Title
Workshop to Receive an Update and Provide Feedback on the Disposition Strategy for Leasing and Sale of Properties within the Reuse Area at Alameda Point. (Base Reuse and Economic Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
From: Adam W. Politzer, Interim City Manager
EXECUTIVE SUMMARY
City of Alameda (City)-owned lands at Alameda Point are divided into two general categories: development areas and the Reuse Area (Exhibit 1). In development areas, the City expects developer partners to deliver backbone streets and other necessary infrastructure as part of their projects. In the Reuse Area, the City intends to deliver the backbone infrastructure, as sufficient revenue is generated through the sale of land and buildings. To generate this revenue, staff follows the recommended hybrid lease-sale Disposition Strategy discussed with City Council in March 2023, prioritizing land sales near newly built backbone streets while continuing to lease the hangars along West Tower Avenue and Monarch Streets until future phases of backbone infrastructure can be funded and built.
This workshop provides an update to City Council on efforts to implement the March 2023 Disposition Strategy, and seeks feedback on the City’s approach to disposition in the Reuse Area in a way that can further deliver on the City’s goals for Alameda Point.
BACKGROUND
The Master Infrastructure Plan
Replacing backbone infrastructure is foundational to the City’s approach to development and disposition of properties at Alameda Point. The Alameda Point Master Infrastructure Plan (MIP), initially approved by City Council in 2014 and updated in 2020, identifies Alameda Point’s new infrastructure needs and sets forth a physical plan for the location of future infrastructure, covering water, sewer, storm drain, electrical, gas, telecommunications, surface street designs, sea level rise adaptation, parks, and other improvements. Ongoing use and maintenance of the existing infrastructure at Alameda Point is challenging with its reduced reliability of service and increased repair costs. In addition, the City is responsible for Navy installed water, gas and telecommunication facilities, which results in ongoing operational expenses that are funded through lease revenues. When new backbone infrastructure is built, the East Bay Municipal Utility District (EBMUD), Pacific Gas and Electric (PG&E) and outside telecommunication providers’ facilities are installed and this responsibility is gradually transferred, with maintenance obligations becoming the responsibility of the property owner.
The new infrastructure identified in the MIP is a necessary precondition to new construction and critical to long-term use of Alameda Point real estate assets. In the Development Areas, the City expects developer partners to deliver backbone streets and other necessary infrastructure as part of their projects. In the Reuse Area, the City intends to deliver the backbone infrastructure, as it generates enough revenue to construct each phase through the sale of land and buildings.
The Reuse Area is bound by Spirits Alley to the West, Seaplane Lagoon to the South, Pan Am Way to the East, and Main Street to the North, and also includes the “Big Whites”, the single family homes in the Northeast corner of the base that are historic in nature. The Reuse Area is a Nationally Registered Historic District that highly restricts significant building demolition and large-scale new “ground up” development. The single buildings and small parcels in this area are unable to support the large cost of implementing cohesive backbone infrastructure, requiring this alternative, City-led approach to infrastructure delivery.
The First Catalytic Investments and Developments
The sale of Buildings 40, 23, 8, 9, and 91 on West Tower Avenue, Monarch, and Saratoga Streets catalyzed new private investment in Alameda Point, as the City was able to use funds from these sales to connect new water lines from Main Street. Developers repurposing Buildings 8, 9, and 91 completed backbone street work on portions of West Tower Avenue and Saratoga Street. The Site A master development also delivered critical utilities, including a new stormwater outfall, sewer pump station, the Seaplane Lagoon Ferry terminal, and Alameda Point’s first new backbone streets with all necessary wet and dry utilities on West Atlantic Avenue.
Three Phases of Infrastructure Delivery in the Reuse Area
EBMUD has a standing requirement throughout its service area that property cannot be transferred until it is connected with EBMUD facilities. In Alameda Point, this requirement is met by ceasing to use the Navy’s system and connecting to new water lines. This created a difficult “chicken and egg” situation for the Reuse Area, as the City needs to generate revenue from land sales in order to pay for this infrastructure. To address this issue, in 2017, the City and EBMUD entered into a Ten-Year Water Infrastructure Agreement (10-Year EBMUD Agreement - Exhibit 2) that established a three-phase plan for backbone infrastructure delivery in the Reuse Area. The City agreed that, within a short time frame of selling buildings in each of the phases, it would complete the backbone water lines and connect the properties to EBMUD water meters. In part because of the need to establish two points of connections for new water lines with the existing EBMUD system, these phases, and all future backbone utilities, will generally be delivered from east to west in Alameda Point.
With the sale of Building 91, the City triggered the first phase of the Reuse Area backbone work, which the City completed in early 2025.
March 2023 Disposition Strategy Recommendations
At the March 7, 2023, City Council meeting, staff presented a proposed “Mixed Portfolio” approach to the disposition of properties in the Reuse Area, that is structured around the three phases of infrastructure defined in the 10-Year EBMUD Agreement for the Reuse Area. The approach, which was endorsed by City Council, is as follows:
• Prioritize backbone infrastructure replacement. The importance of the replacement of infrastructure at Alameda Point cannot be overstated: new infrastructure is necessary prior to new private development and long-term uses. Further, the existing old, deteriorating infrastructure is unreliable and costly for the City to maintain.
• Rely primarily on building sales to fund continued backbone infrastructure development consistent with phasing in MIP. The strategy relies on selling buildings to fund continuous backbone infrastructure replacement consistent with the MIP. New infrastructure development is slated to generally move east to west, building off of the Site A backbone infrastructure that has already been completed and the Phase 1 Reuse Area infrastructure.
• Maximize value and sale proceeds by selling buildings that are located adjacent to new infrastructure. To maximize land value and sale proceeds and recapture the City’s investment, building sales should generally occur after new infrastructure is installed adjacent to a building, requiring close coordination between building sales and infrastructure phasing.
• Account for the fact that the sale of City properties will result in reduced ongoing expenses and the related need for significant leasing revenues. As buildings are sold and additional infrastructure at Alameda Point is replaced, the City’s need to maintain a robust leasing portfolio will decrease because the City’s operational and maintenance needs arising from old, deteriorating infrastructure will also decrease. However, it is important to acknowledge that over 15 City staff full-time equivalent positions in BRED, Planning, the City Attorney’s Office, Public Works, and Finance are funded from lease revenues to manage and address issues at Alameda Point, so the City will need to deliberately adjust staffing resources over time as lease revenues are reduced.
• Retain high-value leasing assets until operational costs in the Reuse Areas are significantly reduced. High-value leasing assets, such as certain hangars, would not be targeted for immediate sale until adjacent backbone infrastructure was completed, although leases with future purchase options may be an option to incentivize building investment from building owners and developers.
• Maintain flexibility and provide for the ability to be nimble and opportunistic. The City’s approach should maintain ample flexibility to pursue opportunities that may not perfectly align with the described strategy, but would result in achieving significant City benefits.
DISCUSSION
Since 2023, staff have implemented the Mixed Portfolio Disposition Strategy for the Reuse Area as described above, focusing on advancing sales of properties adjacent to the now-completed Phase 1 reuse infrastructure loop, as shown in Exhibit 3. Staff recommend continuing to advance the Disposition Strategy as supported by City Council in March 2023, and are providing new information here on the work plan associated with this strategy in 2026 and 2027.
Master Infrastructure Plan and Phase 2 Backbone Cost Estimates
With the Phase 1 backbone infrastructure loop completed, staff is now focused on advancing design and cost estimates for the Phase 2 infrastructure loop, extending east-west on West Tower and West Midway Avenues from Saratoga Street to Monarch Street, and north-south on Monarch and Lexington Streets between West Tower West Midway Avenues. Public Works was able to complete the Phase 1 loop under budget and install EBMUD water lines and meters on the Phase 2 loop, enabling the City to meet its Phase 2 requirements in the 10-Year EBMUD Agreement, and to explore future sales of property in the Phase 2 loop prior to the completion of the entire Phase 2 backbone streets and other utilities.
The estimated cost for the Phase 2 backbone loop, net of the completed water lines, is $43 million. BRED Staff are establishing this number as the minimum target for sales of property in the Phase 1 loop, which is discussed later.
The cost for completion of the full remaining MIP for all of Alameda Point was estimated at $700 million in 2020; Staff commissioned Carlson, Barbee, & Gibson, Inc., the City’s contracted Civil Engineer to complete a cost estimate update. The 2025 estimated cost for the full MIP completion is now $840 million.
Unfortunately, while costs since 2020 have escalated 20%, land and building values have not proportionately increased. In fact, it appears some values have decreased, both due to the depreciating value of the City owned buildings at Alameda Point and due to the softening of the commercial real estate market due to both post-COVID remote work impacts, and to increases in labor, materials, financing, and insurance costs to develop and restore buildings.
Infrastructure Funding Assumptions
The City has long established the intent for Alameda Point to be fiscally neutral to the City; in essence, for the improvements to “pay for themselves” by leveraging land values, and for the additional cost of services to be funded through a Community Facilities District (17-1). For this reason, in 2023, staff established that land and building sales needed to achieve an approximate benchmark value of $2 million per acre in order to ultimately work towards a $700 million price tag for delivering the MIP.
In 2025, both due to the increase in costs, and a modification to the assumptions about the total developable area (Exhibit 4), the estimated cost per acre for the MIP is $2.55 million.
This number may be a helpful general benchmark for sales of property, but the actual per acre sales price may increase or decrease depending on a range of factors. For example, land in the Historic District and near the habitat for the California Least Tern may have limited development potential, warranting a lower sales price than other properties.
Importantly, in the current economic climate, it may not be possible to achieve a per-acre land price that averages out to the required $2.55 million benchmark. The negotiated sales price for the Pacific Fusion transaction that City Council considered in June 2025 was $2.25 million per acre. Therefore, it is important to consider that the City may need to pursue outside funding sources to pay for some of the improvements in the MIP, as it may not be possible for Alameda Point to “pay for itself” by selling land alone.
The City will need to consider pursuing grants and other funding sources external to Alameda Point for improvements identified in the MIP. For this reason, this year staff identified possible Army Corps of Engineers Water Resources Development Act Grant (WRDA) to help with the sea level rise adaptation improvements along the estuary.
2026-2027 Disposition Work Plan Recommendations
Staff recommends continuing to implement the “Mixed Portfolio” approach to the Disposition Strategy as described above, with further details on the 2026-2027 anticipated work plan described below.
Phase 1 Loop Land Sales
Staff will continue to pursue sales of land and buildings in the Phase 1 loop area as follows:
• Food Bank: Since 2023, staff sold 677 West Ranger Avenue to the Alameda Food Bank, relocating them from the City-owned Building 92 (650 West Ranger Avenue).
• Building 92: Staff completed a request for proposals for this building in 2025 and are in negotiations with a potential buyer now. Staff anticipates bringing this purchase and sale agreement to City Council in mid-2026. This is an historically contributing building that will be adaptively reused.
• Building 7 and Lot 116 (851 West Midway Avenue): Staff anticipates placing this small, two-story former lab space and adjacent lot on the market in early 2026. The building behind it (Building 116) was demolished in early 2025 as it was a collapsing and red-tagged structure.
• Lot of Buildings 101 / 114 (801 West Ranger Avenue): Two Navy-era structures on this property were demolished due to earlier building fires. Staff are identifying infill development potential on this approximately 5-acre lot, and aiming for a mid- to late-2026 solicitation for a land sale.
• Building 41 (650 West Tower Avenue): This approximately 100,000-square-foot hangar is one of the City’s highest value buildings at Alameda Point, and certainly the building of greatest value on the Phase 1 infrastructure loop. However, as there is known per-and polyfluoroalkyl substances (PFAS) contamination, the building has not yet been conveyed by the Navy. Approximately 1/3 of the building is currently leased by Deep Ocean Explorer and Research (DOER Marine), with their lease option ending in fall 2026. Staff recommends placing this building on the market regardless of the Navy’s continued ownership, and seeking a long term lease with an option to purchase the building once the Navy conveyance is completed. Staff anticipates the conveyance will occur in 2027 or 2028; however, the timeline is unknown as the PFAS remedial investigation report will not be published until mid-2026.
With the sale and lease of these properties, most of the City-owned land adjacent to the Phase 1 loop will be in private ownership. Further, remaining properties benefiting from the backbone infrastructure include Building 35 (801 West Ranger Avenue), which is currently leased by Small Size, Big Mind preschool and is adjacent to the RESHAP construction, the Sue Matheson Head Start Center, and Building 17 on West Essex, which is owned by the Alameda Unified School District.
Phase 2 Loop Recommendations
While staff believes the sale of the aforementioned properties should be sufficient to meet the $43 million target for commencement of the Phase 2 backbone infrastructure loop, staff still supports the original recommendation to be flexible and opportunistic, allowing future sale and development opportunities elsewhere to be considered. Staff is also concerned that the PFAS difficulties with Building 41 could hinder a clean sale, and it is important for the City to consider alternative paths to securing the funds for the Phase 2 loop.
Buildings 11/12/400: In particular, staff recommends exploring the potential to sell, lease, or lease with purchase option, the Building 11, 12, and 400 complex located from 1050 to 1190 West Tower Avenue, for the following reasons:
• While highly desirable due to its height clearances, large spans, and hangar doors, the City has not been able to lease the 110,000 square foot hangar at Building 11. Largely this is because few tenants need, or are able to occupy, the entire space. The City does not have the resources a private developer would have to demolish the space or consider other potential mixed tenant leases in the building.
• The complex is in need of significant capital repair including a new roof, which may exceed $10 million. This is money the City would prefer to allocate to the new backbone infrastructure. Building 400 and Building 12 are currently leased to Google and Saildrone, and the City has a strong interest in retaining these tenants and employers in Alameda, but may not be able to afford the repairs needed to keep them in this complex.
• The complex is not considered an historically contributing building, allowing a developer to consider creative options for its reuse and development.
• While buildings 400 and 400A are still owned by the Navy, and expected to be conveyed on the same timeline as Building 41, the City has the authority to enter into a long-term lease on these buildings and could offer them as part of a larger sale, with a purchase option.
Several developers have toured this complex with staff and expressed a strong interest in purchasing and restoring the property. It will be a complicated transaction due to the partial Navy ownership, but staff believes it would be largely economically beneficial to the City and reduce staff property management time and costs.
Building 2 (1025 West Midway Avenue): The original Bachelor’s Enlisted Quarters (BEQ) complex comprises Buildings 2, 3, and 4. Again due to its location on the completed EBMUD water loop, staff is prepared to explore interest in adaptive reuse of this historically contributing complex. This will be a longer-term (late 2026/2027) project, but staff is eager to seek ideas from the Alameda community and potential developers for ways to active this area of the City.
Value Capture: The 2023 Disposition Strategy in part recommended delaying sales of the hangars on the Phase 2 loop until the backbone streets could be completed. Part of the reason for this recommendation is that the value of the buildings will increase with the new streets in place. Staff believes it could be possible to negotiate a deal for the backbone streets involving a “participation” component, where the City receives a share of gross receipts or profits if they exceed a certain threshold. In this way, the City could benefit further from selling properties before the infrastructure is completed, and generate a long-term revenue stream.
Other Upcoming Related Work
The Infrastructure Agreement with EBMUD will expire in mid-2027. Staff intends to commence negotiations with EBMUD in 2026, and may explore some modifications to the infrastructure loops and building sales that have been assumed in the 2017 agreement.
Additionally, in 2013, the City entered into a term sheet with the Veteran’s Administration (VA) as a condition of stepping aside and allowing the Navy to transfer 74 acres of land in the runway area directly to the VA for its medical center and columbarium. A condition of this term sheet was for the VA to build $7 million of on-site roadways and utilities benefiting the planned regional sports complex (2013 dollars), and $5.5 million in roadway and utility improvements on West Red Line Avenue and Lexington Street (2013 dollars). The City will continue to pursue the VA project and these committed benefits, which represent a significant contribution to the MIP.
Summary of Recommendations
Staff recommends continuing to pursue the basic principles of the 2023 Disposition Strategy as described above, with specific focused activities in 2026 and 2027 as follows:
• Advance potential sales in the Phase 1 loop of Buildings 92, 7, and lot 101/114
• Issue a Request for Proposals for a long-term lease with purchase option for Building 41
• Target a benchmark sales revenue of at least $43 million from these transactions. Explore other funding and financing options with City Council if this benchmark seems unachievable due to market conditions.
• Explore potential sale of the Building 11/400/12 complex in the Phase 2 loop
• Explore options for the BEQ complex in late 2026 / early 2027
• Continue to focus on leasing the other hangars on Monarch Street
• Advance negotiations on a new agreement with EBMUD before the current one expires in 2027
• Continue to be open and opportunistic if other offers come along that advance the goals of the Disposition Strategy
Additionally, staff will begin to seek other potential external sources of revenue such as grants to advance key aspects of the MIP, acknowledging that the land and buildings at Alameda Point may not be able to generate sufficient revenue to cover the entire MIP cost.
ALTERNATIVES
• Provide feedback to staff on the proposed 2026-2027 Work Plan for implementing the Alameda Point Reuse Area Disposition Strategy.
• Provide feedback to staff on an alternative approach to the lease and sale of buildings in the Reuse Area of Alameda Point.
• Direct staff to seek additional third-party information to advance or to inform the Disposition Strategy.
FINANCIAL IMPACT
The activities recommended in this work session will require existing staff and professional services budget that has already been allocated (29061822 and 29161822).
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
• Naval Air Station (NAS) Alameda Community Reuse Plan (1996)
• Alameda Point General Plan Amendment Chapter 9 (2003)
• Alameda Point Zoning and Municipal Code Amendments (2014)
• Master Infrastructure Plan (MIP) (2014)
• Town Center and Waterfront Specific Plan (2014)
• Main Street Neighborhood Specific Plan (2017)
• Transportation Demand Management Plan (2018)
• Climate Action and Resiliency Plan (2019)
• MIP Amendment (2020)
• Citywide Strategic Plan (2024-5): TIE 25 - Implement the City’s Alameda Point Disposition Strategy
ENVIRONMENTAL REVIEW
As this is a work session with no action, this item does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
Implementation of the Disposition Strategy will help generate revenue to implement the Master Infrastructure Plan, protecting Alameda Point’s assets from sea level rise, groundwater rise, storm surges, and improving the capacity of the stormwater system to prevent flooding of assets. Sales of buildings to private developers will also enhance investments protecting Alameda Point’s existing buildings from seismic risk.
RECOMMENDATION
Receive an update and provide feedback on the Disposition Strategy for leasing and sale of properties within the Reuse Area at Alameda Point.
Respectfully submitted,
Abigail Thorne-Lyman, Base Reuse and Economic Development Director
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibits:
1. Exhibit 1: Map Showing Development Areas and Reuse Area
2. Exhibit 2: Ten-Year Water Infrastructure Agreement
3. Exhibit 3: Map Showing Phase 1, 2, 3 Reuse Area Backbone Improvements and Anticipated Property Sales
4. Exhibit 4: Developable Area at Alameda Point