Title
Introduction of Ordinance Authorizing the City Manager to Execute a Second Lease Amendment for a Portion of Building 41 with DOER Marine Operations, Located at 650 West Tower Avenue, at Alameda Point, Alameda, California, for an Additional Term of Six (6) Months with Two Six-Month Extension Options. [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 Section 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: Gerry Beaudin, City Manager
EXECUTIVE SUMMARY
Staff recommends that the City Council authorize the City Manager to execute a lease amendment with DOER Marine Operations, a California corporation (DOER), for a portion of 6560 West Tower Avenue (Building 41) at Alameda Point for an additional term of six (6) months with two six-month extension options. DOER is currently occupying a portion of the building under an existing, short-term Lease Agreement with the City of Alameda (City) that expires on September 2, 2026. DOER is a marine consulting firm and long-standing Alameda business that utilizes the leased premises for office, retail, and as a workshop. The recommended lease amendment will allow for continued partial occupancy of the building, while staff finalizes the process and timeline for the long-term disposition of the Building 41 property in accordance with City Council direction.
BACKGROUND
The City controls Building 41, a former US Navy Hangar, under a Lease in Furtherance of Conveyance (LIFOC) from the Navy. The LIFOC allows the City to lease the building, while the Navy completes required remediation efforts and obtains regulatory approvals to enable full fee title conveyance of the property to the City.
Built in 1945, Building 41 has approximately 118,041 square feet, with 50’ height ceilings, hangar doors, and ceiling cranes. DOER occupies and leases approximately 30,000 square feet of interior space of the building, as well as some vehicle parking and storage in a portion of the fenced yard. DOER began occupying a portion of Building 41 in 2017 as a subtenant under the master tenant Wrightspeed. When the master tenant vacated, the City negotiated an administrative license with DOER to remain in occupancy. In September of 2024, City Council approved a new two-year Lease with DOER (inclusive of an extension option) that expires on September 2, 2026 (Exhibit 2).
DOER was founded in 1992 as a marine consulting firm that also specializes in design, engineering, and fabrication of equipment for undersea exploration. From 2002 to 2017, DOER was located in Alameda Marina; it then relocated to Building 41. Building 41 houses office space for DOER’s consulting, design, research and development functions, fabrication workshop for prototyping, including assembly of undersea marine vehicles and components, educational activities, and a retail dive shop that services and repairs equipment.
Given Building 41’s central location within the Waterfront Town Center Precise Plan at the entrance to the Adaptive Reuse area, it is a highly desirable building that is adjacent to new infrastructure installed as part of the City’s Master Infrastructure Plan.
During the January 20, 2026, regular City Council meeting, staff presented a Workshop for City Council to “Receive an Update and Provide Feedback on the Disposition Strategy for Leasing and Sale of Properties within the Reuse Area at Alameda Point.” Staff discussed a recommended sale of certain buildings in Reuse Area, including the disposition of Building 41 via a long-term lease with a purchase option, given that the Navy’s real property conveyance process to the City is delayed as the Navy works with various regulatory agencies to address the handling of per- and polyfluoroalkyl substances (PFAS) identified as present on and near the premises of Building 41.
The goal stated in the Workshop was to generate sufficient revenue from various building sales to implement a second phase of backbone infrastructure in the Reuse Area in the very near future, which is currently estimated at $43 million. New water infrastructure was installed west of Saratoga a couple of years ago; however, other infrastructure, such as sewer, storm, electrical, and roadway improvements, is still needed. Staff is advancing the design of these additional improvements with the goal of achieving sufficient building sales in 2027 to construct this infrastructure.
Staff is actively planning for the disposition of Building 41, and plans to market the property in the coming months. Staff anticipates that the process will take at least a year to complete, and during this time, staff recommends that Building 41 remain at least partially occupied by a tenant to both provide security of occupancy and generate funds to help offset the property holding costs to the Base Reuse Fund.
DISCUSSION
If the Ordinance to approve the lease amendment is introduced on September 1, and then adopted on September 15, the recommended lease amendment would be effective October 15, 2026, adding an additional term of six (6) months (Extension Term) to the Lease with two additional six-month Renewal Options, which DOER could exercise with City approval. Staff recommends that City Council provide the City Manager with authority to approve and execute the two Renewal Options, at the City Manager’s discretion. The purpose of the two proposed short-term renewals is to provide the City with flexibility in effectuating the disposition of the building in accordance with City Council direction, while continuing to provide opportunity for the business to continue its occupancy during this period of possible transition.
The proposed Base Rent for the Extension Term in the Second Lease Amendment remains consistent with the current rate charged at $0.70 per square foot. The Base Rent would increase by five percent (5%) for each of the Renewal Terms if the options are exercised by DOER and approved by the City Manager.
The amended lease revenue for the 6-month Extension Term would be $21,000 per month or a total of $126,000 in Base Rent. The City’s commercial brokers have indicated that fair market rent for long-term hangar leases would be closer to $1.50. Staff believes this lower rate reflects an adequate fair market value given the shorter duration of the Extension Term. Further, each Renewal Option, if exercised by DOER, requires mutual agreement; thus, DOER's security of occupancy is somewhat limited under this Second Amendment.
|
|
Months |
PSF Base Rent |
Total Base Rent Over Term |
|
Extension Term |
1-6 |
$0.70 |
$126,000 |
|
Renewal Term 1 |
7-12 |
$0.735 |
$132,300 |
|
Renewal Term 2 |
13-18 |
$0.771 |
$138,780 |
The current Lease agreement also includes an option for DOER to expand its occupied space by 10,000 square feet, bringing the total to 40,000 square feet. If DOER elects to do so, the Base Rent would be adjusted upwards.
In conclusion, staff believes that the proposed Second Amendment to Lease with DOER is an acceptable interim use of Building 41, while the City moves forward with the marketing and disposition of the property.
ALTERNATIVES
• Approve the first reading of the Ordinance authorizing the City Manager to execute a lease amendment with DOER on the terms described in this staff report.
• Choose not to approve the first reading and direct the City Manager to terminate negotiations with DOER and notify DOER to vacate.
• Elect not to approve the first reading and direct the City Manager to continue negotiations with DOER. In this scenario, the City Council should identify the specific lease terms or conditions that require further negotiation.
FINANCIAL IMPACT
The amended lease will contribute modest annual revenues (approximately $397,800 over the 18-month period) but will also ensure Building 41 is partially occupied, which helps to provide security and minimize opportunities for trespassing or vandalism of the property. 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, as well as 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.
On a separate and independent basis, this action is categorically exempt from further environmental review pursuant to CEQA Guidelines Section 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
Introduce an Ordinance authorizing the City Manager to execute a Second Lease Amendment for a portion of Building 41 with DOER Marine Operations, located at 650 West Tower Avenue, at Alameda Point, Alameda California, for an additional term of six (6) months with two six-month extension options.
Respectfully submitted,
Abigail Thorne-Lyman, Base Reuse and Economic Development Director
By,
Alesia Strauch, Base Reuse Manager
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibits:
1. Second Amendment to Lease
2. Lease Agreement and First Amendment