The Ravenswood City School District is one step closer to leasing out its district office, which could potentially bring in about $1.5 million to the district annually. But because of recent "significant" broader economic changes, the board approved plans with some caveats.

The district's governing board voted unanimously to enter into two agreements with Madison Capital, a San Francisco-based real estate investment firm, on Nov. 17: an option agreement and a ground lease for the lot, located on a 4.15-acre site at 2120 Euclid Ave. in East Palo Alto.

Madison Capital is proposing a seven- to eight-story life science lab and office space, which is similar in scope to the Sobrato project next door and aligned with current zoning on the location. It would include ground floor retail space and 20,000 to 40,000 additional square feet of publicly accessible green space. The retail space could include "a grocery store, coffee shops, or other stores that ensure a vibrant community," according to the board. The district would prohibit businesses like pawn shops or liquor stores at the site.

"This is financial freedom," said trustee Ana Maria Pulido. "It's huge for the district so we can stand on our own two feet."

She noted that the district can use the funds on student programs and to help fund recent staff raises.

Trustees emphasized the importance of having a green space that the community can also use.

The lease would "bring in significant revenue" to the district $1.5 million annually plus profit sharing over the 99-year-term, according to a staff presentation.

During a previous meeting, board President Mele Latu was the lone vote against the agreement for the district office land, noting during the meeting that the length of the lease terms, 90-plus years for each, is a "bit worrisome." She also had concerns about how East Palo Alto residents would react to a new seven- or eight-story building in their community.

"I understand our district has been making moves to financially serve our community and our students better and so this is a hard decision for me, but it's one I have gone back to my community and asked for feedback and I haven't received anything good or bad," she said.

The school board also agreed to sign a letter to the East Palo Alto City Council addressing the need to enter an agreement with Madison Capital.

"Philosophically, we wish we did not need to lease land in order to be able to stand on our own two feet," the letter states. "For years we have wished for sustainable changes to state and federal funding that would close inequitable funding gaps between us and neighboring districts. We have advocated for those changes. Some progress has been made, but it is too little, too slow. ... Our students, families, and our community cannot wait. So we are taking action to close these funding gaps through leasing our biggest asset, the land our community has entrusted us with."

The City Council and Planning Commission have to approve early design plans for the space.

Over a year ago, the board entered an exclusive negotiating agreement with Madison Capital to redevelop the site. The district currently leases nearly half of all its overall space to local community groups, according to a 2021 district staff report.

The district is still negotiating a ground lease to develop multifamily housing for Ravenswood City School District teachers and staff at the former James Flood School site in Menlo Park. The negotiations were slowed down by Measure V, a citizen initiative that failed to pass last month. It would have required any zoning changes to the Flood School site to be approved by Menlo Park voters in a regular election, circumventing the normal approval process by the Menlo Park City Council. The vacant school site is zoned for single family housing and will need to be rezoned in order for workforce housing to be built.

There is a clause for initial market stabilization of three to seven months, where either party can walk away penalty free. District staff has the ability to finalize minor aspects of the contract without board approval (aside from any dollar figure changes), said Chief Business Officer Will Eger.

Eger described the negotiations process with Madison Capital to the board as "intense."

"We've seen a dramatic increase in Federal Reserve interest rates, which has trickled through the real estate market, and we've seen challenging circumstances in tech with massive layoffs at many local companies," he explained to the board on Nov. 17. "We can continue the work we're doing, but also take a bit of a pause, we do not want the district to buy in at the lowest possible point. I don't want to lock us in. ... So we're allowed to step back and exit the deal, while also starting the clock on our financial stability."