Title
Introduction of Ordinance Approving a Lease and Authorizing the City Manager to Negotiate and Execute Amendments and Other Corresponding Documents Necessary to Implement the Terms of a Lease with Proximo Distillers, LLC for Ten Years with an Additional Ten Year Option in a Portion of Building 22 Located at 2505 Monarch Street at Alameda Point. (Base Reuse 819099)
Body
To: Honorable Mayor and Members of the City Council
From: John A. Russo, City Manager
Re: Introduce an Ordinance Approving a Lease and Authorizing the City Manager to Negotiate and Execute Amendments and Other Corresponding Documents Necessary to Implement the Terms of a Lease with Proximo Distillers, LLC for Ten Years with an Additional Ten Year Option in a Portion of Building 22 Located at 2505 Monarch Street at Alameda Point (Base Reuse 819099)
BACKGROUND
Proximo is a privately owned, premium spirits importer based in Jersey City, New Jersey. With just over six years of business, the company's portfolio has already grown to hold twelve premium brands including: 1800 Tequila, Azul Tequila, El Zarco Tequila, Gran Centenario Tequila, Jose Cuervo, Maestro Dobel Tequila, Hangar One Vodka, Three Olives Vodka, The Kraken Black Spiced Rum, Matusalem Rum, Agavero Liqueur, Boodles Gin, and Stranahan's Whiskey.
Proximo, translated as "next" in Spanish, is the next major producer of innovative spirits marketing and new product development. The company continues to develop strong relationships with distributor partners in the US, and internationally, while accelerating the growth of their high-profile portfolio of award-winning, premium brands.
Proximo Spirits purchased the Hangar One vodka brand approximately four years ago. Since acquiring the brand production has been done by the previous owner; by agreement, Proximo will now begin producing the brand. Proximo would like to keep the brand in Alameda and create a brand/tourism center.
DISCUSSION
Since it started six years ago, Proximo yields twenty times its initial volumes of production and continues to grow. In addition to its proposed distillery in Alameda, Proximo also operates a whiskey distillery in Colorado as well as the largest distilled spirits bottling plant in North America, which is located in Indiana.
Proximo's goal with the five-year build out of Building 22 is to triple the production capacity of the Hangar One vodka brand and create a world class brand and consumer experience in Alameda. The company anticipates investing several million dollars in the build out of the hangar.
In addition to retail and tasting room staff, Proximo will need to assemble a full production staff for distilling and bottling. During the first 6 months of the lease term, Proximo will undertake the construction of major tenant improvements to Building 22. Upon completion of those improvements Proximo will receive an "Improvement Credit" in an amount not to exceed $10.00 per square foot ($325,000). The credit will be received in the form of a "Monthly Base Rent Offset" of $2,850.87 per month until the amount of base rent so offset equals the total Improvement Credit.
The proposed rent structure for the lease is:
Base Rent: |
Months |
Monthly Base Rent per square foot |
Monthly Base Rent |
Monthly Base Rent: Net of Improvement Credit |
|
1 - 6 |
$0.34 |
$11,050.00* |
|
|
7 - 12 |
$0.34 |
$11,050.00 |
$8,199.13 |
|
13 - 24 |
$0.35 |
$11,375.00 |
$8,524.13 |
|
25 - 36 |
$0.36 |
$11,700.00 |
$8,849.13 |
|
37 - 48 |
$0.37 |
$12,025.00 |
$9,174.13 |
|
49 - 60 |
$0.38 |
$12,350.00 |
$9,499.13 |
|
61 - 72 |
$0.39 |
$12,675.00 |
$9,824.13 |
|
73 - 84 |
$0.40 |
$13,000.00 |
$10,149.13 |
|
85 - 96 |
$0.41 |
$13,325.00 |
$10,479.13 |
|
97 - 108 |
$0.42 |
$13,650.00 |
$10,799.13 |
|
109 - 120 |
$0.43 |
$13,975.00 |
$11,124.13 |
|
*subject to abatement for qualified shell improvements |
Taxes and Utilities: |
Tenant shall pay directly to service providers all costs of utilities to the Premises, as defined in the Lease. Tenant shall pay Tenant's Share of Landlord's Expenses and all taxes (including possessory interest taxes), Tenant shall pay 100% of all taxes levied on its personal property. |
Security Deposit: |
Eleven Thousand Fifty Dollars ($11,050.00) |
FINANCIAL IMPACT
The funds for this lease will be deposited in the Base Reuse Fund 858 and are subject to the restrictions included in the Economic Development Conveyance between the United States Government and the City of Alameda.
ENVIRONMENTAL REVIEW
This project involves leasing of an existing building and is exempt from the California Environmental Quality Act (CEQA) pursuant to Guidelines sections 15301 (Existing Facilities) and 15331(Historical Resource Restoration/Rehabilitation).
RECOMMENDATION
Approve an ordinance approving a lease and authorizing the City Manager to negotiate and execute amendments and other corresponding documents necessary to implement the terms of a lease with Proxmio Distillers, LLC, for ten years with an additional ten year option in a portion of Building 22 located at 2505 Monarch Street at Alameda Point.
Respectfully submitted,
Jennifer Ott, Chief Operating Officer - Alameda Point
By,
Nanette Mocanu, Division Manager
Financial Impact section reviewed,
Fred Marsh, Finance Director
Exhibit:
1. Map of Premises