in Sections 25.1.1 – 25.1.5 above or Section 25.1.7 below, where such failure shall continue for a period of thirty (30) days after Landlord’s delivery of Notice thereof; provided that if the nature of any such failure is such that more than thirty (30) days are reasonably required for its cure, then no Tenant Default shall be deemed to occur if (and for so long as) Tenant commences the cure of such failure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion within ninety (90) days after Landlord’s delivery of Notice thereof; or
25.1.7. The (a) making by Tenant of any general assignment for the benefit of creditors; (b) filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any Law relating to bankruptcy; (c) appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease; (d) attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease; or (e) Tenant’s convening of a meeting of its creditors or any class thereof for the purpose of effecting a moratorium upon or composition of its debts, or any class thereof; provided that no Tenant Default will be deemed to occur under this Section 25.1.7 if (i) any petition described in clause (a) above that filed against (rather than by) Tenant, is dismissed within thirty (30) days) after filing, (ii) in the event any trustee or receiver shall take possession of substantially all of Tenant’s assets located at the Premises or Tenant’s interest in this Lease, possession of the same is restored to Tenant within thirty (30) days or (iii) any attachment, execution or other judicial seizure described in clause (d) above is discharged within thirty (30) days.
Any Notice from Landlord required hereby shall be in lieu of, and not in addition to, any Notice required under California Code of Civil Procedure Section 1161 regarding unlawful detainer actions or any similar successor statute. Accordingly, Tenant (for itself and all others claiming through Tenant) hereby expressly and irrevocably waives the notice requirements of California Code of Civil Procedure Section 1162 that would otherwise govern notices required under Section 1161, and agrees that any notice provided pursuant to this Section 25.1 shall replace and satisfy any such requirements of Section 1162.
25.2 Landlord Remedies. In the event of any such Tenant Default, in addition to any other remedies available to Landlord at law or in equity, including, without limitation, the remedies available under California Civil Code Section 1951.2 and any successor statute, Landlord shall have the immediate option to terminate this Lease and Item 9
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all rights of Tenant hereunder. In the event that Landlord shall elect to so terminate this Lease then Landlord may recover from Tenant:
25.2.1. The worth at the time of award of any unpaid Rent which had been earned at the time of such termination; plus
25.2.2. the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; plus
25.2.3. the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided; plus
25.2.4. any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary repair, renovation and alteration of the Premises, reasonable attorneys’ fees and any other reasonable costs; and
25.2.5. at Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable Law.
As used in Sections 25.2.1 and 25.2.2 above, the “worth at the time of award” is computed by allowing interest at the Default Rate. As used in Section 25.2.3 above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco (“Discount Rate”) at the time of award plus one percent (1%). If the format or components of the Discount Rate are materially changed, or if the Discount Rate ceases to exist, Landlord shall substitute a discount rate which is maintained by the Federal Reserve Bank of San Francisco or similar financial institution and which is most nearly equivalent to the Discount Rate.
25.3 Additional Remedies . If any such Tenant Default occurs, Landlord may utilize the remedy described in California Civil Code Section 1951.4 (which provides landlord may continue the lease in effect after a tenant’s breach and abandonment and recover Rent as it becomes due, if tenant has the right to sublet or assign subject to reasonable limitations). Accordingly, in the event of any Tenant Default and abandonment of the Premises by Tenant, if Landlord does not elect to terminate this Lease on account of such Tenant Default, then Landlord may from time-to-time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all Rent as it becomes due. In the event of the Abandonment of the Premises by Tenant or in the event that Landlord utilizes the remedy described in this Section 25.3 above or shall take possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by Law, then if Landlord does not elect to terminate this Lease as provided above, Landlord may from time to time, without terminating this Lease, either recover all Rent as it becomes due or relet the Premises or any part thereof for the Term of this Lease on terms and conditions as Landlord in its sole discretion may deem advisable with the right to make alterations and repairs to the Premises.
If Landlord shall elect to so relet, such reletting shall not relieve Tenant of any obligation hereunder, except that the rents received by Landlord from such reletting shall be applied as follows: (a) first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; (b) second, to the payment of any cost of such reletting; (c) third, to the payment of the cost of any alterations and repairs to the Premises; (d) fourth, to the payment of Rent due and unpaid hereunder and (e) the residue, if any, shall be held by Landlord and applied to payment of future Rent as the same may become due and payable hereunder. Should that portion of such rents received from such reletting during any month, which is applied to the payment of Rent hereunder, be less than the Rent payable during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses, including attorneys’ fees, incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rents received from such reletting. During the continuance of a Tenant Default, Landlord shall have the right to market the Premises to potential new tenants and may show the Premises to such potential new tenants during normal business hours.
25.4 Notice of Default. Tenant hereby acknowledges that default by Tenant hereunder, and Landlord’s election to prepare and serve a Notice of any such default hereunder (a “Notice of Default”), will cause Landlord to Item 9
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incur costs not contemplated by this Lease, and costs in addition to any costs which may be reimbursed to Landlord by any provision which may be contained herein relative to the payment of interest or late charges on amounts due hereunder. Accordingly, Landlord shall be entitled to reasonable attorneys’ fees and all other costs and expenses incurred in the preparation and service of a Notice of Default and consultations in connection therewith, with respect to which Landlord and Tenant agree that Seven Hundred Fifty Dollars ($750.00) is a reasonable minimum sum per such occurrence, whether or not legal action is subsequently commenced in connection with any such default. It is further hereby specifically agreed by and between Landlord and Tenant that any and all such fees and costs shall be deemed Additional Rent hereunder, and may, at the option of Landlord, be included in any Notice of Default hereunder.
25.5 Landlord’s Right to Cure. If Tenant should fail to make any payment or perform any of its other obligations hereunder, Landlord, without being under any obligation to do so and without thereby waiving such default, may make such payment and/or remedy such other default for the account of Tenant (and enter the Premises for such purpose): (a) immediately and without notice in the case: (i) of emergency, (ii) of a default by Tenant of its obligations under Section 8.3, Section 15.2 and/or Article 31, (iii) where such default unreasonably interferes with any other tenant in the Building or Project, (iv) a failure to satisfy or otherwise discharge any lien, or (v) where such default will result in the violation of Law or the cancellation of any insurance policy maintained by Landlord and (b) in any other case if such default continues beyond the applicable notice and cure period specified in Section 25.1 above, and thereupon Tenant shall be obligated to, and hereby agrees to pay Landlord, upon demand, all costs, expenses, and disbursements incurred by Landlord in taking such remedial action, together with an amount equal to five percent (5%) thereof for Landlord’s overhead and administrative expenses, and the sum of such costs, together with interest thereon at the rate described in Section 5.3 from the date of Landlord’s payment thereof, shall be deemed Additional Rent.
25.6 Waiver of Redemption . Tenant (for itself and all others claiming through Tenant) hereby irrevocably waives and releases its rights to redemption and reinstatement under any present or future case law or statutory provision (including, without limitation, Sections 473, 1174 and 1179 of the California Code of Civil Procedure and Section 3275 of the California Civil Code) in the event that Tenant is dispossessed from the Premises for any reason.
25.7 Landlord’s Default. Landlord’s failure to perform or observe any of its obligations under this Lease shall constitute a default by Landlord under this Lease (a “Landlord Default”) only if Landlord, or the Holder (defined below) of any Security Instrument (defined below) covering the Premises, fails to perform obligations required of Landlord within thirty (30) days after Notice by Tenant to Landlord (and to each Holder pursuant to Section
36.5 below), specifying wherein Landlord has failed to perform such obligations in reasonable detail; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for performance, then no Landlord Default shall occur if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion (or if any Holder of any Security Instrument commences and prosecutes the cure pursuant to Section 36.5 below). In no event shall Tenant be entitled to terminate this Lease by reason of any Landlord Default, and Tenant’s remedies shall be limited to an action for monetary damages at law.
Without limiting the foregoing, in recognition that Landlord must receive timely payments of Rent and operate the Building and Project, Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord (except as expressly set forth in Section 25.8 below) and, except as expressly provided in Section 19.8 or Articles 23 and 24, shall have no right to withhold, set-off, or abate Rent.
25.8 Tenant’s Right to Cure. Notwithstanding the foregoing, if (i) Landlord fails to take or perform any of Landlord’s express construction, maintenance, replacement or repair obligations under this Lease, (ii) no good faith dispute exists with respect to such obligation, and (iii) such failure to take action will materially affect Tenant’s ability to operate at the Premises (a “Material Landlord Maintenance Failure”), then Tenant may deliver Notice thereof to Landlord (“Initial Notice”). If within thirty (30) days of receiving Tenant’s Initial Notice, Landlord fails to cure or commence to cure and diligently pursue the cure of the items specified in the Initial Notice, Tenant may deliver to Landlord a second notice (“Reminder Notice”). The Reminder Notice must include a copy of the Initial Notice and specify that Tenant will have the rights granted under this Section 25.8. If Landlord fails to take or commence to take the required action within ten (10) business days of receiving the Reminder Notice (and diligently pursue the same to completion), then Tenant may, subject to the terms of this Section, proceed to take the required action with respect to correcting the Material Landlord Maintenance Failure; provided, however, if a Material Landlord Maintenance Failure is creating an imminent danger to Tenant’s improvements, personal property or personnel, or imminent risk to public health or safety, Tenant may take immediate action to correct the Material Landlord Maintenance Failure without prior Item 9
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notice to Landlord, but only to the extent reasonably necessary to mitigate the imminent danger. Tenant may not take any such self-help action which alters or modifies the structural integrity of the Building, except in connection with an imminent danger or imminent risk to public health or safety. Landlord shall reimburse Tenant for Tenant’s reasonable out-of-pocket costs and expenses in remedying the Material Landlord Maintenance Failure within thirty (30) days after receiving an invoice from Tenant setting forth a reasonably particularized breakdown of such costs and expenses.
ARTICLE 26
NO WAIVER
All rights, options and remedies of Landlord contained in this Lease shall be construed and held to be cumulative, and not one of them shall be exclusive of the other, and Landlord shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by Law, whether or not stated in this Lease. The waiver by Landlord or Tenant of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition herein contained, nor shall any custom or practice which may grow up between the parties in the administration of the terms hereof be deemed a waiver of or in any way affect the right of Landlord or Tenant to insist upon the performance by the other in strict accordance with said terms. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent. No acceptance by Landlord of a lesser sum than the Basic Rent and Additional Rent or other sum then due shall be deemed to be other than on account of the earliest installment of such Rent or other amount due, nor shall any endorsement or statement on any check or any letter accompanying any check be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or other amount or pursue any other remedy provided in this Lease. Without limiting the foregoing, Tenant (for itself and all others claiming through Tenant) acknowledges that this Article 26 imparts actual notice to Tenant, pursuant to California Code of Civil Procedure Section 1161.1(c), that Landlord’s acceptance of partial payment of Rent shall not constitute a waiver of any rights available under this Lease or at law or equity, including, without limitation, the right to recover possession of the Premises.
ARTICLE 27
ASSIGNMENT AND SUBLETTING
27.1 Transfer. Tenant shall not voluntarily or by operation of law: (a) sublease all or any part of the Premises (“Sublease”), (b) assign this Lease (“Assignment”), or (c) enter into any other agreement or arrangement:
(i) that permits a third party (other than Tenant’s employees, contractors, and occasional guests) to enter, occupy or use any portion of the Premises or remove any of Tenant’s Personal Property therefrom or (ii) otherwise assigns, transfers, mortgages, pledges, hypothecates, encumbers or permits a lien to attach to Tenant’s interest under this Lease or in the Premises (each of the foregoing (a), (b) and (c), a “Transfer”), without first obtaining Landlord’s prior written consent in accordance with this Article 27. In addition, for purposes of this Lease a “Transfer” (which shall be subject to the provisions of this Article 27) shall also include: (A) a direct or indirect transfer, assignment, pledge, or hypothecation of a Controlling (defined below) interest in Tenant and/or (B) the dissolution of the entity that constitutes Tenant without its immediate reconstitution. “Control” or “Controlling” means possession of the direct or indirect power to direct or cause the direction of the management and policies of a person or entity. No consent to an assignment, encumbrance or sublease shall constitute a waiver of any provision of this Article 27 or consent to any future assignment, encumbrance or transfer. Any Transfer without Landlord’s prior written consent shall be voidable at Landlord’s election and shall constitute a Tenant Default.
27.2 Transfer Procedure. If Tenant desires to make any Transfer, then at least thirty (30) days prior to the date when Tenant desires the Transfer to be effective (“Transfer Date”) Tenant shall give Landlord a Notice (“Transfer Notice”) setting forth: (a) the name, address and business of the person or entity to which the Transfer is proposed (“Proposed Transferee”); (b) information (including references) concerning the character, ownership and financial condition of the Proposed Transferee; (c) the proposed Transfer Date (which shall not be later than 90 days following the Transfer Notice); (d) any ownership or co mmercial relationship between Tenant and the Proposed Transferee; and (e) the consideration and all other material terms and conditions of the proposed Transfer, all in such Item 9
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detail as Landlord shall reasonably require. If Landlord reasonably requests additional detail (including, without limitation, financial statements of the proposed Transferee or a current estoppel certificate from Tenant), the Transfer Notice shall not be deemed to have been received until Landlord receives such additional detail, and Landlord may withhold consent to any proposed Transfer until such information is provided to it.
27.3 Recapture. Within thirty (30) days of Landlord’s receipt of a Transfer Notice, and all information specified in Section 27.2 above, Landlord may, at its option, in its sole and absolute discretion, by Notice to Tenant, elect to: (a) in the case of a proposed Sublease, sublease the Premises or the portion thereof proposed to be sublet by Tenant at a rental rate per square foot equal to the lesser of the per square foot rental rate under this Lease or the proposed Sublease; (b) in the case of a proposed Assignment, t ake an assignment of this Lease upon the same terms as those offered to the proposed assignee; or (c) terminate this Lease in its entirety or as to the portion of the Premises subject to the proposed Transfer. If Landlord elects to proceed pursuant to clause (a) or (b) above, any payment by Landlord to Tenant pursuant to such clause shall not exceed the amount which Tenant would have received pursuant to Section 27.5.2 below if Landlord had elected to consent to the proposed Sublease or Assignment. If this Lease shall be terminated with respect to the entire Premises, the Term shall end on the Transfer Date as if that date had been originally fixed in this Lease for the expiration of the Term. If Landlord recaptures only a portion of the Premises, the Rent during the unexpired Term and Tenant’s Percentage shall be adjusted proportionately based on the Rentable Square Feet remaining in the Premises after such recapture. Tenant shall, at Tenant’s own cost and expense, discharge in full any commissions which may be due and owing as a result of any proposed assignment or subletting, whether or not the Premises (or portion thereof) are recaptured pursuant to this Section 27.3 and rented by Landlord to the proposed tenant or any other tenant.
27.4 Landlord’s Consent; Consent Standards; No Release.
27.4.1. Unless Landlord elects to exercise any of its rights under Section 27.3 above, Landlord shall, by Notice to Tenant, elect to: (a) consent to such proposed Transfer upon the terms and to the Proposed Transferee; or (b) refuse to give its consent to the proposed Transfer. Landlord shall not unreasonably withhold its consent to any Proposed Transfer; provided that, without limiting other situations in which it may be reasonable for Landlord to withhold its consent to any proposed Transfer, it shall be deemed reasonable for Landlord to withhold its consent to any proposed Transfer if Landlord determines in its sole discretion that: (i) the Proposed Transferee does not have sufficient financial strength or stability to perform all obligations under this Lease, and to perform them without any higher risk of default than Tenant; (ii) the intended use of the Premises (or the applicable portion thereof) by the Proposed Transferee is inconsistent or incompatible with other uses in the Project; (iii) the intended use o f the Premises (or the applicable portion thereof) by the Proposed Transferee will require alteration of the Premises; (iv) the intended use of the Premises (or the applicable portion thereof) by the Proposed Transferee will violate this Lease or any Laws governing the Premises or the Building or Project; (v) intentionally omitted; (vi) either the Proposed Transferee, or any person which directly or indirectly controls, is controlled by, or is under common control with the Proposed Transferee: (A) occupies space in the Project or has negotiated with Landlord or any of its affiliates within the preceding one hundred eighty (180) days (or is currently negotiating with Landlord or any of its affiliates) to lease space in the Project or (B) does not intend to o ccupy the Premises or the applicable portion thereof; (vii) at the time Tenant delivers the Transfer Notice, there exists an uncured Tenant Default; (viii) the proposed Transfer would cause Landlord to be in violation of another lease or agreement to which Landlord is a party or would give an occupant of the Project a right to cancel or modify its lease; (ix) any ground lessor or mortgagee whose consent to such Transfer is required fails to consent thereto; (x) the use of the Premises (or the applicable por tion thereof), the Building or the Project by the Proposed Transferee would, in Landlord’s judgment, significantly increase pedestrian traffic in and out of the Building and/or the Project, generate increased loitering in Common Areas, increase security risk, or require any alterations to the Building or the Project to comply with applicable Laws; (xi) the Proposed Transferee would be a competitor to another tenant in the Project ; (xii) the Proposed Transferee has been required by any prior landlord, lender or Governmental Authority to take material remedial action in connection with Hazardous Materials contaminating a property, which contamination resulted from Proposed Transferee’s action or omission or use of the property in question; or (xiii) the Propos ed Transferee is subject to a material enforcement order issued by any Governmental Authority in connection with the use, disposal or storage of Hazardous Materials.
27.4.2. Tenant further agrees that Landlord may condition its consent to any proposed Transfer upon satisfaction of any of the following conditions: (a) delivery to Landlord of a true copy of a fully executed sublease, assignment of lease or other instrument pursuant to which the applicable Transfer is made (“Transfer Instrument”); (b) delivery to Landlord of original executed copies (by Tenant and the Transferee (defined below)) of Item 9
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Landlord’s form of Consent to Sublease (in the case of a Sublease) or Assignment and Assumption of Lease and Consent (in the case of an Assignment) or other instrument under which Landlord grants consent to the applicable Transfer (“Consent Instrument”) and (c) receipt by Landlord of all sums and amounts to which Landlord is entitled under Section 27.5 below. Tenant acknowledges and agrees that any Consent Instrument may, without limitation: (i) in the case of a Sublease or Assignment, require the person or entity to which the Transfer is made (“Transferee”) to be bound by all of the terms and provisions of this Lease and to perform all of the obligations of Tenant hereunder applicable to the Premises, or the portion thereof that is the subject of the applicable Transfer; (ii) in the case of an Assignment, include waivers by Tenant of all applicable suretyship defenses, including, but not limited to, those contained in Sections 2787 to 2855, inclusive, of the California Civil Code; and (iii) in the case of a Sublease: (A) provide that such Sublease is subject and subordinate to this Lease to all Security Instruments encumbering the Building or the Project, (B) require the Transferee to, upon demand by Landlord following the occurrence of any Tenant Default, remit directly to Landlord, all monies payable from such Transferee to Tenant in connection with such Sublease and (C) provide that in the event of termination of this Lease for any reason, including without limitation a voluntary surrender by Tenant, or in the event of any reentry or repossession of the Premises by Landlord, Landlord may, at its option, either: (x) terminate the sublease or (y) take over all of the right, title and interest of Tenant, as sublessor, under such sublease, in which case such sublessee shall attorn to Landlord, but that nevertheless Landlord shall not: (1) be liable for any previous act or omission of Tenant under such sublease, (2) be subject to any defense or offset previously accrued in favor of the sublessee against Tenant, or (3) be bound by any previous modification of any sublease made without Landlord’s written consent, or by any previous prepayment by sublessee of more than one month’s rent.
27.4.3. If Landlord grants its consent to any proposed Transfer described in any Transfer Notice, Tenant may during the thirty (30) days thereafter consummate such Transfer with the Proposed Transferee upon the terms and conditions described in the applicable Transfer Notice; provided, however, that any material change in such terms shall be subject to Landlord’s consent as provided in this Article 27. No Assignment or Sublease or other Transfer (whether with or without Landlord’s consent, including a Permitted Transfer) shall relieve Tenant or any assignee or sublessee from any obligation under this Lease whether or not accrued as of the date of the Assignment or Sublease (and, to the extent such Tenant is deemed a surety of an assignee, Tenant hereby waives all applicable suretyship defenses, including, but not limited to, those contained in Sections 2787 to 2855, inclusive, of the California Civil Code).
27.4.4. Notwithstanding the foregoing, Tenant may Transfer its interest in this Lease or the Premises to another department of the City of Palo Alto without Landlord’s consent, provided that (i) Tenant notifies Landlord of such Transfer at least thirty (30) days prior thereto and promptly thereafter supplies Landlord with any documents or information reasonably requested by Landlord regarding such Transfer or such entity; and (ii) such Transfer is not a subterfuge by Tenant to avoid its obligations under this Lease or otherwise effectuate any “release” by Tenant of such obligations. A Transfer made in accordance with this Section 27.4.4 shall be referred to as a “Permitted Transfer” and the transferee shall be referred to as a “Permitted Transferee.”
27.5 Landlord’s Costs; Transfer Premiums.
27.5.1. If Tenant requests Landlord’s consent to a proposed Transfer under the provisions of this Article 27, Tenant shall, upon demand, reimburse all of Landlord’s reasonable expenses, costs and attorneys’ fees incurred in connection with processing such request for consent, whether or not Landlord grants consent to such proposed Transfer.
27.5.2. Intentionally omitted.
27.6 Rights Not Transferable . All: (a) options to extend or renew the Term and/or to expand the Premises, if any, contained in this Lease or any addendum or amendment hereto or letter of agreement; (b) all rights to any signage at the Project in any location outside of the Premises, if any, contained in this Lease or any addendum or amendment hereto or letter of agreement; (c) all rights to above standard (or discounted) parking at the Project, if any, contained in this Lease or any addendum or amendment hereto or letter of agreement; and (d) all rights to receive any above standard services or utilities, if any, contained in this Lease or any addendum or amendment hereto or letter of agreement, are personal to the Original Tenant, and may not be transferred in connection with any Transfer or exercised by any Transferee. Consent by Landlord to any Transfer shall not include consent to the assignment or transfer of any such options, rights or privileges (and such options, rights, or privileges shall terminate upon such Item 9
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assignment or subletting), unless Landlord, in its sole and absolute discretion, specifically grants in writing such options, rights, privileges or services to such assignee or subtenant.
ARTICLE 28
SUBORDINATION
Without the necessity of any additional documents being executed by Tenant for the purpose of effecting a subordination, and at the election of Landlord, or any current or future mortgagee or holder of deed of trust with a lien on the Building or the Project or any ground lessor with respect to the Building or the Project (each, a “Holder”), this Lease shall be subject and subordinate at all times to: (a) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Building, the Project, or the land upon which the Building and the Project are situated, or both; and (b) the lien of any mortgage or deed of trust which may now exist or hereafter be executed in any amount for which the Building, the Project, the land upon which the Building and the Project are situated, ground leases or underlying leases, or Landlord’s interest or estate in any of said items is specified as security (collectively, “Security Instruments”). Notwithstanding such subordination, Tenant’s right to quiet possession of the Premises shall not be disturbed provided that Tenant is not in default after the expiration of any applicable notice and cure period, unless this Lease is otherwise terminated pursuant to its terms. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated such ground leases or any such liens to this Lease. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the tenant of the successor-in-interest to Landlord, at the option of such successor-in-interest to Landlord.
Tenant covenants and agrees to execute and deliver, within ten (10) business days after demand by Landlord therefor, any additional documents evidencing the priority or subordination of this Lease with respect to any such Security Instruments, and Landlord shall have the right, but not the obligation, to cause any such additional documents to be recorded in the official records of the county in which the Project is located. Tenant hereby irrevocably appoints Landlord as its attorney-in-fact to execute, deliver and record any such document in the name and on behalf of Tenant.
ARTICLE 29
ESTOPPEL CERTIFICATE
29.1 Tenant Estoppel Certificate. Within ten (10) business days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord a statement, in a form substantially similar to the form of Exhibit “E” attached hereto, and incorporated herein by this reference (a “Tenant Estoppel Certificate”) certifying: (a) the Commencement Date of this Lease; (b) that this Lease is unmodified and in full force and effect (or, if there have been modifications hereto, that this Lease is in full force and effect, and stating the date and nature of such modifications); (c) the date to which the Rent and other sums payable under this Lease have been paid; (d) that to the best of Tenant’s knowledge, there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant’s statement; and (e) such other matters as are included in such statement by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Article 29 may be relied upon by any mortgagee, lessor, beneficiary, purchaser or prospective purchaser of the Building or the Project or any interest therein.
29.2 Failure to Deliver. Tenant’s failure to deliver such statement within such time shall be conclusive upon Tenant: (a) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (b) that there are no uncured defaults in Landlord’s performance, (c) that not more than one (1) month’s Rent has been paid in advance and (d) that the statements included in the Tenant Estoppel Certificate are true and correct, without exception. Additionally, any such failure to timely deliver a Tenant Estoppel Certificate shall constitute an immediate Tenant Default hereunder.
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ARTICLE 30
INTENTIONALLY OMITTED
ARTICLE 31
SURRENDER OF PREMISES
Upon the expiration or earlier termination of the Term hereof, Tenant shall peaceably surrender the Premises and all Leasehold Improvements therein, excepting only any of the same that are required to be removed in accordance with Section 15.2 above, to Landlord broom-clean, in good order, repair and condition, with all of Tenant’s Personal Property removed and free of any Hazardous Materials (other than those which were brought onto the Premises by Landlord), and shall otherwise comply with all of the requirements of Section 15.2 above and Section 41.1 below.
Upon the expiration or earlier termination of the Term hereof, Landlord shall rekey the Premises and the cost thereof shall be the Landlord’s responsibility. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, operate as an assignment to it of any or all subleases or subtenancies. The delivery of keys to any employee of Landlord or to Landlord’s agent or any employee thereof shall not be sufficient to constitute a termination of this Lease or a surrender of the Premises.
At least thirty (30) days prior to Tenant’s surrender of possession of any part of the Premises, Tenant, at Tenant’s sole cost and expense, shall provide Landlord with (a) a Facility Decommissioning and Hazardous Materials Closure Plan for the Premises (“Closure Plan”) prepared by an independent third party certified safety professional or environmental professional defined by 33 CFR § 137.25 and reasonably acceptable to Landlord following the standards set forth in the American National Standards Institute (“ANSI”) Publication Z9.11-2016 (entitled “Laboratory Decommissioning”), and (b) after the decommissioning is implemented Tenant, at Tenant’s sole cost and expense, shall provide Landlord a “Final Status Report” prepared by an independent third party reasonably certified safety professional or environmental professional acceptable to Landlord following the standards set forth in the ANSI Z9.11-2016 Laboratory Decommissioning Standard including evidence of 1) transport and removal of Hazardous Materials, universal and electronic waste, 2) chemical and biological use area and equipment decontamination certifications, 3) written evidence of all appropriate governmental releases obtained by Tenant in accordance with applicable Laws, including Laws pertaining to the surrender of the Premises, and 4) if recommended by independent third party certified safety professional or environmental professional during the Closure Plan process, environmental sampling and analytical results. In addition, Tenant agrees to remain responsible after the surrender of the Premises for the remediation of any recognized environmental conditions set forth in any exit survey prepared by Landlord and compliance with any recommendations set forth in such survey. Tenant’s obligations under this Section shall survive the expiration or earlier termination of this Lease.
ARTICLE 32
PERFORMANCE BY TENANT
All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be timely performed by Tenant at Tenant’s sole cost and expense and without any abatement of Rent. If Tenant shall fail to pay any sum of money owed to any party other than Landlord, for which it is liable hereunder, or if Tenant shall fail to timely perform any other act on its part to be performed hereunder Landlord may, without waiving or releasing Tenant from obligations of Tenant, but shall not be obligated to, make any such payment or perform any such other act to be made or performed by Tenant pursuant to Section 25.5 above.
ARTICLE 33
PARKING
Beginning on the Commencement Date, Tenant and Tenant’s business visitors (“Tenant’s Parking Invitees”) shall be entitled to use the number of Tenant’s Vehicle Parking Spaces set forth in Section 1.8 during the Initial Term, which Tenant’s Vehicle Parking Spaces shall be located in the surface parking area of the Project (“Parking Area”).
There shall be no direct charge attributable to Tenant’s use of the Parking Area, other than any taxes imposed by any governmental authority in connection with the renting of parking spaces by Tenant or the use of the Parking Area by Tenant. Tenant’s continued right to use the Parking Area is conditioned upon Tenant abiding by the Parking Rules and Item 9
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Regulations set forth on Exhibit “G” as amended from time to time for the orderly operation and use of the Parking Area, including any sticker, parking pass or other identification system established by Landlord, Tenant’s cooperation in seeing that Tenant’s employees and visitors also comply with the Parking Rules and Regulations and Tenant not being in default under this Lease (beyond any applicable notice and cure periods). Landlord agrees to apply such Parking Rules and Regulations in a nondiscriminatory manner. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Parking Area at any time, provided that the number of Tenant’s Vehicle Parking Spaces is not reduced as a result thereof unless required by applicable Law, and Tenant acknowledges and agrees that Landlord may, from time to time, close-off or restrict access to the Parking Area for purposes of permitting or facilitating any such construction, alteration or improvements; provided, however, in connection with any such access restrictions, the same shall be without incurring any liability to Tenant and without any abatement of Rent under this Lease to the extent Landlord provides any reasonably required temporary, alternate parking. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to Landlord. Any parking passes issued to Tenant pursuant to this Article 33 shall be provided to Tenant solely for use by Tenant’s own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord’s prior approval. Tenant may validate visitor parking by such method or methods as Landlord may establish, at the validation rate from time to time generally applicable to visitor parking.
ARTICLE 34
LIMITATION ON LIABILITY
34.1 Landlord’s Liability. In consideration of the benefits accruing hereunder, Tenant and all of its successors and assigns covenant and agree that, in the event of any actual or alleged failure, breach or default hereunder by Landlord:
34.1.1. The sole and exclusive remedy shall be against Landlord’s interest in the Building and Project (including, without limitation, any proceeds received by Landlord from any insurance claims filed in connection with Landlord’s obligations herein);
34.1.2. Only Landlord shall be sued or named as a party in any suit or action;
34.1.3. No writ of attachment, execution, possession, or sale, will ever be levied against the assets of Landlord, except the Building;
34.1.4. The obligations under this Lease do not constitute personal obligations of any Landlord Indemnified Party (other than Landlord), and Tenant shall not seek recourse against any Landlord Indemnified Party (other than Landlord) or any of their personal assets (other than Landlord's interest in the Building) for satisfaction of any liability in respect to this Lease (and, without limiting the foregoing, neither the negative capital account of any Landlord Indemnified Party, nor any obligation of any Landlord Indemnified Party to restore a negative capital account or to contribute capital to Landlord, shall at any time be deemed to be the property or an asset of Landlord, and neither Tenant nor any of its successors or assigns shall have any right to collect, enforce or proceed against or with respect to any such negative capital account of an Landlord Indemnified Party’s obligation to restore or contribute); and
34.1.5. These covenants and agreements are enforceable by Landlord and the other Landlord Indemnified Parties.
ARTICLE 35
CONFIDENTIALITY
Tenant agrees that the terms and conditions of this Lease and any documents or information delivered hereunder are confidential and constitute proprietary information. Disclosure of the terms and conditions hereof or any documents or information delivered hereunder could adversely affect the ability of Landlord to negotiate with other tenants or potential tenants of the Building. Tenant and its partners, officers, members, managers, directors, employees, agents, advisors, representatives and attorneys, shall not disclose the terms and conditions of this Lease or any documents or information delivered hereunder to any other person without the prior written consent of Landlord except (a) pursuant to an order of a court of competent jurisdiction, (b) to its lenders or prospective lenders, (c) to accountants who audit its financial statements or prepare its tax returns, (d) to its attorneys, insurers, to any Item 9
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Governmental Authority or person to whom disclosure is required by applicable Law (including, without limitation, to the extent required on the basis that Tenant is a governmental entity) and (e) in connection with any action brought to enforce the terms of this Lease on account of the breach or alleged breach hereof.
ARTICLE 36
MISCELLANEOUS
36.1 Rules and Regulations . Tenant shall faithfully observe and comply with the “Rules and Regulations”, a copy of which is attached hereto, marked Exhibit “F”, and incorporated herein by this reference (“Rules and Regulations”), and all modifications thereof and additions thereto made from time to time by Landlord.
Landlord shall not be responsible to Tenant for the violation or nonperformance by any other tenant or occupant of the Building or the Project of any of said Rules and Regulations but Landlord agrees to apply such Rules and Regulations in a nondiscriminatory manner.
36.2 Conflict of Laws. This Lease shall be governed by and construed pursuant to the Laws of the State of California (without reference to its conflicts of laws rules or principles).
36.3 Successors and Assigns . Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns (subject to the restrictions on Tenant’s right to assign, sublet or transfer contained in Article 27).
36.4 Professional Fees. If either party should bring suit for possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provisions of this Lease, or for any other relief against the other party hereunder, or in the event of any other litigation between the parties with respect to this Lease, then all reasonable costs and reasonable expenses, including, without limitation, actual professional fees such as appraisers’, accountants’, and attorneys’ fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.
36.5 Mortgagee Protection. Tenant shall give Notice to any beneficiary of a deed of trust or mortgage covering the Premises whose address shall have been furnished to Tenant of any default on the part of Landlord under this Lease, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, in no event less than sixty (60) days, including time to obtain possession of the Premises by power of sale or a judicial foreclosure if necessary to effect a cure.
36.6 Definition of Landlord . The term “Landlord”, as used in this Lease, so far as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners, at the time in question, of the fee title of the Premises or the lessees under any ground lease, if any. In the event of any transfer, assignment or other conveyance or transfers of any such title, the original landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved from and after the date of such transfer, assignment or conveyance of all liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed. Without further agreement, the transferee of such title shall be deemed to have assumed and agreed to observe and perform any and all obligations of Landlord hereunder, during its ownership of the Premises. Landlord may transfer its interest in the Premises without the consent of Tenant and such transfer or any subsequent transfer shall not be deemed a violation on Landlord’s part of any of the terms and conditions of this Lease.
36.7 Identification of Tenant. If more than one person or entity executes this Lease as Tenant: (a) each of them shall be jointly and severally liable for observing and performing all of the terms, covenants, conditions, provisions and agreements of this Lease to be observed and performed by Tenant, and (b) the term “Tenant” as used in this Lease shall mean and include each of them jointly and severally. The act of or Notice from, or Notice or refund to, or the signature of any one or more of them, with respect to the tenancy of this Lease, including but not limited to any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons executing this Lease as Tenant with the same force and effect as if each and all of them had so acted, so given or received such Notice or refund, or so signed.
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36.8 Force Majeure. Each party shall have no liability whatsoever to the other party on account of any of the following (“Force Majeure”): (a) the inability of such party to fulfill, or any delay in fulfilling, any of its obligations under this Lease by reason of strike, other labor trouble, governmental preemption or priorities or other controls in connection with a national or other public emergency, or shortages of fuel, supplies or labor resulting therefrom, governmental or permitting delays, inclement weather, casualty, earthquake, war, riot, civil commotion, terrorism or any other cause, whether similar or dissimilar to the above, beyond such party’s reasonable control (financial condition excepted); or (b) any failure or defect in the supply, quantity, character, or maintenance of electricity, water, intrabuilding network telephone and data cable service, or other service furnished to the Premises by reason of any requirement, act or omission of the public utility or others furnishing the Building with such service, or for any other reason, whether similar or dissimilar to the above, beyond such party’s reasonable control. If this Lease specifies a time period for performance of an obligation of such party, that time period shall be extended by the period of any delay in such party’s performance caused by any of the events of Force Majeure described above.
Notwithstanding the foregoing, nothing in this Section 36.8 shall relieve Tenant from the obligation to pay any Rent or extend the time for payment of any Rent ; provided further that if a Force Majeure event occurs and disrupts the operation of the Tenant’s Administrative Services Department, then the time for payment of Rent shall be extended by ten (10) business days (or such period of delay as is caused by such Force Majeure event, whichever is less) without penalty or interest provided Tenant has delivered written notice of such disruption to Landlord (which may be by email).
36.9 Terms and Headings. The words “Landlord” and “Tenant” as used herein shall include the plural as well as the singular. Words used in any gender include other genders. The Article and Section headings of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof.
36.10 Examination of Lease. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution by and delivery to both Landlord and Tenant.
36.11 Time. Time is of the essence with respect to the performance of every provision of this Lease in which time is a factor.
36.12 Prior Agreement; Amendments. This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter, written or verbal, shall be effective for any purpose. No provisions of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors-in-interest.
36.13 Severability. Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof, and such other provisions shall remain in full force and effect.
36.14 Recording. Tenant shall not record this Lease or a short form memorandum hereof without the consent of Landlord (in its sole and absolute discretion), which consent may be conditioned upon Tenant’s delivery to Landlord of a fully executed quitclaim releasing Tenant’s interest in the Premises, the Project or any portion thereof.
36.15 Intentionally Omitted.
36.16 Financial Statements. At any time during the Term of this Lease, Tenant shall, upon ten (10) days’ Notice from Landlord, provide Landlord with its current financial statements and financial statements of the two (2) years prior to the year in which Landlord’s Notice was given (together with, if Tenant's obligations under this Lease are guaranteed, the guarantor's current financial statements and financial statements of the two (2) years prior to the year in which Landlord’s Notice was given). Such statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. All financial statements shall be certified as true and correct by Tenant’s chief financial officer and Tenant agrees that Landlord may share such financial statements with prospective lenders or purchasers of the Property.
36.17 Quiet Enjoyment. Landlord covenants and agrees with Tenant that, upon Tenant paying the Rent required under this Lease and performing all of the covenants and provisions on Tenant’s part to be observed and performed under this Lease, Tenant shall during the Term, peaceably and quietly have, hold and enjoy the Premises in accordance with this Lease without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied.
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36.18 Tenant as Corporation, Partnership or Limited Liability Company. If Tenant is a corporation, partnership or limited liability company, Tenant and the persons executing this Lease on behalf of Tenant represent and warrant that it is an entity duly qualified to do business in California and that the individuals executing this Lease on Tenant’s behalf are duly authorized to execute and deliver this Lease on its behalf, in the case of a corporation, in accordance with its by-laws and with a duly adopted resolution of the board of directors of Tenant, a copy of which shall be delivered to Landlord upon execution hereof by Tenant, in the case of a partnership, in accordance with the partnership agreement and the most current amendments thereto, if any, copies of which shall be delivered to Landlord upon execution hereof by Tenant, and, in the case of a limited liability company, in accordance with its governing documents and any documents required thereby, copies of which shall be delivered to Landlord upon execution hereof by Tenant, and that this Lease is binding upon Tenant in accordance with its terms.
36.19 CASp Disclosure. For purposes of Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant that the Project Common Areas and Premises, as of the date of this Lease, have not been inspected by a Certified Access Specialist (CASp), as that term is defined in California Civil Code Section 55.52. In accordance with subsection (e) of Section 1938 of the California Civil Code, Tenant is further notified as follows:
A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.
ARTICLE 37
SIGNAGE
Landlord retains absolute control over the exterior appearance of the Building and the Project and the exterior appearance of the Premises as viewed from the Project Common Areas. Tenant will not install, or permit to be installed, any drapes, furnishings, signs, lettering, designs, advertising or any items that will in any way alter the exterior appearance of the Building, the Project or the exterior appearance of the Premises as viewed from the Project Common Areas. Any sign, advertising, design, or lettering installed by Tenant shall be considered an Alteration and shall be subject to the provisions of Article 15 ; provided that Landlord shall have the right to withhold its consent to the same in its sole and absolute discretion. Notwithstanding the foregoing, Tenant shall have (a) the non-exclusive right to have its name (including its logo) displayed on one (1) panel of the Project’s monument sign, and (b) the exclusive right to have its name displayed on one (1) Building standard tenant suite identification sign adjacent to the door to the Premises (the signage rights granted to Tenant in the foregoing subsections (a) and (b) shall be collectively referred to herein as “Tenant’s Signage”), subject to the terms and conditions set forth in this Article 37. The specifications of Tenant’s Signage (including, without limitation, the dimensions and configuration thereof) shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned, or delayed, provided that such specifications are consistent with Landlord’s sign program for the Project and all applicable Laws. The construction and installation of Tenant’s Signage shall be performed by Tenant (upon Landlord’s approval thereof) at Tenant’s sole cost and expense or, if requested by Tenant, by Landlord as part of the Tenant Improvements, at Tenant’s sole cost and expense. Prior to installation, Tenant shall deliver to Landlord a drawing depicting the design, size, location, specifications, graphics, materials and colors of Tenant’s Signage, all of which shall be consistent with Landlord’s sign program and the Rules and Regulations. Tenant’s Signage shall be subject to any applicable review and approval by the City of Palo Alto and any other authorities with jurisdiction over the Project, and Tenant shall obtain all applicable permits and authorizations by Governmental Authorities prior to installation of Tenant’s Signage. After installation, Tenant shall maintain Tenant’s Signage in good condition and repair at all times through the Term. Tenant shall remove Tenant’s Signage upon the expiration or earlier termination of this Lease and shall repair any damage caused thereby. The maintenance and removal of Tenant’s Signage shall be performed at Tenant’s sole cost and expense. All signage rights granted to Tenant under this Lease are personal to Item 9
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the Original Tenant named herein, and, except in connection with a Permitted Transfer to a Permitted Transferee, may not be assigned or transferred without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion.
ARTICLE 38
EXECUTIVE ORDER 13224
Landlord and Tenant each hereby represents and warrants to the other that it is not: (a) in violation of any Anti-Terrorism Law (defined below); (b) conducting any business or engaging in any transaction or dealing with any Prohibited Person (defined below), including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Prohibited Person; (c) dealing in, or otherwise engaging in any transaction relating to, any property or interest in property blocked pursuant t o Executive Order No. 13224; (d) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in any Anti- Terrorism Law; or (e) a Prohibite d Person, nor are any of its partners, members, managers, officers or directors a Prohibited Person. As used herein, “Anti-Terrorism Law” is defined as any Law relating to terrorism, anti-terrorism, money laundering or anti-money laundering activities, including, without limitation, Executive Order No. 13224 and Title 3 of the USA Patriot Act. As used herein “Executive Order No. 13224” is defined as Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, and relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, or Support Terrorism.” “Prohibited Person” is defined as: (i) a person or entity that is listed in the Annex to Executive Order No. 13224; (ii) a person or entity with whom Tenant or Landlord is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; or (iii) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement website or other official publication of such list. “USA Patriot Act” is defined as the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (Public Law 107-56).
ARTICLE 39
WAIVER OF JURY TRIAL
TO THE EXTENT PERMITTED BY LAW, LANDLORD AND TENANT WAIVE THE RIGHT TO A TRIAL BY JURY .
ARTICLE 40
TENANT REPRESENTATIONS
Tenant represents and warrants to Landlord as of the date hereof and continuing thereafter as follows:
(a) The execution and delivery of this Lease by Tenant will not result in a breach of the terms or provisions of, or constitute a default (or a condition that, upon notice or lapse of time, or both, would constitute a default) under its organizational documents or any indenture, agreement, or obligation by which Tenant is bound, and will not constitute a violation of any Law applicable to Tenant. (b) The person executing this Lease on Tenant’s behalf is duly authorized to so act; that Tenant is duly organized, is qualified to do business in the jurisdiction in which the Building is located, is in good standing under the Laws of the state of its organization and the Laws of the jurisdiction in which the Building is located, and has the power and authority to enter into this Lease; and that all action required to authorize Tenant and such person to enter into this Lease has been duly taken.
(c) Any financial statements provided by Tenant are true, correct and complete in all material respects and do not omit to state a fact that would be material to Tenant’s financial condition. There has been no material adverse change in Tenant’s financial condition since Tenant provided such financial statements. (d) Tenant is in compliance with all applicable anti-money laundering Laws, including, without limitation, the USA Patriot Act, and the Laws administered by the United States Treasury Department’s Office of Foreign Assets Control, including, without limitation, Executive Order No. 13224. Tenant is not owned or controlled Item 9
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directly or indirectly by any person or entity, on the SDN List published by the United States Treasury Department’s Office of Foreign Assets Control and Tenant is not a person otherwise identified by any Governmental Authority as a person with whom a U.S. Person is prohibited from transacting business. As of the date hereof, a list of such designations and the text of Executive Order No. 13224 are published under the internet website address www.ustreas.gov/offices/enforcement/ofac.
Landlord represents and warrants to Tenant as of the date hereof and continuing thereafter as follows:
(a) The execution and delivery of this Lease by Landlord will not result in a breach of the terms or provisions of, or constitute a default (or a condition that, upon notice or lapse of time, or both, would constitute a default) under its organizational documents or any indenture, agreement, or obligation by which Landlord is bound, and will not constitute a violation of any Law applicable to Landlord. (b) The person executing this Lease on Landlord ’s behalf is duly authorized to so act; that Landlord is duly organized, is qualified to do business in the jurisdiction in which the Building is located, is in good standing under the Laws of the state of its organization and the Laws of the jurisdiction in which the Building is located, and has the power and authority to enter into this Lease; and that all action required to authorize Landlord and such person to enter into this Lease has been duly taken.
(c) Landlord is in compliance with all applicable anti-money laundering Laws, including, without limitation, the USA Patriot Act, and the Laws administered by the United States Treasury Department’s Office of Foreign Assets Control, including, without limitation, Executive Order No. 13224. Landlord is not owned or controlled directly or indirectly by any person or entity, on the SDN List published by the United States Treasury Department’s Office of Foreign Assets Control and Landlord is not a person otherwise identified by any Governmental Authority as a person with whom a U.S. Person is prohibited from transacting business. As of the date hereof, a list of such designations and the text of Executive Order No. 13224 are published under the internet website address www.ustreas.gov/offices/enforcement/ofac.
ARTICLE 41
ADDITIONAL PROVISIONS
41.1 Environmental Assessments . Upon the Commencement Date, Landlord, at its sole cost and expense, shall cause a Phase I environmental assessment regarding the Project to be prepared by a reputable firm (“Phase I Assessment”) and shall provide a copy of the same to Tenant. The Phase I Assessment shall serve as the “baseline” for determining the environmental condition of the Project upon Tenant’s occupancy thereof. In addition to the surrender obligations set forth elsewhere in this Lease (including, without limitation, Section 15.2 and Article 31), upon the expiration or earlier termination of this Lease, Tenant, at its sole cost and expense, shall (a) cause a Phase I environmental assessment (or similar non-invasive assessment) of the Project (“Phase I Surrender Assessment”) to be performed and deliver the results thereof to Landlord no later than thirty (30) days following such expiration or earlier termination (but in no event shall the Phase I Surrender Assessment be dated more than ten (10) days prior to such expiration or earlier termination); and (b) if and to the extent recommended by the Phase I Surrender Assessment and consented to by Landlord in writing, cause a Phase II environmental assessment (or similar additional assessment) of the Project (“Phase II Surrender Assessment”) to be performed and deliver the results thereof to Landlord no later than thirty (30) days following the date of the Phase I Surrender Assessment. In addition, Landlord shall have the right, in its sole and absolute discretion, to hire, or to cause Tenant to hire, an environmental consultant to conduct a physical inspection of the Project (“Environmental Inspection”) upon the expiration or earlier termination of this Lease, which inspection shall be at Tenant’s sole cost and expense. The Phase I Surrender Assessment and any Phase II Surrender Assessment and/or Environmental Inspection, as the same compare to the Phase I Assessment, shall be used to, among other things, determine the extent of Tenant’s compliance (or noncompliance) with Section
8.3 above as of the dates thereof.
41.2 Early Access. Following no less than twenty-four (24) hours’ notice to Landlord and provided that Landlord has received the Security Deposit, first month’s Rent (inclusive of Basic Rent and Tenant’s Percentage of Operating Expenses and Real Property Taxes) and all required insurance certificates, and provided further that Tenant is not in default under any provision of this Lease beyond the applicable notice and cure period, Landlord shall permit Item 9
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Tenant and its agents to enter the Premises approximately thirty (30) days prior to the Scheduled Commencement Date (“Early Access Period”) for the sole purpose of installing, at Tenant’s sole cost and expense, its furniture, fixtures, equipment and cabling in the Premises; provided, however, that in no event shall such early access, regardless of when provided, extend or otherwise affect the Commencement Date. Any such entry shall be in a manner and upon terms and conditions and at times reasonably satisfactory to Landlord’s representative. The foregoing license to enter the Premises prior to the Commencement Date is, however, conditioned upon Tenant’s contractors and their subcontractors and employees working in harmony and not materially interfering with the work being performed by Landlord. If at any time such entry shall cause disharmony or interfere with the work being performed by Landlord, this license may be withdrawn by Landlord upon twenty-four (24) hours written notice to Tenant. Tenant shall be liable for any damages caused by Tenant’s activities at the Premises. Such license is further conditioned upon the compliance by Tenant’s contractors with all requirements imposed by Landlord on third party contractors, including, without limitation, the maintenance by Tenant and its contractors and subcontractors of workers’ compensation and public liability and property damage insurance in amounts and with companies and on forms satisfactory to Landlord, with certificates of such insurance being furnished to Landlord prior to proceeding with any such entry. The entry shall be deemed to be under all of the provisions of this Lease except as expressly set forth in this Section 41.2. During the Early Access Period, Tenant shall have no obligation to pay Basic Rent or electricity costs (provided Tenant’s electricity usage during such Early Access Period is not excessive). Landlord shall not be liable in any way for any injury, loss or damage which may occur to any such work being performed by Tenant, the same being solely at Tenant’s risk. All costs and expenses in connection with or arising out of the performance of any work by Tenant during such early entry shall be borne by Tenant, and all payments therefor shall be made by Tenant promptly as they become due. Tenant shall, at its sole cost and expense, comply with all applicable laws, ordinances, regulations and policies governing its work. Tenant shall defend, indemnify and hold Landlord and its members, agents, employees, partners, and their respective employees, partners, officers, directors, agents, representatives, successors and assigns, harmless from and against any and all suits, claims, actions, losses, costs, liabilities or expenses (including reasonable attorneys’ fees and claims for workers’ compensation) to the extent arising out of or in connection with any and all work during such early entry (including, but not limited to, claims for breach of warranty, personal injury or property damage). Landlord shall have the right, in Landlord’s sole and absolute discretion, to settle, compromise, or otherwise dispose of any and all suits, claims, and actions against any of the indemnified parties arising out of or in connection with the work performed by Tenant during any early entry. Tenant shall coordinate such entry with Landlord’s building manager and, except as expressly set forth in this Section 41.2, such entry shall be made in compliance with all terms and conditions of this Lease and the Rules and Regulations attached hereto.
41.3 Early Parking. Between the Effective Date and the date immediately prior to the Commencement Date (the “Early Parking Period”), Tenant (and Tenant’s employees and contractors (but no heavy construction vehicles) at a nearby location) shall be allowed to use Tenant’s Vehicle Parking Spaces in those areas of the Parking Area designated by Landlord from time to time, subject to the terms and conditions of Article 33 (except as set forth in this Section 41.3). During the Early Parking Period, the number of Tenant’s Vehicle Parking Spaces may be reduced by Landlord from time to time to the extent reasonably necessary for Landlord’s activities at the Project (including, without limitation, construction activities), and Landlord shall have the right to designate the permitted locations of such Tenant’s Vehicle Parking Spaces during such Early Parking Period.
41.4 Additional EV Spaces . Landlord shall install no less than three (3) additional electric vehicle charging stations at the Project (“Additional EV Spaces”). The Additional EV Spaces shall be located in the Parking Area, at a location to be determined by Landlord in its sole and absolute discretion, and shall be available for the non- exclusive use by all tenants and visitors of the Project on a first-come, first-served basis, subject to the Parking Rules and Regulations as amended from time to time. The installation of the Additional EV Spaces shall be at Landlord’s sole cost and expense (not to be included in Operating Expenses). The costs and expenses incurred by Landlord to maintain and repair the Additional EV Spaces shall be included in the Operating Expenses for the Project, except to the extent excluded under Section 6.1.2 above. The costs and fees for charging at the Additional EV Spaces and all other electric vehicle spaces at the Project shall be borne directly by the user thereof. [signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Lease as of the Effective Date.
LANDLORD: EMBARCADERO WAYPROPERTY OWNER, LP,
a Delaware limited partnership
By: HSRE-BPI II GP, LLC
a Delaware limited liability company,
its general partner
By: ________________________________
Name: Steve Bollert
Title: Authorized Signatory
TENANT: CITY OF PALO ALTO,
a California chartered municipal corporation
By:
Name:
Its:
By:
Name:
Its:
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EXHIBIT “A-I”
1 EXHIBIT “A-I”
OUTLINE OF PREMISES
The entire 2470 building, as outlined below.
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1 EXHIBIT “A-II”
PROJECT SITE PLAN
The following site plan is intended only to show the approximate general outline of the Project, which is subject to change in accordance with the Lease. This site plan is not to be scaled and any measurements or distances shown thereon are approximations only.
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EXHIBIT “B”
1 EXHIBIT “B”
WORK LETTER AGREEMENT
THIS WORK LETTER AGREEMENT is entered into as of _____________, 2025, by and between EMBARCADERO WAY PROPERTY OWNER, LP, a Delaware limited partnership (“Landlord”), and CITY OF PALO ALTO, a California chartered municipal corporation (“Tenant”).
R E C I T A L S:
A. Concurrently with the execution of this Work Letter Agreement, Landlord and Tenant have entered into a lease (“Lease”) covering certain premises (“Premises”) more particularly described in the Lease. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby incorporated by reference to the extent applicable) and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant hereby agree as follows:
1. Tenant Improvements. Reference herein to “Tenant Improvements” shall include all work to be done in the Premises pursuant to the Space Plan and Construction Documents (defined below), including, but not limited to, partitioning, doors, ceilings, floor coverings, wall finishes (including paint and wallcovering), electrical (including lighting; switching; outlets; telephone; etc.), plumbing, heating, ventilating and air conditioning, fire protection, cabinets and other millwork.
2. Tenant Improvement Allowance; Excess Costs. The Tenant Improvements shall be constructed at Tenant’s sole cost and expense, subject to the Tenant Improvement Allowance. In the event that the Tenant Improvement Allowance exceeds the cost of the Tenant Improvements, any remaining portion of the Tenant Improvement Allowance shall accrue to the sole benefit of Landlord, it being agreed that Tenant shall not be entitled to any credit, offset, abatement or payment with respect thereto. The cost of the Tenant Improvements shall include, and Landlord shall be entitled to deduct from the Tenant Improvement Allowance (or otherwise bill to Tenant), a construction management fee for Landlord’s oversight of the Tenant Improvements in an amount equal to three percent (3%) of the total cost of the Tenant Improvements, including all hard and soft costs, but excluding all testing equipment ordered by Tenant or directly via the Contractor. Any and all amounts incurred by Landlord in connection with the Tenant Improvements in excess of the Tenant Improvement Allowance, and any and all increased costs and expenses incurred by Landlord that arise out of any change requested by Tenant pursuant to Paragraph 9 below or any Tenant Delay (defined below), shall be deemed “Excess Costs.” Any and all Excess Costs shall be deemed Rent under the Lease and Tenant shall pay to Landlord such Excess Costs, within thirty (30) days after demand therefor, on a quarterly, advanced basis during the term of this Work Letter Agreement. Landlord shall apply the Tenant Improvement Allowance toward the cost of the Tenant Improvements on a pari passu basis. Tenant’s failure to timely pay any Excess Costs shall constitute a Tenant Default under the Lease. The statements of costs submitted to Landlord by Landlord’s contractors shall be conclusive for purposes of determining the actual cost of the items described therein.
Upon Tenant’s request, Landlord shall deliver copies of all pay applications to Tenant.
3. Space Plan. As soon as reasonably possible after the mutual execution of the Lease, Landlord and Tenant shall work with Jacobs Engineering (“Architect”) to prepare a draft space plan for the Tenant Improvements (“Draft Space Plan”). Tenant shall review and approve (or reasonably disapprove and provide details for such disapproval) of the initial Draft Space Plan within ten (10) business days after receipt thereof and shall review and approve (or reasonably disapprove and provide details for such disapproval) of any subsequent modifications to the Draft Space Plan within five (5) business days after receipt thereof. The Draft Space Plan shall also be subject to the review and approval of Landlord within five (5) business days after receipt thereof, which shall not be unreasonably withheld or conditioned. The version of the Draft Space Plan which is ultimately approved by both Landlord and Tenant shall be referred to herein as the “Space Plan.”
4. Construction Documents. Based upon the approved Space Plan, the Architect shall prepare final working drawings and/or construction documents for the Tenant Improvements containing architectural drawings and mechanical, plumbing, fire sprinkler and electrical engineering drawings, as applicable (“Construction Documents”).
Landlord shall submit the Construction Documents to Tenant for its review and approval, which shall not be unreasonably withheld, conditioned or delayed. Tenant shall review and approve (or reasonably disapprove and provide details for such disapproval) of the initial Construction Documents within ten (10) business days after receipt Item 9
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2 thereof and shall review and approve (or reasonably disapprove and provide details for such disapproval) of any subsequent modifications to the Construction Documents within five (5) business days after receipt thereof. The Construction Documents shall also be subject to the review and approval of Landlord within five (5) business days after receipt thereof, which shall not be unreasonably withheld or conditioned. Landlord’s supervision and/or performance of any work for or on behalf of Tenant or Landlord’s approval of the Space Plan and/or Construction Documents and any revisions thereto shall not be deemed to be a representation by Landlord that such Space Plan and/or Construction Documents or any revisions thereto comply with applicable insurance requirements, building codes, ordinances, laws or regulations or that the Tenant Improvements will be adequate for Tenant’s use. Tenant hereby acknowledges and agrees that (i) Landlord makes no representation or warranty with respect to the design of the Tenant Improvements or any portion thereof; (ii) certain design elements of the Tenant Improvements may increase the risk of injury to persons and/or damage to the Premises and Tenant’s personal property and equipment contained therein; and (iii) any such injury and/or damage shall be subject to the waiver of liability set forth in Sections 20 and 21 of the Lease.
5. Contractor. Landlord and Tenant shall select and mutually agree upon a general contractor to perform the Tenant Improvements (“Contractor”). After the mutual approval of the Construction Documents and the Contractor, the Contractor shall competitively bid the Tenant Improvements to Landlord’s pre-approved, qualified subcontractors and shall share such bids with Tenant. Tenant shall review such bids and select the appropriate subcontractors within five (5) business days after receipt of such bids.
6. Design and Permit Deadlines. Tenant shall cause the Space Plan and Construction Documents to be completed no later than three (3) months after the mutual execution of the Lease, and Tenant shall cause the building permit for the Tenant Improvements to be obtained no later than nine (9) months after the mutual execution of the Lease (collectively, “Design and Permit Deadlines”). If Tenant fails to meet the Design and Permit Deadlines, then the number of days between the Design and Permit Deadlines and the actual dates upon which the Space Plan and Construction Documents are completed and the permit is received shall be “Tenant Delays” and shall accelerate the Scheduled Commencement Date as provided in Paragraph 11 below.
7. Work Schedule. Within a reasonable period of time after the mutual approval of the Construction Documents, Landlord shall deliver to Tenant, for Tenant’s review and approval (which approval shall not be unreasonably withheld, conditioned or delayed), a schedule setting forth a timetable for the planning and completion of the installation of the Tenant Improvements to be constructed in the Premises (“Work Schedule”). Upon approval by both Landlord and Tenant, such Work Schedule shall become the basis for completing the Tenant Improvements.
If Tenant fails to provide written approval of the Work Schedule, as it may be modified after discussions between Landlord and Tenant, within five (5) business days after the date the Work Schedule is first delivered to Tenant by Landlord, the Work Schedule shall be deemed approved. Pursuant to Section 1.10 of this Lease, the date set forth in the Work Schedule as the date on which the Tenant Improvements are expected to be Substantially Complete shall be deemed to be the Scheduled Commencement Date (subject to acceleration due to Tenant Delays as set forth in Paragraph 11 below), and in no event shall the Commencement Date under this Lease be any later than the Scheduled Commencement Date (except in the event of any Landlord Delay Day (as that term is defined below)).
8. Cost of Space Plan and Construction Documents . The cost of preparing the Space Plan and the Construction Documents, and all other fees charged by the Architect, shall be included in the cost of the Tenant Improvements and either deducted from the Tenant Improvement Allowance or paid by Tenant as Excess Costs.
9. Changes in Plan and Construction Documents . Any changes requested by Tenant in the Construction Documents or other plans and specifications after approval thereof by Tenant shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld, delayed, or conditioned, and, if approved, shall be prepared at Tenant’s sole cost and expense, and any excess costs resulting from such changes shall also be at Tenant’s sole cost and expense. Furthermore, Tenant shall be liable for any resulting delays in completing the Tenant Improvements and for any increased cost in completing the Tenant Improvements, if any, resulting from such delays.
Any such delays shall be “Tenant Delays” as provided in Paragraph 11 below.
10. Construction of Tenant Improvements . After the Construction Documents have been prepared and approved, the final pricing has been approved and a building permit for the Tenant Improvements has been issued, Landlord shall cause the Contractor to begin installation of the Tenant Improvements in accordance with the Construction Documents and permit. Landlord shall supervise the completion of such work and shall use commercially reasonable efforts to secure substantial completion of the work in accordance with the Work Schedule.
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3 The cost of such work shall be paid as provided in Paragraph 2 above. Landlord shall not be liable for any direct or indirect damages as a result of delays in construction beyond Landlord’s reasonable control, including, but not limited to, acts of God, inability to secure governmental approvals or permits, governmental restrictions, strikes, availability of materials or labor or delays by Tenant (or its architect or anyone performing services on behalf of Tenant).
11. Substantial Completion. The Tenant Improvements shall be deemed “Substantially Complete” (and “Substantial Completion” shall be deemed to have occurred) upon the date upon which (i) construction of the Tenant Improvements in the Premises has been substantially completed pursuant to the Construction Documents, with the exception of any minor punch list items and any Tenant fixtures, work-stations, built-in furniture, or equipment to be installed by Tenant, and (ii) a temporary or permanent certificate of occupancy or other equivalent approval from the local governmental authority has been issued permitting occupancy of the Premises (such as sign off on the building inspection cards or a “safe to occupy” approval). “Tenant Delay” shall be a delay in Substantial Completion of the Tenant Improvements as a result of:
(a) Tenant’s request for materials, finishes or installations other than those readily available, provided Tenant had been advised in writing that its selection may create a Tenant Delay; (b) Tenant’s changes in the Space Plan or Construction Documents after approval by Tenant; (c) Tenant’s failure to comply with the Work Schedule or otherwise timely perform any obligation or provide any approval required of Tenant hereunder, including, without limitation, failure to meet the Design and Permit Deadlines, which continues for two (2) business days following written notice of such failure ; (d) Tenant’s failure to timely pay any Excess Costs, which continues for two (2) business days following written notice of such failure; or
(e) any negligent or willful act or omission of Tenant or any Tenant Party; To the extent the same delays the Substantial Completion of the Tenant Improvements then the Scheduled Commencement Date of the Term of this Lease shall be accelerated by the number of days of such Tenant Delay.
The Tenant Improvements shall be deemed Substantially Complete notwithstanding the fact that minor details of construction, mechanical adjustments or decorations that do not materially interfere with Tenant’s use and enjoyment of the Premises remain to be performed (items normally referred to as “punch list” items).
12. Landlord Caused Delays.
a. To the extent there are delays in Tenant’s ability to meet the Design and Permit Deadlines due to a Landlord Caused Delay, then the Design and Permit Deadlines shall be extended for each Landlord Delay Day (as that term is defined below). To the extent there are delays in the Substantial Completion of the Tenant Improvements due to a Landlord Caused Delay, then the Scheduled Commencement Date shall be extended for each Landlord Delay Day. As used herein, “Landlord Caused Delay” shall mean actual delays to the extent resulting from the (i) failure of Landlord to timely perform any obligation or provide any approval required of Landlord hereunder; (ii) the failure of Landlord to timely make any payments due and payable to the Architect or Contractor (provided that Tenant has timely paid all Excess Costs); or (iii) delays due to any sole or active negligence or willful acts or willful failures to act of Landlord or its employees.
b. If Tenant contends that a Landlord Caused Delay has occurred, Tenant shall notify Landlord in writing (“Delay Notice”) of the event that it contends constitutes such Landlord Caused Delay. If such actions, inaction or circumstance described in the Delay Notice is not cured by Landlord within three (3) business days following Landlord’s receipt of the Delay Notice and if such action, inaction or circumstance otherwise qualifies as a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have occurred during the period commencing as of the date of Tenant’s effective delivery of the Delay Notice (pursuant to the provisions of Section 10.2 of this Lease) and ending as of the date such delay ends. To the extent the same delays Tenant’s ability to meet the Design and Permit Deadlines and/or the Substantial Completion of the Tenant Improvements, each day during such period shall be referred to herein as a “Landlord Delay Day.”
13. Keying of Premises. Upon Substantial Completion of the Tenant Improvements, Tenant, at Tenant’s sole cost and expense, shall use Landlord’s approved vendor to key the Premises onto the master key system for the Building.
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EXHIBIT “B”
4 14. Warranty. Landlord shall warrant, for a period of twelve (12) months after the Commencement Date (the “Warranty Period”), that (a) all Building systems and subsystems existing as of the Commencement Date of the Lease shall be in good working order as of such date, and (b) that the Tenant Improvements, on the Commencement Date, shall be in good working order and free of any code violations and shall otherwise comply with all applicable laws and direction of any governmental authority including Title 24 and ADA requirements in effect as of the date of the issuance of the building permit for the Tenant Improvements and as memorialized in such permit. The Warranty Period for certain items shall be extended if and to the extent that Landlord is provided with a longer warranty period for such items from the applicable Architect, Contractor or subcontractor. In the event that Tenant has a claim against the foregoing warranty, Tenant shall notify Landlord of such claim immediately following its discovery of the facts giving rise to such claim, but in no event later than the expiration of the Warranty Period. If Tenant timely delivers such a claim to Landlord, Landlord’s sole obligation, liability and responsibility in connection therewith shall be to correct the deficiency or violation giving rise to such claim at Landlord’s sole cost and expense. Landlord shall have the right to pursue any warranty it holds from the Architect, Contractor or any subcontractors in connection therewith. [signatures on following page]
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EXHIBIT “B”
5 IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the date first written above.
LANDLORD: EMBARCADERO WAY PROPERTY OWNER, LP,
a Delaware limited partnership
By: HSRE-BPI II GP, LLC
a Delaware limited liability company,
its general partner
By: ________________________________
Name: Steve Bollert
Title: Authorized Signatory
TENANT: CITY OF PALO ALTO,
a California chartered municipal corporation
By:
Name:
Its:
By:
Name:
Its:
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EXHIBIT “C”
6 EXHIBIT “C”
FORM OF MEMORANDUM OF LEASE TERMS
MEMORANDUM OF LEASE TERMS
To: Date:
Re: Lease Agreement (“Lease”) dated _______________, 20__, between EMBARCADERO WAY PROPERTY OWNER, LP, a Delaware limited partnership, Landlord, and CITY OF PALO ALTO, a California chartered municipal corporation, Tenant, concerning 2470 Embarcadero Way, Palo Alto, California 94303 (“Premises”).
Dear ____________:
In accordance with the Lease, we wish to advise and/or confirm as follows (terms with initial capital letters which are not separately defined herein shall have the meanings ascribed to them in the Lease):
1. That the Premises have been accepted herewith by Tenant as being “Substantially Complete” in accordance with the subject Lease and that there is no deficiency in construction.
2. That Tenant has possession of the Premises and acknowledges that under the provisions of the Lease the Term of said Lease shall commence as of _______________________________ for a term of ____________________ ending on ___________________________.
3. That in accordance with the Lease, Rent commenced to accrue on _________________________.
4. If the Commencement Date of the Lease is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in the Lease.
5. Rent is due and payable in advance on the first day of each and every month during the Term of Lease. Your Rent checks should be made payable to _________________________ at _______________________ ______________________________________________________________________. [signatures on following page]
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EXHIBIT “C”
7 AGREED AND ACCEPTED:
TENANT: LANDLORD:
_____________ PROPERTY OWNER, LP,
a Delaware limited partnership
By: ______________________________________
Name: ___________________________________
Its: _______________________________________
Date: _____________________________________
By: HSRE-BPI II GP, LLC
a Delaware limited liability company,
its general partner
By: ________________________________
Name: Steve Bollert
Title: Authorized Signatory
Date: ________________________________
SAMPLE ONLY
NOT FOR EXECUTION
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EXHIBIT “D”
1 EXHIBIT “D”
RESERVED
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EXHIBIT “E”
1 EXHIBIT “E”
FORM OF TENANT ESTOPPEL CERTIFICATE
TENANT ESTOPPEL CERTIFICATE
This Estoppel Certificate is given to [___________________, a _____________] (together with any successors and assigns, collectively, “Landlord”), by [____________ a ______________] (“Tenant”), with the understanding that Landlord, its current or prospective lenders and their respective counsel will rely on this Certificate in connection with the real property known as [_______________________], located at [___________________________] (“Property”). Tenant hereby certifies as follows:
1. The undersigned is Tenant under that certain lease dated ____________, ____ (“Lease”) executed by Landlord or its predecessor in interest, as landlord, and Tenant, as tenant.
2. Pursuant to the Lease, Tenant has leased a portion of the Property consisting of approximately _____ rentable square feet (“Premises”).
3. The commencement date of the term of the Lease is ___________.
4. The expiration date of the term of the Lease is ________________.
5. The monthly basic rent is $________________, payable in advance on the first day of each calendar month.
6. The next rental payment in the amount of $________________ is due on _____________, 20__.
7. No rent has been prepaid except for the current month, and Tenant agrees not to pay rent more than one month in advance at any time.
8. The obligation to pay rent began on ________, _____.
9. The annual minimum rent is subject to rental increases as set forth in the Lease, and the last increase covers the period from _______, ____ through ___________, _____.
10. Tenant’s payment of its share of Operating Expenses and Real Property Taxes is currently based on an annual amount of $______, which is currently being paid on an estimated basis in advance at the rate of $______ per month.
11. All rent has been paid through ________, 20__.
12. Tenant has paid a security deposit of $_________ in connection with the Lease.
13. Tenant does not have any right or option to renew or extend the term of the Lease or to expand into any additional space or to terminate the Lease in whole or in part prior to the expiration of the term except as follows:
_______________________________________________________________________.
14. The Lease has been duly executed and delivered by, and is a binding obligation of, Tenant (and Guarantor, if applicable), and the Lease is in full force and effect. The Lease is the entire agreement between Landlord (or any affiliated party) and Tenant (or any affiliated party) pertaining to the Premises. A true, correct and complete copy of the Lease, together with any amendments, modifications and supplements thereto, is attached hereto as Exhibit A, and except as attached hereto, there are no amendments, modifications, supplements, arrangements, side letters or understandings, oral or written, of any sort, modifying, amending, altering, supplementing or changing the terms of the Lease.
15. Tenant has unconditionally accepted the Premises and is satisfied with all the work done by and required of Landlord; Tenant has taken possession and is in occupancy of the Premises and is open for business; rent payments have commenced, and all tenant improvements in the Premises have been completed by Landlord in accordance with plans and specifications approved by Tenant; and as of the date hereof Tenant is not aware of any defect in the Premises.
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EXHIBIT “E”
2 16. Except as set forth on Exhibit B attached to this Certificate: Landlord has satisfied all commitments made to induce Tenant to enter into the Lease; there are no offsets or credits against rentals payable under the Lease; no free rent, tenant improvements, contributions or other concess ions have been granted to Tenant; Landlord is not reimbursing Tenant or paying Tenant’s rent obligations under any other lease, and Tenant has not advanced any funds for or on behalf of Landlord for which Tenant has a right of deduction from, or set off against, future rent payments.
17. Except as set forth on Exhibit B attached to this Certificate, Landlord has no obligations to repair or maintain the Premises.
18. All obligations of Landlord under the Lease have been performed, and no event has occurred and no condition exists that, with the giving of notice or lapse of time or both, would constitute a default by Landlord under the Lease. There are no offsets or defenses that Tenant has against the full enforcement of the Lease by Landlord.
19. Tenant is not in any respect in default under the Lease and has not assigned, transferred or hypothecated the Lease or any interest therein or subleased all or any portion of the Premises. Tenant (and Guarantor, as applicable) is not insolvent and is able to pay its debts as they mature. Tenant (and Guarantor, as applicable) has not declared bankruptcy or filed a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, Tenant has no present intentions of doing so, and no such proceeding has been commenced against Tenant seeking such relief, and Tenant has no knowledge that any such proceeding is threatened.
20. Tenant does not have any right or option to purchase all or any part of the real property of which the Premises constitute a part.
21. Tenant agrees that no future modifications or amendment of the Lease will be enforceable unless the modification or amendment has been consented to in writing by Landlord.
24. Tenant has no notice of any assignment of the Lease by Landlord, or any assignment, hypothecation or pledge of rents accruing under the Lease by Landlord, except in connection with prior mortgage financing obtained by Landlord.
22. Tenant has received no notice by any governmental authority or person claiming a violation of, or requiring compliance with, any applicable federal, state or local law or regulation intended to protect the environment and public health and safety (“Environmental Law”). The Premises are not, and during the term of the Lease have never been used to handle, treat, store, or dispose of oil, petroleum products, hazardous substances in any quantity, hazardous waste, toxic substances, regulated substances or hazardous air pollutants in violation of any Environmental Law.
23. The person executing this Estoppel Certificate is authorized by Tenant to do so and execution hereof is the binding act of Tenant enforceable against Tenant.
Dated: _________________, 20__ TENANT:
By: ____________________________
Name: ____________________________
Title: ____________________________
Exhibits
A – Complete copy of the Lease, together with any amendments B – Exceptions to certifications (Note: If no exceptions are noted on Exhibit B, then the word “none” shall be deemed to have been inserted therein)
SAMPLE ONLY
NOT FOR EXECUTION
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EXHIBIT “F”
1 EXHIBIT “F”
RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Project. In the event of any conflict between the Rules and Regulations and the other provisions of this Lease, the latter shall control.
1. Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord’s prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord. Upon the termination of this Lease, Tenant shall restore to Landlord all keys of stores, offices, and toilet rooms, either furnished to, or otherwise procured by, Tenant and in the event of the loss of keys so furnished, Tenant shall pay to Landlord the cost of replacing same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such changes.
2. All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises.
3. Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for comparable buildings in Palo Alto, California. Tenant, its employees and agents must be sure that the doors to the Building are securely closed and locked when leaving the Premises if it is after the normal hours of business for the Building. Any tenant, its employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time when it is considered to be after normal business hours for the Building, may be required to sign the Building register. Access to the Building may be refused unless the person seeking access has proper identification or has a previously arranged pass for access to the Building.
Landlord will furnish passes to persons for whom Tenant requests same in writing. Tenant shall be responsible for all persons for whom Tenant requests passes and shall be liable to Landlord for all acts of such persons. Landlord and his agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building or the Project during the continuance thereof by any means it deems appropriate for the safety and protection of life and property.
4. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building and also the times and manner of moving the same in and out of the Building.
Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property in any case. Any damage to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property shall be the sole responsibility and expense of Tenant.
5. The requirements of Tenant will be attended to only upon application at the management office for the Project or at such office location designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord.
6. No sign, advertisement, notice or handbill shall be exhibited, distributed, painted or affixed by Tenant on any part of the Premises or the Building without the prior written consent of Landlord. Tenant shall not disturb, solicit, peddle, or canvass any occupant of the Project and shall cooperate with Landlord and the agents of Landlord to prevent same.
7. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein.
The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees shall have caused same.
8. Tenant shall not overload the floor of the Premises, nor mark, drive nails or screws, or drill into the partitions, woodwork or drywall or in any way deface the Premises or any part thereof without Landlord’s prior written consent.
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EXHIBIT “F”
2 9. Tenant shall provide material safety data sheets for any Hazardous Material used or kept on the Premises.
10. Tenant shall not without the prior written consent of Landlord use any method of heating or air conditioning other than that supplied by Landlord.
11. Tenant shall not permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Project by reason of noise or vibrations, or interfere with other tenants or those having business therein, whether by the use of any musical instrument, radio, phonograph, or in any other way. Tenant shall not throw anything out of doors, windows or skylights or down passageways.
12. Tenant shall not bring into or keep within the Project, the Building or the Premises any animals (other than valid service animals), birds, aquariums, or, except in areas designated by Landlord, bicycles or other vehicles.
13. No cooking shall be done or permitted on the Premises, nor shall the Premises be used for the storage of merchandise, for lodging or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, Underwriters’ laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages for employees and visitors, provided that such use is in accordance with all applicable Laws.
14. Tenant shall not occupy or permit any portion of the Premises to be occupied as an office for a messenger-type operation or dispatch office, public stenographer or typist, or for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a medical office, or as a barber or manicure shop, or as an employment bureau without the express prior written consent of Landlord. Tenant shall not engage or pay any employees on the Premises except those actually working for such tenant on the Premises nor advertise for laborers giving an address at the Premises.
15. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.
16. Tenant, its employees and agents shall not loiter in or on the entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators, vestibules or any Project Common Areas for the purpose of smoking tobacco products or for any other purpose, nor in any way obstruct such areas, and shall use them only as a means of ingress and egress for the Premises. Tenant shall not store any property in the Common Areas or use the Common Areas for any purpose not approved by Landlord in Landlord’s sole discretion.
17. Tenant shall not waste electricity, water or air conditioning provided to the Project Common Areas and shall refrain from attempting to adjust any controls with respect thereto.
18. Tenant shall deposit all of its trash, garbage and Hazardous Materials in receptacles within its Premises or in receptacles designated by Landlord outside of the Premises. Tenant shall not place in any such receptacle any material that cannot be disposed of in the ordinary and customary manner of trash and garbage disposal.
Any Hazardous Materials transported through Common Areas shall be held in secondary containment devices provided by Tenant. Tenant shall be responsible, at its sole cost and expense, for Tenant’s removal of its trash, garbage from the Premises to designated receptacles outside of the Premises and the removal of Hazardous Materials from the Premises and the Project pursuant to a separate contract maintained by Tenant. If the Premises is or becomes infested with vermin as a result of the use or any misuse or neglect of the Premises by Tenant, its agents, servants, employees, contractors, visitors or licensees, Tenant shall forthwith, at Tenant’s expense, cause the Premises to be exterminated from time to time to the satisfaction of Landlord and shall employ such licensed exterminators as shall be approved in writing in advance by Landlord.
19. Tenant shall comply with all orders, requirements and conditions now or hereafter imposed by applicable Laws or by Landlord for the Project (“Waste Regulations”) regarding the collection, sorting, separation and recycling of waste products, garbage, refuse and trash generated by Tenant (collectively, “Waste Products”), including (without limitation) the separation of Waste Products into receptacles reasonably approved by Landlord and the removal of such receptacles in accordance with any collection schedules prescribed by Waste Regulations.
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EXHIBIT “F”
3 20. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any Governmental Authority.
21. No awnings or other projection shall be attached to the outside walls of the Building without the prior written consent of Landlord, and no curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises other than Landlord standard drapes. Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened without the prior written consent of Landlord.
Tenant shall be responsible for any damage to the window film on the exterior windows of the Premises and shall promptly repair any such damage at Tenant’s sole cost and expense.
22. Tenant must comply with requests by Landlord concerning the informing of their employees of items of importance to Landlord.
23. Tenant must comply with any applicable “NO-SMOKING” ordinances. If Tenant is required under the ordinance to adopt a written smoking policy, a copy of said policy shall be on file in the office of the Building.
24. Tenant hereby acknowledges that Landlord shall have no obligation to provide guard service or other security measures for the benefit of the Premises, the Building or the Project. Tenant hereby assumes all responsibility for the protection of Tenant and its agents, employees, contractors, invitees and guests, and the property thereof, from acts of third parties, including keeping doors locked and other means of entry to the Premises closed, whether or not Landlord, at its option, elects to provide security protection for the Project or any portion thereof.
Tenant further assumes the risk that any safety and security devices, services and programs which Landlord elects, in its sole discretion, to provide may not be effective, or may malfunction or be circumvented by an unauthorized third party, and Tenant shall, in addition to its other insurance obligations under this Lease, obtain its own insurance coverage to the extent Tenant desires protection against losses related to such occurrences. Tenant shall cooperate in any reasonable safety or security program developed by Landlord or required by Law.
25. Tenant shall not use in any space or in the public halls of the Building, any hand trucks except those equipped with rubber tires and rubber side guards.
26. No auction, liquidation, fire sale, going-out-of-business or bankruptcy sale shall be conducted in the Premises without the prior written consent of Landlord.
27. No tenant shall use or permit the use of any portion of the Premises for living quarters, sleeping apartments or lodging rooms.
28. Tenant shall install and maintain, at Tenant’s sole cost and expense, an adequate, visibly marked and properly operational fire extinguisher next to any duplicating or photocopying machines or similar heat producing equipment, which may or may not contain combustible material, in the Premises.
Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord’s judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises, Building and the Project Common Areas, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Provided that the Rules and Regulations are applied and enforced in a non-discriminatory manner, Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises.
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EXHIBIT “G”
1 EXHIBIT “G”
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern the use of the Parking Area of the Project:
1. Except for the gross negligence or willful misconduct of Landlord, Landlord shall not be responsible for any damage to vehicles, injuries to persons, or loss of property, all of which risks are assumed by the party using the Parking Area. All claimed damage, injuries, or loss must be reported, itemized in writing and delivered to the parking management office located within the Project within ten (10) days after any claimed damage, injuries, or loss occurs. Any claim not so made is waived. In any event, (a) the total liability of Landlord, if any, shall be limited to Two Hundred Fifty Dollars ($250.00) for all damages to any vehicle and/or loss of any property, and (b) Landlord shall not be responsible for the loss of use of any vehicle or property.
2. Tenant shall not park, nor permit Tenant’s Parking Invitees except visitors to park, in any parking areas designated by Landlord as areas for parking by visitors to the Project; nor shall Tenant and/or Tenant’s Parking Invitees park in parking areas designated by Landlord for the exclusive use of tenants or other occupants of the Project.
Neither Tenant, nor Tenant’s Parking Invitees, shall leave vehicles in the parking areas overnight or as extended term storage or park any vehicles in the parking areas other than automobiles, motorcycles, motor driven or non-motor driven bicycles or four wheeled trucks.
3. Parking stickers or any other device or form of identification supplied by Landlord as a condition of use of the Parking Area shall remain the property of Landlord. Such parking identification device must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification device may not be obliterated. Devices are not transferable and any device in the possession of an unauthorized holder will be void.
Landlord may charge a fee for parking stickers, cards or other parking control device supplied by Landlord.
4. Vehicles must be parked entirely within painted stall lines of a single parking stall.
5. All directional signs and arrows must be observed.
6. The speed limit within all parking areas shall be five (5) miles per hour.
7. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where “no parking” signs are posted;
(d) on ramps;
(e) in cross-hatched areas;
(f) in loading areas; and
(g) in such other areas as may be designated by Landlord or Landlord parking operator.
8. Every parker is required to park and lock his own vehicle.
9. Loss or theft of parking identification devices must be reported to Landlord immediately, and a lost or stolen report must be filed by Tenant or user of such parking identification device at the time. Landlord has the right to exclude any car from the Parking Area that does not have an identification device.
10. Any parking identification devices reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution.
11. Washing, waxing, cleaning or servicing of any vehicle in any area not specifically reserved for such purpose is prohibited.
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EXHIBIT “G”
2 12. The parking operators, managers or attendants are not authorized to make or allow any exceptions to these rules and regulations.
13. Tenant’s and Tenant’s Parking Invitees’ continued right to use any parking spaces in the Parking Area is conditioned upon Tenant, and Tenant’s Parking Invitees, abiding by these rules and regulations and those contained in this Lease. Further, if this Lease terminates for any reason whatsoever, Tenant’s, and Tenant’s Parking Invitees’, right to use the parking spaces in the Parking Area shall terminate concurrently therewith.
14. Tenant agrees to sign a parking agreement with Landlord or Landlord’s parking operator within five (5) days of request, which agreement shall provide the manner of payment of monthly parking fees, if any, and otherwise be consistent with this Lease and these rules and regulations.
15. Landlord reserves the right to refuse the sale of monthly stickers or other parking identification devices to any tenant or person and/or his agents or representatives who willfully refuse to comply with these rules and regulations or any posted or unposted Laws.
16. Landlord reserves the right to establish and change parking fees (except to the extent that same are specifically fixed pursuant to Section 1.8) and to modify and/or adopt such other reasonable and nondiscriminatory rules and regulations for the Parking Area as it deems necessary for the operation of the Parking Area. Nothing herein shall require Landlord to charge a uniform monthly parking fee for the use of vehicle parking spaces in the Project, it being expressly acknowledged and agreed that parking fees may differ based on any factor deemed sufficient by Landlord, including without limitation the degree of a particular tenant’s participation in energy and/or traffic management programs of the type described in Section 8.2(a) of this Lease. Landlord may refuse to permit any person who violates these rules to park in the Parking Area, and any violation of the rules shall subject the car to removal, at such car owner’s expense.
17. A third party may own, operate or control the Parking Area, and such party may enforce these Parking Rules and Regulations relating to parking. Tenant will obey any additional rules and regulations governing parking that may be imposed by the parking operator or any other person controlling the Parking Area serving the Project.
18. Tenant will be responsible for the observance of all of the Parking Rules and Regulations by Tenant (including, without limitation, all employees, agents, clients, customers, invitees and guests).
19. Landlord may, from time to time, waive any one or more of these Parking Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a continuing waiver of such Parking Rules and Regulations in favor of Tenant or any other tenant, nor prevent Landlord from thereafter enforcing any such Parking Rules and Regulations against Tenant or any or all of the tenants of the Project.
20. These Parking Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the other terms, covenants, agreements, and conditions of this Lease. To the extent there is any conflict between any of the Parking Rule and Regulations and any express term or provision otherwise set forth in this Lease, such other express term or provision will be controlling.
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EXHIBIT “H”
1 EXHIBIT “H”
Outdoor Equipment Locations
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INDEX OF DEFINED TERMS
Abandonment, 30
Abatement Event, 23
ADA, 12
Additional EV Spaces, 44
Additional Rent, 6
Alterations, 18
Annual Reconciliation, 10
ANSI, 37
Anti-Terrorism Law, 42
Architect. See Exhibit B
Assignment, 33
Basic Rent, 2
Broker(s), 2
Building, 1
Building Systems, 19
Claims, 23
Closure Plan, 37
Commencement Date, 2
Common Areas, 3
Comparable Transactions, 4
Consent Instrument, 35
Construction Documents. See Exhibit B
Contractor. See Exhibit B
Control, 33
Controllable Operating Expenses, 9
Controlling, 33
Default Rate, 6
Delay Notice. See Exhibit B
Design and Permit Deadlines. See Exhibit B
Discount Rate, 31
Dispute Notice, 11
Draft Space Plan. See Exhibit B
Early Access Period, 44
Early Parking Period, 44
Effective Date, 1
Eligibility Period, 23
Environmental Inspection, 43
Estimated Statement, 10
Excess Costs. See Exhibit B
Executive Order No. 13224, 42
Expiration Date, 4
Fair Market Rental Value, 4
Force Majeure, 40
Governmental Authority, 7
Hazardous Material, 15
Hazardous Material Laws, 15
Holder, 36
HVAC, 21
Initial Notice, 32
Initial Term, 1, 3
Institutional Owner Practices, 7
Interest Rate, 7
Landlord, 1
Landlord Caused Delay. See Exhibit B
Landlord Default, 32
Landlord Delay Day. See Exhibit B
Landlord Indemnified Parties, 25
Landlord’s Accountant, 11
Landlord’s Address, 1
Landlord’s Fair Market Rental Value Notice, 4
Laws, 12
Lease, 1
Leasehold Improvements, 19
Major Alteration, 19
Material Landlord Maintenance Failure, 32
Memorandum of Coverage, 25
Memorandum of Lease Terms, 4
Notice, 16
Notice of Default, 31
Operating Expenses, 6
Option, 4
Option Term, 4
Original Tenant, 4
Outline of Premises, 3
Outside Agreement Date, 4
Parking Area, 37
Permitted Alterations, 19
Permitted Transfer, 35
Permitted Transferee, 35
Permitted Use, 2
Phase I Assessment, 43
Phase I Surrender Assessment, 43
Phase II Surrender Assessment, 43
Premises, 1
Prime Rate, 6
Prohibited Person, 42
Project, 1, 3
Project Area, 2
Project Common Areas, 3
Project Site, 3
Project Site Plan, 3
Property Manager, 19
Proposed Transferee, 33
Real Property Taxes, 8
Reimbursements, 9
Reminder Notice, 32
Rent, 6
Rentable Square Feet, 1
Review Notice, 10
Rules and Regulations, 39
Scheduled Commencement Date, 1
Security Deposit, 2
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Security Instruments, 36
SIR, 27
Space Plan. See Exhibit B
Sublease, 33
Substantial Completion. See Exhibit B
Substantially Complete. See Exhibit B
Supplemental Equipment, 20
Taking, 29
Tenant, 1
Tenant Default, 30
Tenant Delay. See Exhibit B
Tenant Estoppel Certificate, 36
Tenant Improvement Allowance, 1
Tenant Improvements. See Exhibit B
Tenant Party, 13
Tenant Water Meter, 22
Tenant’s Address, 1
Tenant’s Parking Invitees, 37
Tenant’s Percentage, 2, 9
Tenant’s Personal Property, 20
Tenant’s Signage, 41
Term, 4
Total Destruction, 28
Transfer, 33
Transfer Date, 33
Transfer Instrument, 34
Transfer Notice, 33
Transferee, 35
Upper Slab, 25
USA Patriot Act, 42
Warranty Period. See Exhibit B
Waste Products. See Exhibit F
Waste Regulations. See Exhibit F
Work Letter Agreement, 3
Work Schedule. See Exhibit B
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: May 19, 2025
Report #:2503-4327
TITLE
Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water Purification System project (WQ-19003); Authorization of Contract Contingency in an Amount Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View; CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled Water Project (SCH 2011062037)
RECOMMENDATION
Staff recommends that City Council:
1. Approve and authorize the City Manager or their designee to execute construction contract No. C25193197 with Anderson Pacific Engineering Construction, Inc., in the amount not-to-exceed $47,282,100, for the construction of Phase I of the Local Advanced Water Purification System project (WQ-19003);
2. Authorize the City Manager or their designee to negotiate and execute one or more change orders to the construction contract with Anderson Pacific Engineering Construction, Inc., for related, additional, but unforeseen work which may develop during the project, the total value of which shall not exceed $4,728,210; and
3. Approve and authorize the City Manager or their designee to execute Amendment No. 2 to the First Amended and Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View.
EXECUTIVE SUMMARY
Staff recommends that the City Council approve the proposed construction contract and amendment to the existing Recycled Water Agreement between Palo Alto and Mountain View to construct, operate, and maintain Phase I of the Local Advanced Water Purification System Item 10
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project.1 The project will reduce the salinity of recycled water produced at the Regional Water Quality Control Plant. This project has been in the planning and design process since 2017, and project objectives are consistent with Palo Alto’s Recycled Water Salinity Reduction Policy and Sustainability/Climate Action Plan. The total project cost is $59.9 million, and the lowest bid is 12% lower than the Engineer’s estimate. Funding to cover capital costs is a combination of direct contributions from Mountain View and Valley Water, a federal grant from the U.S.
Bureau of Reclamation obtained by the City of Palo Alto, and a loan from the State Revolving Fund to be repaid by Mountain View. Palo Alto is not contributing additional resources other than staff time.
Palo Alto uses recycled water for irrigation at the Baylands Golf Links and Greer Park. However, the majority of the blended enhanced recycled water produced by this facility will be used by City of Mountain View. The amendment to the Recycled Water Agreement defines cost-sharing responsibilities between Palo Alto and Mountain View associated with the construction costs for the Local Advanced Water Purification System. Operating costs of this facility will be allocated based on recycled water usage.
Mountain View City Council is scheduled to discuss and act on the amendment on May 13, 2025. Following Mountain View City Council’s action, staff will publish the draft amendment as a late packet supplemental report on May 15, 2025.
BACKGROUND
The Regional Water Quality Control Plant (RWQCP) treats wastewater from a total of six communities (Partner Agencies) and produces approximately 230 million gallons per year of tertiary-treated recycled water for beneficial reuse.
On January 25, 2010, City Council approved the Recycled Water Salinity Reduction Policy, including a goal of reducing the recycled water salinity as measured by total dissolved solids (TDS) to under 600 parts per million (ppm).2 In the following years, the City and the other Partner Agencies completed several projects to reduce infiltration. The repairs reduced the salts entering the RWQCP but not by enough to reach the target. In 2017, City Council approved the Preliminary Conceptual Design Report for a phased Local Salt Removal Facility (Local Advanced Water Purification System or Local AWPS).3 The Local AWPS will improve the recycled water quality by reducing its average concentration of TDS from 800 ppm to 450 ± 50 ppm by 1 Local Advanced Water Purification System (Local AWPS) Project C25193197; https://www.paloalto.gov//files/assets/public/v/1/public-works/rwqcp/contracts/c25193197- apec_cc_5.19.2025_staff-report.pdf
2 City Council, January 25, 2010; Agenda Item #9, SR #111:10, https://portal.laserfiche.com/Portal/DocView.aspx?id=55114&repo=r-704298fc 3 City Council, May 16, 2016; Agenda Item #6, SR #6458, https://portal.laserfiche.com/Portal/DocView.aspx?id=51152&repo=r-704298fc&searchid=18484d70-0fd1-41af- 8a88-b2488233be94
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blending reverse osmosis product water with the existing recycled water. The highly treated water will enable the City as well as Mountain View to expand non-potable recycled water use and/or provide a first step toward small-scale direct or indirect potable reuse in the City.
In December 2019, the City, Mountain View, and the Santa Clara Valley Water District (Valley Water) signed an Agreement to Advance Resilient Water Reuse Programs in Santa Clara County.4 As part of that agreement, Valley Water will provide $16 million toward the cost to design and construct the Local AWPS. On March 8, 2021, City Council approved a contract with Black & Veatch to provide design and engineering services for the Local AWPS.5 In October 2023, City Council approved a Financing Plan for the Project and directed staff to secure financing and to solicit bids for a construction contract and a construction management services contract.6 Under the Financing Plan, the City of Mountain View will cover the remaining capital cost aside from federal and local funding.
In May 2024, City Council approved an application for a Site and Design Review and Design Enhancement Exception to allow construction of this Project following the recommendations of the Planning and Transportation Commission (PTC) and the Architectural Review Board (ARB).7 In June 2024, City Council approved Amendment #5 to Contract C21179265C with Carollo to provide Construction Management services and in December 2024, City Council approved two resolutions to formalize an Installment Sales Agreement with the State of California for a State Revolving Fund Loan to fund a portion of the Local AWPS capital costs.8,9 Background: Amendment No. 2 to the Recycled Water Supply Agreement The RWQCP produces and supplies recycled water through the terms of the first Amended and Restated Contract C059999 between the City of Palo Alto and the City of Mountain View (Recycled Water Supply Agreement or RWSA). In 2016, City Council approved Amendment No. 4 City Council, November 18, 2019; Agenda Item #17, SR #10627, https://portal.laserfiche.com/Portal/DocView.aspx?id=1228&repo=r-704298fc&searchid=2d7ac781-7c53-495e- acd4-4e8e99ce2d08
5 City Council, March 8, 2021; Agenda Item #3, SR #11782, https://portal.laserfiche.com/Portal/DocView.aspx?id=95&repo=r-704298fc&searchid=c6020df0-5272-425f-a399- 0d29b1a69b64
6 City Council, October 16, 2023; Agenda Item #10, SR #2308-1863, https://portal.laserfiche.com/Portal/DocView.aspx?id=67870&repo=r-704298fc 7 City Council, May 13, 2024; Agenda Item #11, SR #2404-2760 https://portal.laserfiche.com/Portal/PdfViewer.aspx?file=https%3A%2F%2Fportal.laserfiche.com%2FPortal%2FEle ctronicFile.aspx%3Fdocid%3D72055%26repo%3Dr-704298fc%26pdfView%3Dtrue#page=153 8 City Council, June 10, 2024; Agenda Item #8, SR #2404-2881 https://portal.laserfiche.com/Portal/DocView.aspx?id=72804&repo=r-704298fc&searchid=afe665f9-1484-4b85- a16c-12d150188f52
9 City Council, December 16, 2024; Agenda Item #7, SR #2411-3772 https://portal.laserfiche.com/Portal/DocView.aspx?id=117737&repo=r-704298fc&searchid=8096632d-c1c2-4310- aa34-1e02aa0ac164
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1 to this Agreement to extend the original term from 2035 to 2060.10 Amendment No. 1 included an authorization to pay the incremental cost of producing recycled water and stated that the costs to increase recycled water production capacity or quality would be absorbed by the requesting agency, which would then own the rights to the additional recycled water produced. Proposed Amendment No. 2 addresses the Local AWPS project and the parties’ respective funding obligations for the project.
Historically, the RWQCP has produced tertiary treated recycled water for non-potable uses to meet volumetric discharge limitations to Lower San Francisco Bay set in the RWQCP’s effluent discharge NPDES Permit. The RWQCP’s marginal operating and maintenance costs of recycled water production and distribution (Marginal O&M Costs) have been negligible. However, the operation and maintenance of the Local AWPS project will increase RWQCP’s costs to produce enhanced recycled water. Amendment No. 2 explains this, and clarifies that Mountain View and Palo Alto will bear the O&M costs in proportion to their respective recycled water usage.
ANALYSIS
Analysis: Award of Construction Contract to Anderson Pacific Engineering Construction, Inc.
On November 27, 2024, a notice inviting formal bids for the Local AWPS project was posted on OpenGov, the City’s eProcurement platform. The bidding period was 78 days, as summarized in Table #1. Bids were received from six contractors on February 13, 2025. The bid details are listed on the attached Bid Summary (Attachment A).
Table #1: Summary of Invitation for Bids
Project Bid Name/Number Local Advanced Water Purification System IFB #193197 Proposed Length of Project 1078 days
Number of Bid Packages Downloaded by Contractors 133
Number of Bid Packages Downloaded by Builder’s
Exchanges 1
Total Days to Respond to Bid 78 days
Mandatory Pre-Bid Meeting Yes
Number of Companies Attending Pre-Bid Meeting 12
Number of Bids Received 6
Base Bid Price Range $46,801,100 to $72,835,495
Public Link to Solicitation https://procurement.opengov.com/portal/palo-alto- ca/projects/133236
10 City Council, April 4, 2016; SR #6691
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Staff reviewed the six bids received and all of them were deemed responsive. Bids were evaluated by RWQCP Engineering staff as well as by the project’s Construction Management staff (Carollo Engineers) and RWQCP Program Manager (Woodard & Curran).
Staff recommends the base bid of $46,801,100 submitted by Anderson Pacific Engineering Corporation (APEC) and addition of the two bid alternates included for a contract amount of $47,212,100, and that APEC be declared the lowest responsible bidder. The base bid is 12% below the Engineer’s estimate of $53,598,743. A contingency amount of $4,721,210 (10% of the total bid price) is requested for related, additional but unforeseen work that may develop during the project. Staff confirmed with the Contractor’s State License Board that the contractor has an active license on file. APEC is currently working on two large projects at the RWQCP (Secondary Treatment Upgrades Project and 12-kV Electrical Power Distribution Loop Upgrade Project) and staff is satisfied with the work completed by the contractor to date. Staff also contacted the listed references for APEC and found that they have performed satisfactorily on past construction projects for other clients.
Analysis: Amendment No. 2 to the Recycled Water Supply Agreement Amendment No. 2 to the RWSA defines the allocation of the capital and operating costs for the Local AWPS project as approved by both Mountain View and Palo Alto City Councils in 2023.11 Amendment No. 2 is structured in two sections. Section 1 includes all subsections that are replaced in their entirety. Section 2 includes all subsections that are added to the RWSA.
Section 2 also covers the terms of the Local AWPS capital cost allocation as described in the Preliminary Finance Plan from 202312. Table 2 below summarizes these changes. RWQCP staff identified and reviewed with Mountain View staff the following Local AWPS Operating and Maintenance costs:
a) Disinfected Tertiary Treated Recycled O&M Costs: Costs related to the operation and maintenance of the existing Recycled Water Plant. The production of recycled water is one of the conditions to discharge treated effluent in the Lower South San Francisco Bay and therefore all Partner Agencies will continue to be billed based on their wastewater flow and load shares to the RWQCP.
b) Local AWPS Maintenance and Energy: Costs includes ongoing maintenance, repairs, parts, and energy required for the Local AWPS recycled water equipment. c) Local AWPS Labor Expenses: The RWQCP requires additional staffing to operate and maintain the local AWPS. An additional operator, and a combination of laboratory staff, mechanic, electrician, and SCADA staff is considered.
11 City Council, October 16, 2023; Agenda Item #10, SR#2308-1863, https://portal.laserfiche.com/Portal/DocView.aspx?id=67870&repo=r-704298fc 12 City Council, October 16, 2023; Agenda Item #10, SR#2308-1863, https://portal.laserfiche.com/Portal/DocView.aspx?id=67870&repo=r-704298fc Item 10
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Items b) and c) will be split between Palo Alto and Mountain View based on actual recycled water use. The smaller RWQCP partners (Los Altos, Los Altos Hills, City of East Palo Alto and Stanford University) are not currently connected to the recycled water distribution, therefore, they will not contribute to the capital, operation, and maintenance cost of the Local AWPS.
Table #2: Recycled Water Supply Agreement Amendment #2 Changes SECTION 1: Sections that are replace in their entirety
Section Description
1.1 - Project Narrative Describes 2009 Pipeline Project and include Local AWPS Project
1.2 - Scope of the Agreement Clarifies the Agreement only covers nonpotable uses using disinfected tertiary recycled water (Title 22).
SECTION 2: Sections that are added to the Agreement
Section Description
3.5 Allocation of Capital Costs for
AWPS
Mountain View agrees to pay 100% of the capital cost difference after adding external funding (USBR Grant and Valley Water)
3.6 Allocation of Valley Water
Funding for AWPS
Full allocation of $16M contribution plus interest to the design, construction and construction management of the Local AWPS
3.7 Allocation of Grants for AWPS Full allocation to the design, construction, and construction management of the Local AWPS
3.8 AWPS SRF Loan Loan requested amount is $57M. Rate is 1.7%. Mountain View to indicate final amount. Delineates of SRF Loan Repayment process.
3.9 Mountain View Cash Payments Mountain View to provide $22M to cover total project costs.
4.1 (e) AWPS O&M Costs Description of AWPS maintenance, energy and staffing costs. Allocation of costs based on use of enhanced recycled water.
7.4 Statewide General Order Definition of agency roles under new regulation
8.5 Meter MV flows Installation of a new City line meter to measure recycled water flow to Mountain View
8.6 (e) Addresses total dissolved solids concentrations if demand exceeds Phase I of Local AWPS capacity.
8.7 Includes Proportional Reduction flows language from 2019 Partnership Agreement with Valley Water
8.8 Meet and confer Includes option to evaluate the need of AWPS Phase II expansion if flow or TDS concentrations exceeds targets
9.3 Early Termination Language to address external funding or loan funding to the Local AWPS Project.
FISCAL/RESOURCE IMPACT
Fiscal/Resource Impact: Local AWPS Capital Cost
Funding for the recommended contract is available in the Wastewater Treatment Fund Fiscal Year 2025 Adopted Capital budget in the Local Advanced Water Purification System project (WQ 19003), including the funding for the Local AWPS that will be provided through contributions from the City of Mountain View, Valley Water, and U.S. Bureau of Reclamation (USBR) as well as the SRF loan (Table #3).
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Table #3: Summary of Project Capital Costs and Available External Funding Item/Funding Source Anticipated Final Project Costs
Capital Cost for Local AWPS $59,947,000
Valley Water Funding1 $17,000,000
US Bureau of Reclamation Grant2 $10,447,730
Cash Contributions $22,000,000Remaining Capital Cost to be Paid by Mountain View Covered by SRF Loan $10,499,270
1. Valley Water funding original amount was $16,000,000; with annual interest accrued, the amount is estimated at $17,139,227 as of January 2025.
2. US Bureau of Reclamation Grant amount is $10,447,730. Per internal policy, US Bureau of Reclamation reserved the remaining $2,420,145 for contingency.
The remaining capital costs allocated to Mountain View ($32.5 million) will be partially covered by a series of cash contributions to the Wastewater Treatment Fund made at various intervals depending on the construction progress (Table 4) and partially financed through the SRF program. Financing terms for this loan are a 30-year repayment term with a locked interest rate of 1.7%. Under these terms, the annual debt service payment is $449,676 and is to be allocated to Mountain View. 13 The funding breakdown for this project is different than other typical capital projects at the RWQCP.
Table #4: Capital Cost Cash Contribution from Mountain View Time Amount
Within 30 days of issuing the construction Notice-to-Proceed $7,000,000 When 50% of total project costs have been incurred $10,000,000 When 80% of total project costs have been incurred $5,000,000 Total $22,000,000
Fiscal/Resource Impact: Local AWPS Operation & Maintenance Costs Upon completion of the Local AWPS (currently estimated for FY 2028), new O&M expenses will be incurred, with costs varying annually based on actual recycled water demand. Palo Alto will be responsible for its proportional share of the annual O&M costs, estimated at $188,000 for the first full year of operation.14 These costs will be evaluated and adjusted annually by the RWQCP based on actual usage and will be split between Mountain View and Palo Alto accordingly. Palo Alto’s portion of the O&M costs for the Local AWPS will be incorporated in the future budget approval process; these expenses are anticipated to start in FY 2028. All Funding 13 City Council, December 16, 2024; Agenda Item #7, SR #2411-3772 https://portal.laserfiche.com/Portal/DocView.aspx?id=117737&repo=r-704298fc&searchid=8096632d-c1c2-4310- aa34-1e02aa0ac164
14 City Council, October 16, 2023; Agenda Item #10, SR #2308-1863, https://portal.laserfiche.com/Portal/DocView.aspx?id=67870&repo=r-704298fc Item 10
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for the Local AWPS will be subject to Council approval as part of the annual budget appropriation process.
STAKEHOLDER ENGAGEMENT
In addition to the study sessions and regular meetings with City Council noted above, staff held predesign and design workshops with project partners (Mountain View and Valley Water) to obtain stakeholder feedback throughout the process. In parallel, staff has provided updates on the project through Joint Recycled Water Meetings with Palo Alto Council Members, Mountain View Council Members, and Valley Water Board Members. The staff report for the May 13, 2024, City Council meeting describes the full stakeholder engagement process.15
ENVIRONMENTAL REVIEW
The City Council previously certified the Palo Alto Recycled Water Project Environmental Impact Report (EIR) to include implementation of the City of Palo Alto Recycled Water Project.16 17 A Notice of Determination for the City of Palo Alto Recycled Water Project was filed on October 1, 2015. The Local AWPS was identified as a potential mitigation measure in the previously adopted EIR.
An addendum to the EIR was prepared to evaluate the Local AWPS impacts; the addendum determined that the Local AWPS would not result in new or more severe significant impacts than those identified in the EIR (SCH 2011062037). The Notice of Determination for the Local AWPS 1.125 MGD Project was filed on November 20, 2019.18
ATTACHMENTS
Attachment A: Bid Summary
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
15 City Council, May 13, 2024; Agenda Item #11, SR #2404-2760 https://portal.laserfiche.com/Portal/PdfViewer.aspx?file=https%3A%2F%2Fportal.laserfiche.com%2FPortal%2FEle ctronicFile.aspx%3Fdocid%3D72055%26repo%3Dr-704298fc%26pdfView%3Dtrue#page=153 16 City Council Resolution 9548; 2015;
https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9548.pdf 17 City Council Resolution 9549; 2015;
https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9549.pdf 18 City Council, November 18, 2019; Agenda Item #17, SR #10627, https://portal.laserfiche.com/Portal/DocView.aspx?id=1228&repo=r-704298fc&searchid=2d7ac781-7c53-495e- acd4-4e8e99ce2d08
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Local AWPS IFB 193197
Bid Date Closed Feb 13, 2025 at 3:00pm
Bid Form ‐ A. Base Bid
Anderson Pacific Engineering Construction, Inc.
Anvil Builders Inc.
Bid Form ‐ C.
Anderson Pacific Engineering Construction, Inc.
Anvil Builders Inc.
C. Overaa & Co.
Mountain Cascade, Inc.
Bid Total + Add. Alternates
$47,282,100$46,801,100
$49,788,480
$51,852,000
$58,785,874
$60,150,500
$72,475,495
$481,000
$2,017,900
$490,000
$956,000
$350,000
$360,000
$51,806,380
$52,342,000
$59,741,874
$60,500,500
$72,835,495
C. Overaa & Co.
Mountain Cascade, Inc.
Shimmick Construction Shimmick Construction
Walsh Construction Company II, LLCWalsh Construction Company II, LLC Item 10
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Planning and Development Services
Meeting Date: May 19, 2025
Report #:2504-4479
TITLE
FIRST READING: Adoption of an Ordinance Amending Section 18.42.110 (Wireless Communications Facilities) of Title 18 (Zoning) to Modify the Permit Process and Required Findings for Tier 2 and Tier 3 Wireless Communications Facilities to Require Architectural Review Board review and Repealing the Objective Aesthetic, Noise, and Related Standards for Wireless Communication Facilities in the Public Rights of Way.
RECOMMENDATION
Adopt a Temporary Ordinance amending Section 18.42.110 (Wireless Communications Facilities) of Title 18 (Zoning) to require Architectural Review Board (ARB) review for Tier 2 and Tier 3 Wireless Communications Facilities in the public rights-of-way to and repeal the Objective Aesthetic, Noise, and Related Standards for Wireless Communication Facilities in the Public Rights-of-Way.
BACKGROUND
On October 21, 2024, City Council considered a Colleague’s Memo recommending the repeal the City’s objective-only aesthetic standards for wireless communication facilities (WCFs) in the public rights-of-way. The recommendation proposed reinstating subjective architectural review findings and requiring Tier 2 and 3 applications in the public rights-of-way undergo Architectural Review Board (ARB) public hearings before a decision is made by the Director of Planning and Development Services.
The Council directed staff to prepare an ordinance incorporating these requested procedural revisions to the City’s WCF ordinance. The draft ordinance (Attachment A) would modify the WCF permit review process for Tier 2 and Tier 3 facilities in the public right-of-way, to repeal the Objective Aesthetic, Noise, and Related Standards for Wireless Communication Facilities in the Public Rights-of-Way (“Objective Standards for WCFs”) and to require review of such applications by the ARB. The draft ordinance is temporary and would be effective for a period Item 11
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of two years, during which time the Planning and Transportation Commission would need to review and recommendation permanent changes to WCF regulations.
The draft ordinance was published as a consent item on December 16, 2024. The staff report, including additional background an analysis, is available online.1 At the December 16, 2024 meeting, Council received additional public comment letters from providers (Attachment D) and pulled the item from consent, to be discussed as an action item at a future meeting.
ANALYSIS
As described in more detail in the December 16, 2024 Council Report, staff continues to have the following concerns:
•Compliance with Legal Timelines: Federal and State “shot clock” laws impose strict deadlines (60 to 150 days) for application processing. The added ARB hearings and potential City Council appeals could make compliance difficult, risking “deemed approved” outcomes if deadlines are missed.
•Loss of Clarity and Consistency: Removing objective standards may reduce clarity for applicants, leading to inconsistent design expectations, lower application quality, and increased likelihood of appeals or litigation.
•Increased Staff Workload and Resource Demands: The proposed changes will increase demands on Planning, Public Works, Utilities, Urban Forestry, and the City Attorney’s Office due to the need for interdepartmental review, ARB and Council meeting participation, and potential appeals.
•Potential Impact on ARB and Council Agendas: Greater volume and complexity of public hearings may affect the City’s ability to process other priority projects, requiring more time on ARB and Council agendas.
•Training Needs: ARB members will require training on federal and state WCF legal frameworks and on how to apply subjective architectural findings to wireless infrastructure.
FISCAL/RESOURCE IMPACT
The December 16 2024 Council report provides greater analysis, but in summary, the primary impact of the proposed changes lies in increased resource demands across multiple departments, including Planning, Public Works, Utilities, Urban Forestry, and the City Attorney’s Office. Staff will need to support ARB hearings, prepare for potential appeals, and manage stricter timelines, all of which require significant time and coordination. While application fees 1 December 16, 2024 Council Report: https://portal.laserfiche.com/Portal/DocView.aspx?id=117753&repo=r- 704298fc&searchid=ec4c2136-a656-4bb2-a80a-afb491504351
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may offset direct costs, the additional staff workload, administrative support, and ARB training may be a substantial burden.
STAKEHOLDER ENGAGEMENT
In addition to public discussion at the City Council meeting on October 21, 2024, two comment letters were received at Council‘s December 16, 2024 meeting (Attachment D).
ENVIRONMENTAL REVIEW
The recommended action is exempt from the California Environmental Quality Act (CEQA) in accordance with CEQA Sections 15301, 15302, and 15303, since the regulation changes would affect existing facilities, replacement or reconstruction of existing structures or facilities, or new construction or conversion of small structures
ATTACHMENTS
Attachment A: Draft Temporary Ordinance
Attachment B: WCF Review Standards (Municipal Code excerpts) Attachment C: Objective Standards for WCF (proposed for repeal) Attachment D: Public Comment letters, received on December 16, 2024 APPROVED BY:
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Ordinance No. ____
Ordinance of the Council of the City of Palo Alto Amending Chapter 18.42 (Standards for Special Uses) of the Palo Alto Municipal Code on a Temporary Basis to Modify the Procedure and Standards Governing the Review of Wireless Communications Facilities Applications; and repealing Resolution 9873 (Amending Objective Aesthetic, Noise, and Related Standards for Wireless Communication Facilities in the Public Rights of Way)
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. Findings and Declarations. The City Council finds and declares as follows:
A. The City Council has adopted a Wireless Communication Facilities (WCF) code to regulate the various health, welfare, and safety impacts presented by the proliferation of WCFs and to balance these impacts with the interests of consumers in receiving the benefits of wireless technologies.
B. Federal and state law place significant limits on the City’s exercise of local control over WCF matters. On September 26, 2018, the Federal Communications Commission adopted a Declaratory Ruling and Third Report and Order (WT Docket No. 1779; WC Docket No. 1784; FCC 18-133), further limiting local control.
C. On August 12, 2020, in a decision in the City of Portland v. FCC, the United States Court of Appeals for the Ninth Circuit invalidated certain elements of the FCC’s Order 18 -133 restricting local aesthetic regulations of WCFs. Specifically, the Court struck down the requirements that local standards be “objective” and “no more burdensome” than those applied to similar types of infrastructure installations. Now, a city’s aesthetic regulations for small wireless facilities will not be preempted by federal law if they are: (1) reasonable (technically feasibl e and reasonably directed at remedying aesthetic harms ) and (2) published in advance.
D. As a result of the Portland decision, the City Council wishes to modify the WCF ordinance provisions relating to the permit review process for Tier 2 and Tier 3 Facilities in the public right-of-way, to repeal references to the Objective Aesthetic, Noise, and Related Standards and to require review of such applications by the Architectural Review Board (ARB) under the City’s architectural review findings.
E. Section 18.80.090 of the Palo Alto Municipal Code authorizes the City Council to change or suspend operation of the Zoning Code for temporary periods without review by the Planning and Transportation Commission when in the determination of the council such suspension or change is necessary for the public health, safety or welfare.
SECTION 2. Resolution 9873, Amending Objective Aesthetic, Noise, and Related Standards for Wireless Communication Facilities in the Public Rights of Way, adopted December 16, 2019, is hereby repealed. For the avoidance of doubt, by this action Council repeals all prior versions of these objective standards, including Resolution 9825 (April 19, 2019), Resolution 9847 (June 17, 2019), and Resolution 9855 (August 12, 2019).
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SECTION 3. Section 18.42.110 Wireless Communication Facilities is hereby amended to read as follows (additions in underline format and deletions in strikethrough format):
18.42.110 Wireless Communication Facilities
(a) Purpose and Interpretation
The purpose of this section is two-fold: (A) to implement within the jurisdictional boundaries of the city the applicable zoning, land use and other laws, rules, regulations and policies and procedures applicable to siting applications filed with the city by wireless communications facilities infrastructure owners and operators and wireless communications service providers, which seek to install or attach their facilities at locations in Palo Alto; and (B) to accommodate new wireless technologies and continued improvements to existing wireless communications facilities while minimizing their adverse visual and structural health and safety impacts.
Consistent with that purpose, the provisions of this section are to be construed in a manner that is consistent with (1) the interest of consumers in receiving the benefits of the deployment of ultra-high-speed and -capacity broadband wireless communication facilities technology and innovations and the delivery of ultra-high-speed and -capacity broadband wireless communications facilities services, (2) the interest in safeguarding the environment, preserving historic properties, and addressing aesthetics and other local values, and (3) the interest in promoting the public health, safety and welfare in Palo Alto. Although this section implements and references provisions of preemptive state and federal law, nothing in this section shall be interpreted to create an independent source of the rights provided an applicant by such state or federal law.
A wireless communications facility is permitted to be sited in Palo Alto subject to applicable requirements imposed by this chapter. These processes are intended to permit wireless communications facilities that blend with their existing surroundings and do not negatively impact the environment, historic properties, or public safety. The procedures prescribed by this section are tailored to the type of wireless communication facility that is sought. Building- mounted wireless communications facilities and collocation of facilities are preferred and encouraged, subject to all other provisions of this section. (b) Definitions
The following abbreviations, phrases, terms and words shall have the meanings assigned in this section or, as appropriate, in Section 18.04.030 and Section 1.04.050 of the Palo Alto Municipal Code, as may be amended from time to time, unless the context indicates otherwise.
Words that are not defined in this section or other chapters or sections of the Palo Alto Municipal Code shall have the meanings as set forth in Chapter 6 of Title 47 of the United States Code, Part 1 of Title 47 of the Code of Federal Regulations, and, if not defined therein, their common and ordinary meaning.
(1) "Antenna" means that part of a wireless communications facility designed to radiate or receive radio frequency signals or electromagnetic waves for the provision of personal wireless services, as defined in 42 U.S.C. § 332(c)(7)(C)(i). This definition does not include antennas designed for amateur or household use.
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(2) "Associated equipment" means any and all on-site equipment, including, without limitation, back-up generators and power supply units, cabinets, coaxial and fiber optic cables, connections, shelters, radio transceivers, regular power supply units, and wiring, to which a wireless antenna is attached in order to facilitate mobile broadband service and personal wireless service delivered on mobile broadband devices. (3) "Base Station" means the same as defined by the FCC at 47 C.F.R. § 1.6100(b), as it may be amended from time to time. For the purpose of convenience only, this definition is stated as follows: a structure or equipment at a fixed location that enables FCC-licensed or authorized wireless communications between user equipment and a communications network. The term does not encompass a tower as defined herein or any equipment associated with a tower. Base Station includes, without limitation:
A. Equipment associated with wireless communications services such as private, broadcast, and public safety services, as well as unlicensed wireless services and fixed wireless services such as microwave backhaul.
B. Radio transceivers, antennas, coaxial or fiber-optic cable, regular and backup power supplies, and comparable equipment, regardless of technological configuration (including Distributed Antenna Systems ("DAS") and small-cell networks).
C. Any structure other than a tower that, at the time the relevant application is filed with the city under this section, supports or houses equipment described in paragraphs (i)-(ii) above and has been previously reviewed and approved by the city. (4) "Collocation" means the same as defined in valid regulations promulgated by the FCC, including 47 C.F.R. §§ 1.6002(g) or 1.6100(b), as those sections may be amended from time to time. For the purpose of convenience only, the definition provided in 47 C.F.R. § 1.6100(b), for eligible facilities requests, is stated as follows: the mounting or installation of transmission equipment on an eligible support structure for the purpose of transmitting and/or receiving radio frequency signals for communications purposes.
(5) "Eligible Facilities Request" means the same as defined by the FCC at 47 C.F.R. §
1.6100(b), as it may be amended from time to time. For the purpose of convenience only, this definition is stated as follows: any request for modification of an existing tower or base station that, within the meaning of the Spectrum Act, does not substantially change the physical dimensions of that tower or base station, and involves (a) the collocation of new transmission equipment, (b) the removal of transmission equipment, or (c) the replacement of transmission equipment.
(6) "Eligible Support Structure" means the same as defined by the FCC at 47 C.F.R. §
1.6100(b), as it may be amended from time to time. For the purpose of convenience only, this definition is stated as follows: any existing tower or base station that exists at the time the application is filed with the city.
(7) "Existing" means the same as defined by the FCC at 47 C.F.R. § 1.6100(b), as it may be amended from time to time. For the purpose of convenience only, this definition is stated as follows: a constructed tower or base station is existing for purposes of an eligible facilities request if has been previously reviewed and approved under the applicable city zoning or siting Item 11
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process, or under another applicable state or local regulatory review process, provided that a tower that has not been reviewed and approved because it was not in a zoned area when it was built, but was lawfully constructed, is "Existing" for purposes of this definition. (8) "FCC" means the Federal Communications Commission or successor agency. (9) "Project" means a WCF to be located in Palo Alto for which a permit is required by the city.
(10) "RF" means radio frequency on the radio spectrum. (11) "Spectrum Act" means Section 6409(a) of the Middle Class Tax Relief Act and Job Creation Act of 2012, 47 U.S.C. § 1455(a) (providing, in part, "… a State or local government may not deny, and shall approve, any Eligible Facilities Request for a modification of any existing wireless Tower or Base Station that does not substantially change the physical dimensions of such Tower or Base Station.").
(12) "Small Wireless Facility" means the same as defined in any valid regulations adopted by the FCC. For purposes of convenience only, the definition provided at 47 C.F.R. Section
1.1312(e)(2) is stated here as follows: a facility that meets each of the following conditions:
A. The structure on which antenna facilities are mounted:
i. Is 50 feet or less in height, or
ii. Is no more than 10 percent taller than other adjacent structures, or iii. Is not extended to a height of more than 10 percent above its preexisting height as a result of the collocation of new antenna facilities; and B. Each antenna (excluding associated antenna equipment) is no more than three cubic feet in volume; and
C. All antenna equipment associated with the facility (excluding antennas) are cumulatively no more than 28 cubic feet in volume; and
D. The facility does not require antenna structure registration under 47 C.F.R. Section 17; and
E. The facility is not located on Tribal lands, as defined under 36 C.F.R. § 800.16(x); and F. The facility does not result in human exposure to radiofrequency radiation in excess of the applicable safety standards specified by the FCC.
(13) "Substantially Changes" means the same as defined by the FCC at 47 C.F.R. §
1.6100(b), as it may be amended from time to time. For the purpose of convenience only, this definition is stated as follows: in the context of an eligible support structure, a modification of an existing tower or base station where any of the following criteria is met:
A. For a tower not located in the public rights-of-way:
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i. The height of the tower is increased by (I) more than ten (10) percent, or (II) by the height of one additional antenna array with separation from the nearest existing antenna not to exceed twenty (20) feet, whichever is greater; or
ii. There is added an appurtenance to the body of the tower that would protrude from the edge of the tower by (I) more than twenty (20) feet, or (II) more than the width of the tower at the level of the appurtenance, whichever is greater.
B. For a tower located in the public rights-of-way and for all base stations:
i. The height of the tower or base station is increased by more than ten (10) percent or ten (10) feet, whichever is greater; or
ii. There is added an appurtenance to the body of that structure that would protrude from the edge of that structure by more than six (6) feet; or iii. It involves the installation of ground cabinets that are more than ten (10) percent larger in height or overall volume than any other ground cabinets associated with the structure; or
iv. It involves the installation of any new equipment cabinets on the ground if there is no pre-existing ground cabinet associated with that structure.
C. For any eligible support structure:
i. It involves the installation of more than the standard number of new equipment cabinets for the technology involved, but not to exceed four (4) cabinets; or ii. There is entailed in the proposed modification any excavation or deployment outside of the current site of the tower or base station; or
iii. The proposed modification would cause the concealment/camouflage elements of the tower or base station to be defeated; or
iv. The proposed modification would not comply with the conditions associated with the prior siting approval of construction or modification of the tower or base station, unless the non-compliance is due to an increase in height, increase in width, addition of cabinets, or new excavation that does not exceed the corresponding thresholds in this section.
D. To measure changes in height for the purposes of this section, the baseline is:
i. For deployments that are or will be separated horizontally, measured from the original support structure;
ii. For all others, measured from the dimensions of the tower or base station, inclusive of originally approved appurtenances and any modifications that were approved by the city prior to February 22, 2012.
E. To measure changes for the purposes of this section, the baseline is the dimensions that were approved by the city prior to February 22, 2012.
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(14) "Tower" means any structure built for the sole or primary purpose of supporting any FCC-licensed or -authorized antenna, including any structure that is constructed for wireless communications service. This term does not include a base station. (15) "Transmission Equipment" means the same as defined by the FCC at 47 C.F.R. §
1.6100(b), as it may be amended from time to time. For the purpose of convenience only, this definition is stated as follows: equipment that facilitates transmission of any FCC-licensed or authorized wireless communication service.
(16) "Wireless Communications Facility" or "WCF" means any antenna, associated equipment, base station, small wireless facility, tower, and/or transmission equipment located in Palo Alto, but does not include:
A. A facility that qualifies as an amateur station as defined by the FCC, 47 C.F.R. Part 97, or its successor regulation;
B. An antenna facility that is subject to the FCC Over-The-Air-Receiving Devices rule, 47 C.F.R. Section 1.4000, or any successor regulation;
C. Portable radios and devices including, but not limited to, hand-held, vehicular, or other portable receivers, transmitters or transceivers, cellular phones, CB radios, emergency services radio;
D. Mobile services providing public information coverage of news events of a temporary nature;
E. Telecommunications facilities owned and operated by any government agency or emergency medical care provider.
(c) Types of WCF Permits Required
(1) A Tier 1 WCF Permit shall be required for an eligible facilities request, as defined in this section.
(2) A Tier 2 WCF Permit shall be required for:
A. Any modification of an eligible support structure, including the collocation of new equipment, that substantially changes the physical dimensions of the eligible support structure on which it is mounted; or
B. Any collocation of a small wireless facility; or
C. Any collocation not eligible for a Tier 1 WCF Permit. (3) A Tier 3 WCF Permit shall be required for the siting of any WCF, including a small wireless facility, that is not a collocation subject to a Tier 1 or 2 WCF Permit. An application shall not require a Tier 3 WCF Permit solely because it proposes the replacement in-place of an existing streetlight or wood utility pole.
(d) WCF Application Requirements
All applications for a WCF Permit shall include the following items:
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(1) Any applicant for a WCF Permit shall participate in an intake meeting with the Planning and Community Environment Department when filing an application; (2) The applicant must specify in writing whether the applicant believes the application is for an eligible facilities request subject to the Spectrum Act, and if so, provide a detailed written explanation as to why the applicant believes that the application qualifies as an eligible facilities request;
(3) The applicant shall complete the city's standard application form, as may be amended from time to time;
(4) The applicant shall include a completed and signed application checklist available from the city, including all information required by the application checklist; (5) Payment of the fee prescribed by the Municipal Fee Schedule; (6) The application must be accompanied by all permit applications with all required application materials for each separate permit required by the city for the proposed WCF, including a building permit, an encroachment permit (if applicable) and an electrical permit (if applicable);
(7) For Tier 2 and 3 WCF Permits, the applicant must host a community meeting at a time and location designed to maximize attendance by persons receiving notice under this subparagraph to provide outreach to the neighborhood around the project site. The applicant shall give notice of the community meeting to all residents and property owners within 600 feet of the project site at least 14 days in advance of the community meeting. Applicants are encouraged to host the meeting before submitting an application. Before an application may be approved, the applicant shall provide a proof of notice affidavit to the city that contains:
A. Proof that the applicant noticed and hosted the community meeting no later than 15 days after filing the application;
B. A summary of comments received at the community meeting and what, if any, changes were made to the application as a result of the meeting; (8) For Tier 3 WCF Permits, the plans shall include a scaled depiction of the maximum increase in the physical dimensions of the proposed project that would be feasible and permitted by the Spectrum Act, using the proposed project as a baseline; and (9) Satisfy other such requirements as may be, from time to time, required by the Planning and Community Environment Department Director ("Director"), as publically stated in the application checklist.
(e) Permit Review ("Shot Clock") Time Periods. The city shall review and act upon application materials in a manner consistent with any timeframes provided in controlling state or federal law, including valid regulations and orders promulgated by the FCC. (f) Tier 1 WCF Permit Process and Findings
(1) A Tier 1 WCF Permit shall be reviewed by the Director. The Director's decision shall be final and shall not be appealable;
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(2) The Director shall grant a Tier 1 WCF Permit provided that the Director finds that the applicant proposes an eligible facilities request;
(3) The Director shall impose the following conditions on the grant of a Tier 1 WCF Permit:
A. The proposed collocation or modification shall not defeat any existing concealment elements of the support structure; and
B. The conditions of approval in Section 18.42.110(j). (g) Tier 2 WCF Permit Process and Findings
(1) A Tier 2 WCF Permit shall be reviewed by the Director, who may, in his or her sole discretion, refer an application to the Architectural Review Board. For WCF installations in the public right of way, the Director shall refer applications to the Architectural Review Board for review. The Director's decision shall be appealable directly to the City Council. An appeal may be set for hearing before the City Council or may be placed on the Council's consent calendar, pursuant to the process for appeal of architectural review set forth in Section 18.77.070(f). (2) T he Director, or Council on appeal, shall grant a Tier 2 WCF Permit provided the proposed WCF complies with the conditions of approval in Section 18.42.110(j), and all objective standards adopted and amended from time to time by resolution of the City Council or the development standards in Section 18.42.110(i). If such objective standards are repealed, an application shall not be granted unless, in addition to the other requirements of this section, and all of the architectural review findings in Section 18.76.020(d) can be made. (3) The Director, or Council on appeal, shall deny a Tier 2 WCF Permit if the above findings cannot be made.
(h) Tier 3 WCF Permit Process and Findings
(1) A Tier 3 WCF Permit shall be reviewed by the Director, who may, in his or her sole discretion, refer an application to the Architectural Review Board and/or Planning and Transportation Commission. For WCF installations in the public right of way, the Director shall refer applications to the Architectural Review Board for review. The Director's decision shall be appealable directly to the City Council. An appeal may be set for hearing before the City Council or may be placed on the Council's consent calendar, pursuant to the process for appeal of architectural review set forth in Section 18.77.070(f). (2) T
he Director or Council on appeal shall grant a Tier 3 WCF Permit provided the conditional use permit findings in Section 18.76.010(c) can be made, and the proposed WCF complies with the conditions of approval in Section 18.42.110(j), and all objective standards adopted and amended from time to time by resolution of the City Council or the development standards in Section 18.42.110(i)., and If the City Council repeals all objective standards, an application shall not be granted unless, in addition to the other requirements of this section, all of the architectural review findings in Section 18.76.020(d) can be made. (3) The Director, or Council on appeal, shall deny a Tier 3 WCF Permit if the above findings cannot be made.
(i) Generally Applicable Development Standards
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