REPORT TO COUNCIL
SUBJECT
Title
Consideration of Amendment No. 1 to Lease with Eta Lambda Facilities Corporation of Kappa Alpha Theta for Morse Mansion property located at 981 Fremont Street, Santa Clara
Report
BACKGROUND
On October 7, 2016, the City of Santa Clara acquired real property located at 981 Fremont Street, also known as the Morse Mansion property. At the time of acquisition, the City assumed a February 1, 2014 Lease with Eta Lambda Facilities Corporation of Kappa Alpha Theta (Tenant) for the building and a portion of the property. The City (Landlord) and Tenant have negotiated modifications to the Lease in order to clarify occupancy limitations and use of the building.
DISCUSSION
Amendment No. 1 to Lease (Amendment) modifies the terms and conditions in several sections of the Lease. The proposed changes include:
* Occupancy: The Amendment clarifies that the maximum allowable occupancy of the building is 16 persons for the purpose of housing members of the Eta Lambda chapter of Kappa Alpha Theta. Further, there is no allowable occupancy of the basement other than for storage.
* Insurance: The Amendment updates the Tenant's insurance requirements to meet City standards.
* Term: The Lease currently expires on January 31, 2024. In order to allow the residents in the building to finish the academic year, the term of the Lease would be extended to June 30, 2024.
* Rent: In recognition of limitations on building occupancy, rent would be adjusted as of July 1, 2018. The proposed rent structure recognizes the change and impact in the Tenant's operating practice as a result of the updated Lease terms. The scheduled CPI rent increases remains consistent with the original lease at a 2% rent escalation per year. The new rent table is below.
Lease Years
Monthly Rent
February 1, 2014 - January 31, 2015
$20,000.00
February 1, 2015 - January 31, 2016
$20,400.00
February 1, 2016 - January 31, 2017
$20,808.00
February 1, 2017 - January 31, 2018
$21,224....
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