Title
Introduction of Ordinance Authorizing the City Manager to Execute a Fourth Amendment to the Lease with Williams-Sonoma, Inc., a Delaware Corporation, Acting for and on Behalf of Williams-Sonoma Stores, Inc., a California Corporation, for Building 169, Suite 102, Located 1680 Viking Street, Alameda, CA, Extending the Term of the Lease for an Additional 12 Months with No Extension Option.
In accordance with the California Environmental Quality Act (CEQA), this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Section 15301 (Existing Facilities). (Community Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
This action introduces an ordinance authorizing a fourth amendment to the lease with Williams-Sonoma, Inc. (Williams-Sonoma) for Building 169, Suite 102, including approximately 43,355 square feet of rentable space (Premises, Exhibit 1), located at 1680 Viking Street at Alameda Point used for retail sale of home furnishings and embellishments. The amendment retroactively extends the term of the lease for an additional 12 months, terminating on April 30, 2024, with no extension option. The monthly base rent for the 12-month term is $30,348.50.
BACKGROUND
Williams-Sonoma is a Delaware corporation operating numerous retail stores under a portfolio of brands that include Williams-Sonoma, Williams-Sonoma Home, Pottery Barn, Pottery Barn Kids, PBTeen, West Elm, Mark and Graham, and Rejuvenation. Founded in 1956, in Sonoma, California, it is a multi-channel specialty retailer of high-quality home products and one of the largest e-commerce retailers in the United States.
Williams-Sonoma entered into a license agreement with the City of Alameda (City) on May 12, 2016. That license was replaced by a lease entered into on March 16, 2017 (Lease, Exhibit 2) under which Williams-Sonoma currently occupies the Premises. Williams-Sonoma uses the Premises for retail sale, at full price and/or discount, of products for home furnishings and embellishments, including furniture, lighting, bathroom fixtures and fittings, and home kitchen accessories, gadgets and tools. The monthly rental rate has remained unchanged at $21,677.50 since Williams-Sonoma first licensed the Premises in 2016.
The first amendment to the Lease dated September 10, 2020 (First Amendment, Exhibit 3) extended the term of the Lease for one year and provided one 12-month extension option. During negotiation of the First Amendment, Williams-Sonoma notified the City that it would be unable to extend the Lease beyond its original three (3) year term without rent abatement. City Council approved providing one (1) month of rent abatement for the first month of the extended term, May 2020.
The second amendment to the Lease dated April 19, 2021 (Second Amendment, Exhibit 4) exercised the 12-month extension option provided by the First Amendment and provided one (1) additional 12-month extension option. The third amendment to the Lease dated May 9, 2022 (Third Amendment, Exhibit 5) exercised the 12-month extension option provided by the Second Amendment and reduced the parking area under the Lease from one (1) primary parking area and two (2) overflow parking areas to just the one (1) primary parking area.
The Lease term expired on April 30, 2023, and Williams-Sonoma is currently in a month-to-month holdover tenancy.
DISCUSSION
Williams-Sonoma is closing down operations at Alameda Point and plans to vacate the Premises no later than April 30, 2024. The proposed fourth amendment to the Lease (Fourth Amendment, Exhibit 6): (1) retroactively extends the term of the Lease for an additional 12 months, terminating April 30, 2024, with no extension option; (2) increases the monthly rent and security deposit from the existing amount of $21,677.50 to $30,348.50; and (3) provides Williams-Sonoma and the City the option to terminate the Lease upon one hundred eighty (180) days prior written notice.
The following table summarizes the major business terms of the Fourth Amendment:
|
Building 169, Suite 102 Terms |
|
Square Footage |
Approximately 43,355 |
|
Uses |
Retail sale, at full price and/or discount, of products for home furnishing and embellishment |
|
Length of Term |
12 months |
|
Extension Options |
None |
|
Termination Right |
Either party upon180 days’ prior written notice |
|
Monthly Base Rent |
$30,348.50 |
|
|
|
|
Security Deposit |
$30,348.50 [Existing deposit ($21,677.50) + Additional deposit ($8,671.00)] |
ALTERNATIVES
• Approve the Fourth Amendment to the Lease with Williams-Sonoma for Building 169, Suite 102.
• Direct staff to renegotiate the terms of the Fourth Amendment to the Lease with Williams-Sonoma and provide specific direction regarding alternative terms.
• Direct staff to seek other prospective tenants and market the property to other prospective tenants. William-Sonoma would need six (6) months to vacate the Premises.
FINANCIAL IMPACT
Lease revenue will be deposited in the Alameda Point/Base Reuse Fund (290) and used for purposes described in the Economic Development Conveyance Agreement. The proposed lease amendment would increase the monthly base rent from $21,677.50 to $30,348.50, or $8,671 per month, resulting in additional annual lease revenue of $104,052 over the full term of the proposed amendment.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
In accordance with CEQA, this action is categorically exempt from further review pursuant to CEQA Guidelines Section 15301 (Existing Facilities).
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Introduce an ordinance authorizing the City Manager to execute a fourth amendment to the lease with Williams-Sonoma, Inc., a Delaware corporation, acting for and on behalf of Williams-Sonoma Stores, Inc., a California corporation, for Building 169, Suite 102 located at 1680 Viking Street at Alameda Point extending the term for an additional 12 months with no extension option.
Respectfully submitted,
Lisa Maxwell, Community Development Director
By,
Lorie Curtis, Real Estate Technician
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Premises
2. Lease
3. 1st Amendment
4. 2nd Amendment
5. 3rd Amendment
6. 4th Amendment