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City Council Meeting: March 22, 2011
Agenda Item: ~'° 1=~
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: JP Morgan Chase (1333 Fourth Street) Lease Modification
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute amendments to the lease at 1333 Fourth Street, which would:
1. move the notice date for the tenant's option to extend the lease from
April 30, 2011 to January 31, 2012;
2. require rent negotiations for the option period to commence no later than August
31, 2011; and
3. modify the dates for the parties to present their appraisals to an arbiter, if
required, to two months prior to commencement of the option period.
Executive Summary
On November 1, 2010, the City acquired 1301-1333 Fourth Street. The City has
assumed the leases of the two existing tenants on the site, including JP Morgan Ghase
("Chase"), the .operator of the branch bank at 1333 Fourth Street. The Chase lease
expires on April 30, 2012 and has two options of five years each. Under the existing
lease, Chase must give the City notice to exercise the first option by April 30, 2011.
Chase has requested an extended notice period (to January 31, 2012) to help give both
parties more time to explore their options while the future use of the site is being
considered. This modification would not change any other provisions of the lease other
than the dates when the parties must present their differing appraisals to an arbiter,
assuming the parties have not agreed upon the rent.
Background
Since 2007, the City has been assembling property in accordance with the Downtown
Parking Program. The most recent acquisition, authorized on May 11, 2010, was a
52,500-square foot property at 1301-1333 Fourth Street. On December 14, 2010,
Council authorized the initiation of a visioning process for re-use of the site.
The existing tenants, including Bank of America and JP Morgan Chase, have been
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informed of the upcoming process, as both banks are expected to be impacted by the
re-use of the site.
Discussion
The City's lease with JP Morgan Chase terminates on April 30, 2012. Chase has two
options of five years each, with the second option expiring on April 30, 2022. Under the
existing lease, Chase must give the City written notice to exercise the first option by
April 30, 2011. Chase has requested an extended notice period (to January 31, 2012) to
help give both parties more time to explore options regarding the bank's future needs.
The additional time would enable Chase to explore the market, including alternative
locations for the interim or permanent relocation of the bank branch, but would not
change the term of the lease.
The time extension reduces the period for the City and Bank to renegotiate the rent.
For this reason, staff proposes that the negotiation period start no later than August 31,
2011. In the event the parties cannot agree upon a lease rate, the lease provides for
arbitration. The proposed lease modification would reduce the arbitration period from
five months prior to the commencement of the option period to two months.
Financial Impacts & Budget Actions
The proposed amendments to the Chase lease do not impact the budget.
Prepared by: Jennifer Taylor, Senior Development Analyst
Forwarded to Council:
Rod Gould
City Manager
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Housing and Economic Development
Reference Resolution No.
9346 (CCS).