Title
Final Passage of Ordinance Authorizing the City Manager, or Designee, to Execute a Lease with Astra Space, Inc., a Delaware Corporation, Substantially in the Form of the Lease Attached to the Staff Report, for Fifty-Nine Months for Building 360, Located at 1900 Skyhawk Street, at Alameda Point. This action is exempt from further review under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15301 (Existing Facilities). (Community Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
Astra Space, Inc. (Astra) is an aerospace research and design firm with more than a decade of experience developing aerospace technology in partnership with NASA. Astra designs, tests, manufactures, and operates next-generation launch services that will enable a new generation of global communications, earth observation, and precision weather monitoring, navigation and surveillance capabilities.
Astra has been an Alameda Point tenant since November 2016, and initially occupied Building 397. Astra now leases several buildings near Building 397 in the Enterprise District, including Buildings 616 and 360, and the east end of Pier 3. Since its successful space launch in December 2020, Astra has experienced a rapid demand for its product and wishes to secure a longer lease term for Building 360 to support its operations. The tenant has and is willing to make investments in Building 360 despite the relatively short five year term limit required to comply with the Surplus Land Act (SLA).
The tenant’s vision of establishing a corporate headquarters in the Enterprise District is consistent with the long term focus of job generation and commercial development in that area of Alameda Point. The expansion of Astra’s innovative operations could be a catalyst for other companies of a similar nature or in related industries.
BACKGROUND
The City Council approved the lease (Exhibit 1) unanimously at its first reading on September 20, 2022. The City Council was concerned the proposed lease gave Astra a six-month window following lease execution to negotiate a Project Stabilization Agreement (PSA) with the Building and Trades Council (BTC). If no agreement on a PSA was reached, Astra could return to the City Council to request a waiver of the PSA requirement. Instead, the City Council directed staff to defer the second and final reading of the lease until a PSA was agreed upon and signed by the parties.
In addition to the executed PSA, the lease modifies the Consent to Sublease process. Council expressed concern about determining who the subtenants were in some of the buildings. Therefore this lease contains a modified process in which consent must be granted by the City Council. All proposed sub-tenants must be presented to the Council with a description of their proposed use and space requirements for approval.
DISCUSSION
Since the September 20, 2022 meeting, Astra and representatives from the Building Trades Council have met to negotiate a PSA. On November 15, 2022 staff was notified that the parties had reached an agreement. The parties desire to keep the contents of the agreement confidential, but have agreed to provide staff with the cover page and signature pages of the agreement along with an attestation that the agreement exists and is fully executed. The relevant pages of the PSA and the attestation are attached as Exhibit 2.
The following summarizes the major business terms of the proposed lease between Astra and the City of Alameda (City) for Building 360:
|
Terms |
Building 360 |
|
Square Footage |
±179,070 square feet |
|
Uses |
Rocket engine testing, research and development, related office use |
|
Length of Term |
59 months |
|
Renewals |
None |
|
Security Deposit |
$151,158.65 |
|
Monthly Base Rent |
.92 cents per sf |
|
1-12 |
$ 164,744.40 |
|
13-24 |
$170,116.50 |
|
25-36 |
$ 177,279.30 |
|
37-48 |
$ 182,651.40 |
|
49-59 |
$ 188,023.50 |
|
Rent Credit |
$2.5 million rent credit applied over the life of the lease in consideration of millions of dollars spent bringing the building to code and the environmental monitoring/work done with the regulators to make the able to be occupied and safe. |
|
Within Six (6) Months of Lease Effective Date |
Tenant must: Use good faith efforts to negotiate a PLA; and provide a safety and risk mitigation plan acceptable to the City’s environmental consultant |
ALTERNATIVES
• Approve the lease with Astra for Building 360, as described above.
• Direct staff to renegotiate the terms of the lease with Astra for Building 360 based on City Council direction.
• Direct staff to seek other prospective tenants by marketing Building 360.
FINANCIAL IMPACT
The revenue generated by from the lease with Astra will be deposited into the Alameda Point/Base Reuse Fund lease revenue account and are limited to uses permitted under the Economic Development Conveyance Memorandum of Agreement with the United States Navy. The current monthly rent, effective July 1, 2022, for Building 360 is $134,302.50. The proposed lease would increase the monthly rent by $30,441.90, or by 23%, to $164,744.40, resulting in an annual increase of lease revenue of approximately $365,000.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This action is exempt from further review under the California Environmental Quality Act (“CEQA”) 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
Final Passage of Ordinance authorizing the City Manager, or designee, to execute a lease with Astra Space, Inc., a Delaware Corporation, substantially in the form of the lease attached to the staff report, for fifty-nine months for building 360, located at 1900 Skyhawk Street, at Alameda Point (Community Development 29061822).
Respectfully submitted,
Lisa Maxwell, Community Development Director
By,
Lorie Curtis, Management Analyst
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Lease
2. Relevant Pages from PSA and the attestation
cc: Erin Smith, City Manager