Title
Introduction of Ordinance Authorizing the City Manager to Execute a Lease for a Portion of Building 169 with the Pacific Pinball Museum, a 501(C)(3) California Nonprofit Organization, Located at 1680 Viking Street, Suite 101 at Alameda Point, Alameda, California, for a Term of Thirty-Six Months. [Requires 4 affirmative votes]
In accordance with the California Environmental Quality Act (CEQA), this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Sections 15301 (Existing Facilities) and 15061(b)(3) (Common Sense). (Base Reuse and Economic Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Staff recommends that City Council authorize the City Manager to execute a lease with Pacific Pinball Museum (PPM), a California Nonprofit Corporation, for a portion of Building 169 at Alameda Point for a term of thirty-six months. PPM is the current occupant under a License Agreement with the City of Alameda (City) for a period of seven months that expired on December 31, 2024. The recommended new lease will help provide continual occupancy of the building, while City staff work to effectuate City Council’s strategy for disposition and redevelopment of Alameda Point’s Enterprise District.
BACKGROUND
PPM is a non-profit organization that started in 2002 and has been a tenant at Alameda Point since 2006. The goals of PPM are to: inspire an interest in electricity, physics, math and the wonders of science; stimulate an interest and appreciation for art; provide a mentor center to encourage students to learn about science, art and history; create the first pinball museum in the U.S. and preserve a valuable collection of pinball machines; educate the public on the history of the pinball machine and its impacts upon American history, art and technology; and create a destination that is educational, entertaining, and enjoyed by the entire family. PPM has a publicly facing museum and art gallery located on Webster Street.
Building 169, located at 1680 Viking Street, is a commercial warehouse with rolling doors, grade level loading and low power supply, and is divided into two suites. PPM occupies suite 101, which contains approximately 43,555 square feet of rentable space and is used as a warehouse and repair facility for historical pinball machines and related administrative functions. PPM also sublicenses a 13,650-square-foot portion of the suite (about 31%) to another company, Navier Boat (Navier), which designs, engineers, prototypes, tests and assembles electric hydrofoiling watercraft. Navier pays PPM $10,238 per month for the sublicense as well as a share of the utilities, fees and taxes, and the sublicense is to terminate upon the City and PPM’s execution of a new lease, which provides uncertainty as to whether Navier will continue to occupy the space. The adjacent suite 102 is currently vacant but was occupied by a retail tenant, William Sonoma, which operated a Pottery Barn Outlet in the space until April 2024. The current License agreement with PPM was a temporary measure to allow continued occupancy when its prior lease agreement executed with the City in 2020 expired earlier this year.
Building 169 is located within the Enterprise District of Alameda Point. In the study session with City Council at its October 1, 2024, meeting, staff proposed to commence development of the Enterprise District in an area bounded roughly by West Pacific Avenue, Central Avenue/Main Street, West Ticonderoga Avenue and Orion Street. Orion Street runs adjacent to Building 169 on the east side; thus, this building would not be in the short term proposed development footprint proposed in the study session but may be adjacent to the first phase of development.
DISCUSSION
The recommended lease would commence retroactively on January 1, 2025, for a term of 36 months. At any time during the term of the lease, either PPM as the tenant, or the City as the landlord has a one-time Right to Terminate with six months prior notice. The intent of this Right to Terminate clause is to offer flexibility for both parties, if PPM decides to relocate to a new permanent facility or the City is able to secure a development deal for the property that extends into this area.
Over the initial 12-month term of the lease the rent would begin at $0.45 per square foot and increase by 3% annually for the following two years. In addition, PPM will share with the City 50% of its profit above the base rent amount derived from its sublease with Navier or any future sublessee. The base value of the initial 12-months is $235,197 plus potentially $61,428 in profit-sharing from the sublease, if the sublicense agreement as currently written continues upon execution of this lease. Although fair market value warehouse lease rates elsewhere in Alameda Point are more in the range of $0.70 to $0.85 per square foot, staff believe this lower rate reflects an adequate fair market value for the shorter-term duration, and Right to Terminate. Staff also considered PPM’s nonprofit status and the benefit they bring to the community in setting the proposed rate.
The proposed lease premises includes non-exclusive parking along Viking Street (shown in the lease as Exhibit A-1). There is no exterior yard area for storage included within the lease premises.
Staff recommends entering into the lease agreement with PPM as described to provide them with a stable location, while offering the City flexibility in achieving its future development goals for the area through the six-month termination clause.
ALTERNATIVES
After opening the public hearing and considering all of the documents and testimony, City Council may consider several alternative courses of action, including:
• Approve the first reading of the ordinance authorizing the City Manager to execute a lease with PPM on the terms described in this staff report.
• Choose not to approve the first reading and direct the City Manager to terminate negotiations with PPM and notify PPM and the subtenant to vacate immediately.
• Elect not to approve the first reading and direct the City Manager to continue negotiations with PPM. In this scenario, the City Council should identify the specific lease terms or conditions that require further negotiation.
FINANCIAL IMPACT
The lease will contribute base lease revenues of $726,970 (net present value of $653,083) over the 36-month period, plus the potential for sublease profit sharing income. These funds will be deposited into the Alameda Point Fund (Fund 290) and will assist with the operating expenses for City-owned Alameda Point properties and may also be allocated in part to funding the infrastructure requirements in the Alameda Point Master Infrastructure Plan.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The proposed uses for the building are consistent with General Plan policies for Alameda Point and the Adaptive Reuse subdistrict and consistent with the Alameda Municipal Code zoning requirements for the property. The recommended lease is also consistent with the 2023 Keyser Marston Property Disposition Framework Analysis and in alignment with the Strategic Plan Goal to “Invest in Transportation, Infrastructure, Economic Opportunities and Historic Resources.” This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in CEQA Guidelines Section 15378 and therefore no further CEQA analysis is required.
Additionally, this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Sections 15301 (Existing Facilities) and 15061(b)(3) (Common Sense).
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Hold a public hearing and approve the first reading of the ordinance authorizing the City Manager to execute a lease with PPM, a 501(c)(3) non-profit organization, located at 1680 Viking Street, Suite 101 at Alameda Point for a term of thirty-six months with a one-time Right to Terminate with six-months’ advance notice.
Respectfully submitted,
Abigail Thorne-Lyman, Base Reuse and Economic Development Director
By,
Alesia Strauch, Base Reuse Manager
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Proposed Lease
2. Existing License