Title
Introduction of Ordinance Authorizing the City Manager to Execute a Lease Amendment for Building 360 at 1900 Skyhawk Street for a Nine-Month Rent and Fee Deferral and Subsequent Twelve-Month Deferred Repayment Schedule, with Astra Space Operations LLC. [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
Astra Space, Inc., a Delaware Corporation (Astra) currently holds a five-year lease for Building 360, located at 1900 Skyhawk Street, a month-to-month lease of Building 397, located at 1690 Orion Street, as well as three expired licenses for property located adjacent to Building 397, at 1750 Orion Street (Buildings 616 and 609), and at Pier 3. The licenses have been held over and are paid by Astra on a month-to-month basis. In total, Astra has been paying the City of Alameda (City) nearly $168,000 per month in rent and fees over the last year.
Astra was a publicly traded company until the owners took the company private on July 18, 2024. Astra is still adjusting to the privatization process and has requested a rent and fee deferral to allow time for the company to begin generating positive revenue and to consolidate its Sunnyvale engine testing operations at its Alameda location.
Staff recommends a lease amendment for Building 360, and an administrative level consolidation of Astra’s other leases and licenses into a series of new licenses with terms of less than one year. The lease amendment would permit Astra to defer 50 percent (50%) of its total lease and license fee revenue for a period of nine months, from October 1, 2024, through June 30, 2025, and to repay the deferred amount in fixed payments over the subsequent 12 months from July 1, 2025, through June 30, 2026.
The renewed and consolidated licenses would be issued by staff for the current fee amounts, with the lease amendment for Building 360 reflecting the total rent and fee deferment and repayment plan.
BACKGROUND
Astra is an aerospace research and design firm that develops aerospace technology including rockets and satellites. Astra designs, tests, manufactures, and operates next-generation launch services from its Alameda and Sunnyvale locations. Astra has been an Alameda Point tenant since November 2016, and initially occupied Building 397. From 2017 to 2022, Astra entered into various short-term agreements with the City to improve Building 360, which is on land owned by the Navy, and leased by the City under a Lease in Furtherance of Conveyance (LIFOC) agreement. The Navy continues to own Building 360 and surrounding areas due to a volatile organic compound (VOC) plume that is located on this and other properties. While the Navy is working to mitigate the VOC plume, the regulatory agencies agreed that Building 360 could be occupied provided the tenant installed a vapor intrusion system including a barrier and ventilation. The City executed a five-year lease with Astra with the requirement that Astra construct and manage this system and all related air monitoring. In exchange, the City provided Astra with a $2.5 million rent credit applied over the five-year period.
In 2017 and 2018, the City also issued Astra licenses for outdoor storage for 26,606 square feet at Building 616 and 609, located at 1750 Orion Street, and 17,355 square feet of land around Building 397. The City also in 2018, issued a license to Astra for use of a southeast portion of Pier 3 where Astra has stored a small boat known as the Maritol.
On September 1, 2020, the City executed an amendment to the lease for Building 397 to provide a three-month rent deferral and to convert the lease to a month-to-month term. The leases and licenses and their current status are shown below in Table 1.
|
Location / Type |
Term |
Current Rate (Monthly) |
|
Building 360 |
7/1/2022 - 12/31/2027 |
$127,793.62 (after $42,372.88 monthly rent credit) |
|
Building 397 |
2/1/2017 - Month-to-Month effective 9/1/2020 |
$12,873.50 |
|
Land 397 |
2/13/2017 - 2/12/2019 expired - Month to Month |
$187.50 |
|
Buildings 616 and 609 |
7/18/2018 - 8/31/2019 expired - Month-to-Month |
$21,780.00 |
|
Pier 3 (Maritol) |
7/3/2018 - 6/30/2021 expired - Month-to-Month |
$5,000.00 |
|
|
Current Monthly Lease & Fees: |
$167,634.62 |
DISCUSSION
On July 18, 2023, the company’s co-founders, Chris Kemp and Adam London, completed the process to privatize the company after three years as a publicly traded company. Astra believes privatization will ultimately secure the financial health of the company and ensure its longevity. However, at this point, following an outlay of significant capital to complete the process, Astra has requested that the City provide a deferral of rent and fees for a period of nine months, retroactively commencing on October 1, 2024, and ending on June 30, 2025. Astra would then repay the rent deferral, including late fees and interest accrued during the deferral period, in fixed amounts over the next year. The City would forego additional interest over the repayment period if the payments are made timely.
The proposed rent deferment and repayment schedule is shown below.
|
DEFERRED RENT REPAYMENT SCHEDULE |
|
Months Deferred |
Nine (9) (October 2024-June 2025) |
|
Total Base Rent, Interest, Late Fees Deferred |
$828,578.18 |
|
Monthly Repayment Effective July 1, 2025 |
Base Rent + $69,048.18 |
This nine-month period, according to Astra, will give the company time to generate revenue, and terminate its Sunnyvale lease, consolidating its operations within its current Alameda footprint.
Staff have negotiated several other conditions associated with the agreement to defer rent:
• The deferral and repayment plan for all rent and fees will be recorded as a lease amendment (Exhibit 2) to the Building 360 lease, as this is Astra’s largest and most valuable leaseholding in the City.
• The month-to-month lease for Building 397 will be terminated and issued as a license agreement for a period of less than one year which will be executed administratively.
• The licenses for the land at Buildings 616, 609 and 397 will be renewed for a period of less than one year which will be executed administratively.
• The license for the southeast portion of Pier 3 will be terminated no later than April 1, and the boat will be removed at Astra’s expense.
• Astra has agreed to a provision in its lease for Building 360 that it will vacate the premises within 60 days if they are unable to pay their rent on time.
• The City will retain the three clean rooms in its facility if they are unable to pay on time, as collateral for the value of the rent deferral. Astra estimates these clean rooms have a value of $1.2 million. Staff believe existing clean rooms would make the building more marketable, if Astra is unable to continue its lease.
Staff believe these amendments are beneficial to the City for several reasons:
• Astra has made a considerable investment in the City, including expending millions of dollars to make Building 360 habitable despite challenges associated with the potential for vapor intrusion. It would be challenging for the City to find another tenant willing to assume a lease for 170,000 square feet that would also be willing to fulfill the air quality testing and ventilation requirements that Astra has assumed for this building.
• Astra’s activity in this area of Alameda Point provides important activation that helps reduce crime and other quality of life issues that emerge with vacant properties. Retaining the City’s tenants is important to reduce the operating costs for additional security, police presence, and addressing vandalism and trespassing.
• Astra’s aerospace research and development activities are an important economic contributor to Alameda and provide the types of jobs and activity Alameda has long sought to bring to the Enterprise District in Alameda Point.
Astra has provided a plan for generating additional revenue to its Alameda operations, and to consolidate its Sunnyvale operations in Alameda, reflecting Astra’s commitment to the City. In total Astra will attract 130 employees, many based in Alameda.
ALTERNATIVES
• Approve first reading of Ordinance directing the City Manager to execute the proposed First Amendment to the Lease for Building 360 with Astra, as recommended.
• Do not approve first reading of Ordinance and direct staff to negotiate alternate 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, additional financial burden on the Lessee, and possible legal action.
FINANCIAL IMPACT
The revenues generated from this Lease are deposited into the Alameda Point Fund (Fund 290). The proposed First Amendment to the Lease temporarily reduces revenue by $775,619.19 plus late fees and interest, as a result of nine months of Deferred Base Rent. At the conclusion of the twelve-month repayment period, all Deferred Base Rent will be repaid.
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. This action helps implement the Strategic Plan goal to expand Citywide business economic development activities, including an Alameda Point attraction and retention program. It is consistent with the Alameda Municipal Code zoning requirements for the property. 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 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 lease amendment for Building 360 at 1900 Skyhawk Street for a nine-month rent and fee deferral and subsequent twelve-month deferred repayment schedule with Astra Space, Inc., a Delaware Corporation.
Respectfully submitted,
Abigail Thorne-Lyman,
Base Reuse and Economic Development Director
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Lease for Building 360
2. Proposed First Amendment to the Lease for Building 360