BOARD OF EDUCATION Attachment: Discussion 10 PALO ALTO UNIFIED SCHOOL DISTRICT Date: 03.22.16 TO: FROM: Dr. Glenn Max McGee, Superintendent Bob Golton, Bond Program Manager SUBJECT: Extension of the Following Site Leases to 2017-18 1. The Lease of the Garland Site to Stratford Schools 2. The Lease of the 525 San Antonio site to Athena Academy STRATEGIC PLAN INITIATIVE Budget Trends and Infrastructure RECOMMENDATION Pending discussion at this meeting, it is recommended that the Board of Education approve a oneyear extension of the Garland site lease to Stratford Schools to June 2018 and a two-year extension of the 525 San Antonio site lease to Athena Academy to June 30, 2018. BACKGROUND The District entered into its current lease with Stratford Schools for the Garland site in 2004. This lease has been extended by amendments, with the Board approval in spring 2015 providing for an extension through June 30, 2017. The attached lease amendment would extend it for another year through June 30, 2018. The District entered into its lease with Athena Academy for the 525 San Antonio site in 2012. The lease was extended by amendments, with the Board approval in spring 2015 providing for an extension through June 30, 2016. The attached lease amendment would extend it for another two years through June 30, 2018. The District has not currently made plans for other use of these sites. The activities that precede actual construction of a school construction project on these two sites are estimated to take approximately two years. Therefore, assuming that no plans are made until the fall to build on these two sites, these are available for lease through June 30, 2018. PROPOSAL The proposal for the Garland lease is as follows. The rent for 2015-2016 is $877,651 and so the rent for 2016-2017 would be a minimum of $903,980. Therefore, the rent for 2017-2018 would be a minimum of $931,099 The proposal for the 525 San Antonio lease is as follows: The rent in 2015-2016 is $131,127. Therefore, the rent of 2016-2017 would be a minimum of $135,061 and the rent for 2017-2018 would be a minimum of $139,112.
FISCAL IMPACT No rental income was anticipated in the District budget projections from the Garland site in 2017-2018. This will result in minimum additional General Fund revenue of $931,099 in 2017-2018 Anticipated rent for 525 San Antonio is already in the District budget projection.
Third Amendment to Lease Agreement 525 San Antonio Avenue, Palo Alto, California 94306 This Third Amendment dated, 2016 ( Third Amendment ), is made to that certain Lease Agreement dated May 23, 2012 ( Lease ), the First Amendment to Lease Agreement dated September 10, 2013 ( First Amendment ), and the Second Amendment to Lease Agreement dated, 2015 ( Second Amendment ) between Palo Alto Unified School District, a California public school district ( Landlord ), and Athena Academy ( Tenant ). The Lease, First Amendment, Second Amendment, and this Third Amendment shall hereinafter be referred to collectively as the Agreement. This Third Amendment shall take effect upon execution by both Parties. The date first stated above shall be the Third Amendment Effective Date. Recitals A. WHEREAS, Landlord and Tenant agreed that Landlord will lease to Tenant the Premises as shown in Exhibit A to the Lease for a term commencing on May 23, 2012, and ending on June 30, 2014; B. WHEREAS, the Parties agreed that the initial annual rent would be $120,000, divided into twelve equal monthly installments of ten thousand dollars ($10,000), and that the annual rent for the second year of the Lease term, commencing on the anniversary of the commencement date of the Lease term, would be increased by three percent (3%); C. WHEREAS, the Parties entered into the First Amendment, which extended the Lease term to June 30, 2015, specified that there would be a 3% increase in rent annually commencing on July 1, 2013, and affirmed that the Lease was not terminated; D. WHEREAS, the Parties entered into the Second Amendment, which extended the Lease term to June 30, 2016; and E. WHEREAS, the Parties desire to extend the Lease term to June 30, 2018. NOW THEREFORE, it is agreed between the Parties that this Third Amendment shall amend the Lease, the First Amendment, and the Second Amendment as follows. Agreement 1. Recitals Included. The Recitals set forth above are true and correct and incorporated herein to this Third Amendment. 2. Extension of Term. Pursuant to Section 2.B of the Lease, the Parties agree to extend the Lease term to June 30, 2018. The annual rent for the fifth year of the Lease term, commencing on July 1, 2016, shall be equal to the Fourth Year Rent increased by three percent (3%), divided into twelve equal monthly installments ( Fifth Year Rent ). {SR151036} 1
The annual rent for the sixth year of the Lease term, commencing on July 1, 2017, shall be equal to the Fifth Year Rent increased by three percent (3%), divided into twelve equal monthly installments ( Sixth Year Rent ). 3. Terms: Conflict. All other terms and conditions contained in the Lease, the First Amendment, and the Second Amendment shall remain in full force and effect and this Third Amendment shall not affect any provisions of the Lease, except as otherwise set forth herein. In the event there is conflicting language between this Third Amendment and the Lease, the First Amendment, or the Second Amendment, this Third Amendment shall prevail. 4. Miscellaneous Terms. a. Counterparts. This Third Amendment may be executed in counterparts, which, when taken together, shall constitute one original version of the Third Amendment. Photocopies of this Third Amendment or of execution signatures on this Third Amendment, or copies made by comparable means (including copies made by facsimile), shall be equivalent to originals. b. Definitions. All terms not otherwise defined herein shall have the meaning ascribed to them in the Lease, the First Amendment, or the Second Amendment, as applicable. c. Entire Agreement. The Agreement constitutes the entire agreement between the Parties related to the rights herein granted and the obligations herein created. d. Further Documents and Actions. Each of the Parties agrees to execute such further documents and take such further actions as may be reasonably necessary or appropriate to effectuate the terms of the Agreement. e. Warranty of Authority. Each of the persons signing this Third Amendment represents and warrants that such person has been duly authorized to sign this Third Amendment on behalf of the Party indicated, and each of the Parties by signing this Third Amendment warrants and represents that such Party is legally authorized and entitled to enter into this Third Amendment. IN WITNESS WHEREOF, Landlord and Tenant have executed this Third Amendment, through their respective officers or representatives duly authorized, as of the day and year first above written. Landlord: Palo Alto Unified School District By: Its: Date: Tenant: Athena Academy By: Its: Date: {SR151036} 2
Sixth Amendment to Lease Agreement Garland School This Sixth Amendment dated, 2016 ( Sixth Amendment ), is made to that certain Lease Agreement dated November 9, 2004 ( Lease ), as amended by the First Amendment to Lease dated October 25, 2005 ( First Amendment ), the Second Amendment to Lease dated August 26, 2009 ( Second Amendment ), the Third Amendment to Lease dated June 20, 2013 ( Third Amendment ), the Fourth Amendment to Lease dated June 11, 2014 ( Fourth Amendment ), and the Fifth Amendment dated, 2015 ( Fifth Amendment ) between Palo Alto Unified School District, a California public school district ( Landlord or District ), and Stratford School, Inc. ( Tenant, and collectively with Landlord, Parties ). The Lease, First Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth Amendment, and this Sixth Amendment shall hereinafter be referred to collectively as the Agreement. This Sixth Amendment shall take effect upon execution by both Parties. Recitals A. WHEREAS, Landlord and Tenant agreed that Landlord will lease to Tenant the Premises as shown in Exhibit A to the Lease for a term of 10 years, until June 30, 2015; B. WHEREAS, section 2B of the Lease provides that either the District or Tenant may terminate the Lease upon thirty-six (36) months advance written notice; C. WHEREAS, the District determined that it would need to utilize the Premises prior to June 30, 2015, and therefore, by letter dated November 20, 2007 (the 2007 Termination Letter ), notified Tenant that the District was terminating the Lease, which termination would become effective on November 25, 2010. Pursuant to the Second Amendment, the Parties agreed to rescind the 2007 Termination Letter, and to clarify how any potential future termination of the Agreement may occur; D. WHEREAS, the District determined that it would need to utilize the Premises prior to June 30, 2015, and therefore, by letter dated June 24, 2011 (the 2011 Termination Notice ), the District notified the Tenant that the District was terminating the Lease, which termination would become effective on June 30, 2014; E. WHEREAS, pursuant to section 3.F of the Agreement, the 2011 Termination Notice resulted in the annual Rent being reduced by Eighty Three Thousand Three Hundred Thirty-Three Dollars and Thirty-Three Cents ($83,333.33) for each of the final three years of the Agreement, for a total reduction of Two Hundred Fifty Thousand Dollars ($250,000.00), in addition to which Tenant received reduced escalations annually due to the application of the increase to the reduced annual Rent; F. WHEREAS, the District thereafter determined that the Premises were not needed by the District prior to June 30, 2015, the end date of the original Lease term, and {SR151029} 1
therefore in the Third Amendment, rescinded its 2011 Termination Notice, and reinstated the terms of the Lease as set forth in the Agreement, including but not limited to a termination date of June 30, 2015, and Rent for 2013-2014, as if the District had not served the 2011 Termination Notice; G. WHEREAS, pursuant to section 2.C of the Agreement, the District may, in its sole discretion, extend the term of the Lease beyond June 30, 2015, on mutually agreed terms and conditions for the extension. Pursuant to the Fourth Amendment, the Parties extended the term of the Lease to June 30, 2016, and specified that the Rent for 2013-2014 to be used for calculating the 2014-2015 Rent and 2015-2016 Rent would be $827,270; H. WHEREAS, pursuant to the Fifth Amendment, the Parties extended the term of the Lease to June 30, 2017, and specified that the Rent for 2014-2015 to be used for calculating the 2015-2016 Rent and 2016-2017 Rent would be $852,088.10; and I. WHEREAS, the Parties now desire to extend the term of the Lease to end on June 30, 2018. NOW THEREFORE, it is agreed between the Parties that this Sixth Amendment shall amend the Agreement as follows. Agreement 1. Recitals Included. The Recitals set forth above are true and correct and incorporated herein to this Sixth Amendment. 2. Extension of Term. The term of the Lease as set forth in section 2.A of the Agreement is hereby extended so that it shall end on June 30, 2018. All of the terms and conditions of the Agreement, including but not limited to section 3.C regarding escalations, shall continue to apply during the extended term. 3. Rent. The Rent for 2015-2016 used for calculating the 2016-2017 Rent and 2017-2018 Rent shall be $877,650.74. 4. Terms: Conflict. All other terms and conditions contained in the Lease, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, and the Fifth Amendment shall remain in full force and effect and this Sixth Amendment shall not affect any provisions of the Lease, except as otherwise set forth herein. In the event there is conflicting language between this Sixth Amendment and the Lease, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, or the Fifth Amendment, this Sixth Amendment shall prevail. 5. Miscellaneous Terms. a. Counterparts. This Sixth Amendment may be executed in counterparts, {SR151029} 2
which, when taken together, shall constitute one original version of the Sixth Amendment. Photocopies of this Sixth Amendment or of execution signatures on this Sixth Amendment, or copies made by comparable means (including copies made by facsimile), shall be equivalent to originals. b. Definitions. All terms not otherwise defined herein shall have the meaning ascribed to them in the Lease, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, or the Fifth Amendment, as applicable. c. Entire Agreement. The Agreement constitutes the entire agreement between the Parties related to the rights herein granted and the obligations herein created. d. Further Documents and Actions. Each of the Parties agrees to execute such further documents and take such further actions as may be reasonably necessary or appropriate to effectuate the terms of the Agreement. e. Warranty of Authority. Each of the persons signing this Sixth Amendment represents and warrants that such person has been duly authorized to sign this Sixth Amendment on behalf of the Party indicated, and each of the Parties by signing this Sixth Amendment warrants and represents that such Party is legally authorized and entitled to enter into this Sixth Amendment. IN WITNESS WHEREOF, Landlord and Tenant have executed this Sixth Amendment, through their respective officers or representatives duly authorized, as of the day and year first above written. Landlord: Palo Alto Unified School District By: Its: Date: Tenant: Stratford School, Inc. By: Its: Date: {SR151029} 3