Title
Introduction of Ordinance Authorizing the City Manager to Execute a Fourth Lease Amendment with Auctions by the Bay, Inc., for Building 20, Located at 2701 Monarch Street at Alameda Point for an Eleven-Month Extension to the Rent Relief Program Deferred Rent Repayment Schedule. [Requires 4 affirmative votes]
In accordance with California Environmental Quality Act (CEQA), this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Section 15301 (Existing Facilities). (Base Reuse and Economic Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Auctions by the Bay, Inc. DBA Michaan’s Auctions (Michaan’s) currently holds a lease for Building 20, located at 2701 Monarch Street which is a 63,972 square foot hangar at Alameda Point (Premises). Michaan’s is a full-service auction house, specializing in the appraisal and sale of antiques and fine art. The City of Alameda (City) entered into the current lease agreement (Lease), on May 1, 2012, and the parties executed three subsequent amendments to the Lease, as detailed further below.
Staff recommends that City Council authorize the City Manager to execute a Fourth Amendment to the Lease with Michaan’s, providing additional time to repay a remaining balance of $77,739.73 in deferred rent from 2020 incurred by their participation in the City’s Rent Relief Program offered in response to the Covid-19 pandemic.
BACKGROUND
Established in 2002, Michaan’s hosts around 30 auction sales each year at their Alameda Point location, drawing consigners and buyers from the greater bay area and around the country. Michaan’s utilizes Building 20 as a venue for pre-sale viewing of antiques, hosting the in-person and online hybrid auctions. Adjacent to Building 20, along the “Northwest Territories Runway”, Michaan’s also hosts the monthly Alameda Antiques Faire, the largest antiques show in Northern California on the first Sunday of every month, under a separate license with the City. Michaan’s established themselves as a well-known auction house and is considered a keystone tenant activating Alameda Point’s Spirit’s Alley drawing patrons from all over the region for auctions and antique fairs amid the backdrop of the San Francisco skyline.
On July 26, 2012, the City first entered into the Lease (Exhibit 1) with Michaan’s to occupy Building 20, located at 2701 Monarch Street, a historic Naval airplane hangar with approximately 63,972 square feet of rentable space. The Lease was first amended (Exhibit 2) on January 8, 2013, extending the Lease term through December 31, 2022, and including one (1) ten-year Option to Renew.
In 2020, the COVID-19 pandemic, and resulting Shelter in Place order, caused major economic impacts to businesses and manufacturers worldwide. Prohibitions on large gatherings impacted businesses like Michaan’s that rely on revenues from in person auctions and sales. In response, on October 6, 2020, City Council approved a rent relief program (Program) for non-profits and Spirits Alley tenants at Alameda Point, including Michaan’s. The program allowed tenants to defer up to nine (9) months of rent and repay the deferred rent over a three-year repayment period. Tenants that paid off the deferred rent in accordance with their repayment schedule earned a rent credit of up to three months in total of Base Rent.
Michaan’s applied and was found eligible to participate in the Program, and on March 1, 2022, the City and Michaan’s entered into a Second Amendment (Exhibit 3) to the Lease. Michaan’s deferred nine (9) months of rent totaling $247,833 and agreed to repay the deferred rent over a three-year repayment period. The Second Amendment did not specify a fixed, monthly repayment schedule but instead allowed the Tenant to repay as able within this time frame with the rent credit as incentive to do so.
On December 12, 2022, the City and Michaan’s exercised their Option to Renew and entered into a Third Amendment extending the Lease term through 2032 (Exhibit 4).
DISCUSSION
The current proposed Fourth Amendment (Exhibit 5) to the Lease with Michaan’s will provide the business additional time to repay a remaining balance of deferred rent from their participation in the City’s rent relief Program by modifying the language in the Second Amendment to the Lease.
Michaan’s deferred a total of $247,833 under the Program and to date, have repaid $170,093.27. Michaan’s remains current on base rent payments and utility expenses and otherwise in good standing under the terms of its Lease. Staff believe the past performance demonstrates Michaan’s ability to repay the outstanding balance by January 2026, within the timeframe requested in the Fourth Amendment.
Further, Michaan’s proactively came to City Staff to request the additional time to repay and discussed alternative repayment options with City Staff, including a lump sum payment. Michaan’s expressed that a lump sum payment could cause undue hardship and are committed to the repayment of deferred rent in a timely manner, as agreed below:
DEFERRED RENT REPAYMENT SCHEDULE
|
Remaining Months Deferred |
Three (3) from October 2020 - December 2020 |
|
Total Remaining Base Rent Deferred |
$ 77,739.73 |
|
Repayment Period |
Payment Due |
|
Month 1 |
Base Rent + $6,884.25 when March 2025 Base Rent payment is due. |
|
Month 2 |
Base Rent + $6,884.25 when April 2025 Base Rent payment is due. |
|
Month 3 |
Base Rent + $6,884.25 when May 2025 Base Rent payment is due. |
|
Month 4 |
Base Rent + $6,884.25 when June 2025 Base Rent payment is due. |
|
Month 5 |
Base Rent + $6,884.25 when July 2025 Base Rent payment is due. |
|
Month 6 |
Base Rent + $6,884.25 when August 2025 Base Rent payment is due. |
|
Month 7 |
Base Rent + $6,884.25 when September 2025 Base Rent payment is due. |
|
Month 8 |
Base Rent + $6,884.25 when October 2025 Base Rent payment is due. |
|
Month 9 |
Base Rent + $6,884.25 when November 2025 Base Rent payment is due. |
|
Month 10 |
Base Rent + $6,884.25 when December 2025 Base Rent payment is due. |
|
Month 11 |
Base Rent + $8,897.23 when January 2026 Base Rent payment is due |
With the new proposed repayment schedule, Tenant will not complete repayment of Deferred Base Rent within the terms of the Second Amendment, and thus the tenant is not entitled to any of the Rent Credit. Consistent with rent repayment amendments with other recipients of the Rent Relief Program, Staff propose not to charge any late fees or interest as part of this extension of the repayment period.
ALTERNATIVES
• Approve first reading of draft Ordinance directing City Manager to execute the proposed Fourth Amendment to the Lease with Michaan’s, as recommended.
• Do not approve first reading of Ordinance and direct staff to negotiate alternate Fourth Amendment terms based on City Council direction.
• Do not approve the first reading of the Ordinance and direct staff to enforce the existing Lease terms, which will result in late fees, interest and potential default of the Lease, placing an additional financial burden on the business.
FINANCIAL IMPACT
The revenues generated from this Lease are deposited into the Alameda Point Fund (Fund 290). The proposed Fourth Amendment to the Lease extends the deferred rent repayment by eleven months for the remaining $77,739.73 of deferred rent.
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. This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
In accordance with CEQA, this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Section 15301 (Existing Facilities).
CLIMATE IMPACT
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 Lease Amendment with Auctions By the Bay, Inc., for Building 20, located at 2701 Monarch Street at Alameda Point, for an eleven-month extension to the rent relief program deferred rent repayment schedule.
Respectfully submitted,
Abby Thorne-Lyman, Base Reuse and Economic Development Director
By,
Annie Cox, Management Analyst
Financial Impact section reviewed,
Ross McCarthy, Acting Finance Director
Exhibits:
1. Lease
2. First Amendment to the Lease
3. Second Amendment to the Lease
4. Third Amendment to the Lease
5. Proposed Fourth Amendment to the Lease