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Study Session on the Future Development of the Enterprise District Area in Alameda Point
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To: Members of the Mayor’s Economic Development Advisory Panel
From: Abigail Thorne-Lyman, Base Reuse & Economic Development Director
EXECUTIVE SUMMARY
Staff are seeking the input of the Mayor’s Economic Development Advisory Panel (EDAP) on strategies to attract tenants and future development to the Enterprise District, a roughly 100-acre subarea of Alameda Point which has been envisioned for future job-generating land uses. For over a decade, the City has undertaken various efforts to advance development in this area, but has been challenged by the need for extensive replacement of core infrastructure, environmental conditions, policy restrictions and market realities. Now that the City has addressed two key barriers which arose during the 2019 development efforts, staff are contemplating the next step to reignite development interest in the Enterprise District. Staff intend to bring a study session to the City Council in late 2024.
BACKGROUND
The Enterprise District encompasses roughly 100 acres of land bounded by West Atlantic Avenue to the north, Main Street and Central Avenue to the east, and Seaplane Lagoon to the west. The Enterprise District is entitled for commercial development and it is anticipated that over 2 million square feet of new development could be accommodated in this area.
From 2009-2014, the City, acting as “master developer”, undertook a number of initiatives to add value and reduce uncertainty to maximize the success of redevelopment at Alameda Point.
These efforts included:
• Preparing a number of planning documents, including a Town Center and Waterfront Specific Plan, General Plan Amendment, Zoning Amendment and Master Infrastructure Plan (MIP);
• Establishing a Community Facilities District (CFD) as part of ensuring fiscal neutrality;
• Certifying an Environmental Impact Report (EIR);
• Obtaining a commitment from the Water Emergency Transportation Authority (WETA) to build a ferry terminal at the Seaplane Lagoon and securing grant funding for a portion of the project;
• Adopting a Development Impact Fee (DIF) to help fund the required infrastructure improvements; and
• Receiving permits for key backbone infrastructure projects.
Over the years following these major planning milestones, the City has made several attempts to advance development in the Enterprise District:
• In 2014, the City Council directed staff to issue two separate Requests for Qualifications (RFQs) from developers for both Site A and Site B (now the Enterprise District). The City received four qualified responses from developers to the Commercial Project Enterprise District RFQ. Following a lengthy period of unsuccessful negotiations with two finalists, the City Council in 2015 directed Staff to postpone decisions in the Enterprise District until there could be more certainty about the development of infrastructure surrounding Site A, which would also support future development to the south.
• In 2016, with the approval of the Disposition and Development Agreement for Site A, the City Council approved a “new approach” for development at the Enterprise District that focused on attracting major commercial businesses or “end users,” instead of utilizing a master/commercial developer who then solicits “end users.” This new approach offered flexibility in marketing and revenue-producing interim use of the site until an interested commercial end user is identified. The Council approved utilizing Cushman & Wakefield (Cushman) to market the Enterprise District in order to leverage its existing knowledge and experience at Alameda Point and Bay Area markets as a whole.
• Through this 2016 process, the City was able to attract Astra as a major tenant of the existing buildings in the northern area of the Enterprise District, and it was thought at the time that Astra and similar tenants could be the catalyst for future development.
• In 2019, the Council directed staff to market a 23.9-acre portion of the Enterprise District (Site B) for redevelopment consistent with the City’s goals and objectives for commercial development at Alameda Point. Following a successful RFP process in which eight proposals were received, the City narrowed the pool to four finalists. At that point, however, the State of California modified the Surplus Land Act requiring that publicly owned land be offered first for affordable housing development (among other things), which caused the solicitation process to falter. Additionally, it was discovered during this time that a portion of the area being offered was contaminated with tarry refinery waste, and the City did not have a strategy at that point to remediate the area.
DISCUSSION
Since the City’s efforts to develop the Enterprise District in 2014, 2016, and 2019 collectively, a number of conditions have changed, and some have not.
• Infrastructure: the need to replace core infrastructure throughout the Enterprise District (and the rest of Alameda Point) continues to be a driving factor in the City’s development strategies. Any property offered for development must have two points of connection with East Bay Municipal Utility District (EBMUD) water lines on Main Street, Central Avenue, or West Atlantic Avenue. It must connect new sewer lines to a sewer pump station on West Atlantic Avenue, and must connect new stormwater lines to a replaced outfall on the bay. The total cost of these improvements will range from $27 million to $45 million. This is unchanged, and as a result, the 23.9 acre offering from 2019 - or a subsection therein - is the appropriate location to advance the first phase of development as it can most efficiently fit this infrastructure logic puzzle.
• Environmental Contamination: There are a number of areas throughout the Enterprise District that are in need of remediation, including areas aligning West Atlantic Avenue to Seaplane Lagoon which are still owned by the Navy; an area along Main Street which is still owned by the Navy; and an area near West Oriskany Avenue and Skyhawk Street, which is owned by the City. Since 2019, the City has worked with Chevron, the site’s former owner, and now believes there is potential for a remediation strategy for the tarry refinery waste to be in place by the end of 2024.
• Surplus Land Act: the 2019 amendments to the State Surplus Land Act halted all development and leasing activity in Alameda Point. In 2022, Assemblymember Mia Bonta introduced Assembly Bill 2319, which was passed and signed by Governor Newsom. This bill amended the Surplus Land Act to allow for exemptions within Alameda Point specifically, provided that the City meets certain development conditions throughout the former Naval Air Station property.
• Market Conditions: Post-pandemic commercial market conditions are much more challenging than the 2019 climate, and effectively render all efforts from 2019 to be irrelevant today. With high office and life science vacancy rates, there is a very limited market for the type of job generating development that the City would like to see. Moreover, current high interest rates hinder the ability of developers to generate the capital needed to provide the up-front infrastructure improvements that the City will require. As a result, staff believe the best opportunity for development in the area will be to attract a specific tenant with unique, large-scale needs that can only be fulfilled by new development.
As Alameda faces improved environmental and political conditions, but more challenging economic conditions, staff are seeking EDAP’s feedback on strategies to again position the Enterprise District for development, in particular around the following issues.
Timing: While it may seem better to wait until the commercial market is more competitive, staff recommend advancing development sooner rather than later, for a number of reasons:
• The end user of the Enterprise District will be a specialized tenant who may not be sensitive to the ebbs and flows of the commercial real estate market, but who is seeking a build-to-suit development grounded in the strength of their own industry or business’s growth needs. Staff believe pursuing this end user is more advantageous to the City than pursuing a developer who is looking to speculate on future growth of a given commercial product type.
• The City continually faces issues with aging and deferred maintenance of the buildings and infrastructure received from the Navy, and their ongoing deterioration increases the cost of repair and replacement.
• The extensive vacant properties in the Enterprise District create safety, security, and quality of life challenges that are costly for both Alameda Point property management, and for the City.
Property to be Offered: As noted above, Staff re-evaluated the 2019 offering of 23.9 acres and have determined that the location is best suited for the first phase of development, but that the price tag of $45 million for infrastructure is potentially cost prohibitive. Staff have worked with the City’s civil engineering consultant, Carlson, Barbee and Gibson, Inc. (CBG) to identify a smaller infrastructure package that could help catalyze new development without compromising the City’s needs. CBG has identified a smaller $27 million package of improvements which provide EBMUD water, replace some streets, and repair sewer and storm drains and outfalls without the full replacement that will be ultimately required, which could be roughly offset by providing 10-12 acres of property instead of the original 23.9.
Staff believe a smaller parcel of land could be offered as consideration for these improvements which may be more aligned with the capital available up front to a developer and tenant. A development of this more moderate scale provides backbone infrastructure that will support further development without such a major investment from the next user, potentially enabling Alameda to accommodate smaller businesses and projects over time.
Priority Uses: On June 1, staff hosted an Alameda Point open house which provided the community with much of the information presented in this staff report. Staff asked the community for feedback on the types of uses participants would be interested in seeing in the Enterprise District. Responses included Responses included a desire to develop a technology campus to attract clean, green and blue tech firms, the film and entertainment industry, AI and other big technology. Respondents also expressed interest in a commercial commissary kitchen or bakery for small businesses, new housing, parks and recreational uses like a rock-climbing gym, archery range, skating rink or waterpark, as well as new retail and restaurants. There was a particular focus on creating opportunities for community maker spaces for art, music, cultural and performing arts.
Disposition Process: Staff are also seeking EDAP’s feedback on proceeding with marketing for development. Typically the City would consider proceeding with a competitive process; however, it is unlikely that there is a pool of multiple developers today who could be prepared to front the capital without a secure tenant in place. It is much more likely that the Enterprise District will attract “build-to-suit” approach where a tenant is in need of a facility meeting its specific needs, and has the capital to build its facility. However, these tenants will be few and far between, and not ready and waiting for a competitive process.
Staff have identified the following options for the process:
1. Create a pre-qualified bench of developers through a competitive process, who can work with interested prospective tenants without requiring tenants to undertake a separate competitive process;
2. Accept unsolicited offers from prospective tenant and developer partners as they arise, without a competitive process (or without a competitive process, so long as they meet key criteria established by the City Council);
3. Accept an unsolicited offer only for the initial developer who is making the risky catalytic investment in infrastructure, as a way to “sweeten the deal,” while requiring competitive processes for subsequent deals.
4. Run a standard competitive solicitation process.
Staff are seeking a study session with EDAP to brainstorm creative approaches to development that can balance the transparency and competitiveness of a solicitation, with the economic realities of this particular offering and the need to be opportunistic.
ALTERNATIVES
• Do not hold a study session
• Provide alternative feedback to staff
FINANCIAL IMPACT
This is a study session and there is no decision being made that would have a fiscal impact.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code. This action is subject to the Levine Act. Relevant documents include:
• NAS Alameda Community Reuse Plan (1996)
• Alameda Point General Plan Amendment Chapter 9 (2003)
• Alameda Point Zoning and Municipal Code Amendments and EIR (2014)
• Master Infrastructure Plan (MIP) (2014)
• Town Center and Waterfront Specific Plan (2014)
• Transportation Demand Management Plan (2018)
• Economic Development Strategic Plan (2018)
• Climate Action and Resiliency Plan (2019)
• MIP Amendment (2020)
ENVIRONMENTAL REVIEW
No action is proposed, therefore no further CEQA analysis is required.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Hold a study session to provide staff with feedback on development strategies for the Enterprise District of Alameda Point.
Respectfully submitted,
Abigail Thorne- Lyman, Base Reuse and Economic Development Director