Title
Recommendation to Authorize the City Manager to Approve the Assignment of Lease for Building 9 from 707 West Tower Avenue, LLC to 651/707 West Tower Avenue, LLC, a Delaware Limited Liability Company. (Base Reuse 819099)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Authorize the City Manager to Approve the Assignment of Lease for Building 9 from 707 West Tower Avenue, LLC to 651/707 West Tower Avenue, LLC, a Delaware limited liability company
BACKGROUND
In November, 2015, the City of Alameda entered into lease agreements with limited liability companies formed by Joe Ernst for Buildings 9 and 91. The tenant under the Building 9 Lease is 707 West Tower Avenue, LLC, a Delaware Limited Liability Company “707 LLC”). The tenant under the Building 91 Lease is 651 West Tower Avenue, LLC, a Delaware Limited Liability Company (“651 LLC”). It is now the intent of Joe Ernst to reorganize 651 West Tower Associates, LLC, and rename it “651/707 West Tower Associates, LLC.” (“651/707 LLC”) Mr. Ernst has explained that for purposes of obtaining financing for purchasing Buildings 9 and 91, his lender requests that the Building 9 lease be assigned to this reorganized and renamed Limited Liability Company. To that end, he has prepared an Assignment and Assumption of Lease and Consent (“Assignment and Assumption Agreement”) and requested that the City sign the same, approving the assignment of the Building 9 Lease. A copy of the Assignment and Assumption Agreement is attached hereto as Exhibit 1.
DISCUSSION
Under both the Building 9 Lease and the Building 91 Lease, the Tenant may not voluntarily assign either lease “without first obtaining the written consent of Landlord, which consent shall not be withheld unreasonably” provided that the Tenant is not in default and that there has been no previous assignment or transfer of the Lease. The one exception is an assignment to a “Tenant Affiliated” which is defined to include a successor corporation related to Tenant by reorganization. Such an assignment does not require the prior consent of Landlord, but instead requires only delivery to Landlord of a copy of the fully executed assignment or sublease.
Since 651/707LLC is a successor to 651LLC, as a result of a reorganization, an assignment of the Building 91 Lease to this reorganized entity does not require Landlord’s prior consent.
An assignment of the Building 9 Lease from 707 LLC, to 651/707 LLC, does require Landlord consent because the newly named entity is not a successor to 707 LLC.
Under the terms of the proposed Assignment and Assumption Agreement (Exhibit 1), all of the right, title and interest of 707 LLC in the Building 9 Lease will be assigned to 651/707 LLC. The consent requested of the City will not be deemed a consent to any further assignment and is conditioned upon 707 LLC not being released from its obligations under the Building 9 Lease. Since 707 LLC is not in Default under the Building 9 Lease, and the Tenant has not previously assigned or transferred the Lease, the attached form of Assignment and Assumption Agreement satisfies the conditions an Assignment of the Building 9 Lease.
FINANCIAL IMPACT
Although the Tenant for both Buildings 9 and 91 would be the same entity, 651/707 LLC, the obligations under the two leases, both financial and otherwise, will remain separate and distinct. The assignment will not generate any additional lease revenue. The monies from both of the Leases will continue to be deposited into the Base Reuse Department Lease Revenue Fund (Fund 858) and will remain subject to the restrictions including in the Economic Development Conveyance between the United States Government and the City of Alameda.
ENVIRONMENTAL REVIEW
This action involves an assignment of a lease of an existing building and is exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines, Section 15301 (Existing Facilities).
RECOMMENDATION
Authorize the City Manager to approve the Assignment of Lease for Building 9 from 707 West Tower Avenue, LLC to 651/707 West Tower Avenue, LLC, a Delaware limited liability company.
Respectfully submitted,
Jennifer Ott, Chief Operating Officer, Alameda Point
By,
Nanette Mocanu, Division Manager
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Assignment and Assumption of Lease and Consent
2. Lease