REPORT TO COUNCIL
SUBJECT
Title
Action on First Amendment to Lease between Gahrahmat Family Limited Partnership 11, LP (Gahrahmat) for Commercial Space at 881 Martin Avenue (APN 224-04-090) for Silicon Valley Power [Council Pillar: Deliver and Enhance High Quality Efficient Services and Infrastructure]
Report
BACKGROUND
In 2015, Silicon Valley Power (SVP) entered into a five-year lease agreement with Gahrahmat for office space at 881 Martin Avenue for staff working in SVP's Resources, Power Trading, Systems Support, and Marketing and Customer Services Divisions. Since that time, a number of additional staff including engineering, estimating, and executive support staff have been moved out of City Hall and into 881 Martin Avenue freeing up space at City Hall for other City needs. That lease is expiring on October 31, 2020.
DISCUSSION
The parcel at 881 Martin Avenue includes nearly 32,500 square feet of building space and is centrally located between City Hall, the Electric Corporation yard and the Donald Von Raesfeld Power Plant. This is a triple net lease with the City paying a share of taxes, maintenance, and insurance. In addition, the City reimburses the property owner for a prorated share of services including utilities, repairs, and capital maintenance. This additional lease term represents an increase from $1.10 per square foot including taxes, insurance, and maintenance in 2015 to $1.86 per square foot in 2025. During the initial five-year term (2015-2020), the base rent increased from $1.10 per square foot to $1.24 per square foot, a 3% annual increase. During the next five-year period, the base rent would start at $1.65 per square foot and increase 3% annually to $1.86 per square foot. In late 2019, an analysis of local properties was completed to compare local lease rates. The rate of $1.65 per square foot beginning November 1, 2020 is very competitive when compared to similar commercial properties in Santa Clara. The triple net rate of ...
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