Title
Introduction of Ordinance Approving A Purchase And Sale Agreement of Building 40, Located At 800 West Tower Avenue at Alameda Point, with Bladium, Inc., a California Corporation (Purchase Price: $7,900,000); and Recommendation to Accept a Reduction in the Exclusivity of Recreational Use Clause Included in the Original Lease. [In accordance with the California Environmental Quality Act (CEQA), this project is Categorically Exempt under the CEQA Guidelines Section 15301(c) - Existing Facilities.] [Requires Four Affirmative Votes]. (Base Reuse 819099)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Introduction of Ordinance Approving A Purchase And Sale Agreement of Building 40, Located At 800 West Tower Avenue at Alameda Point, with Bladium, Inc., a California Corporation (Purchase Price: $7,900,000); and Recommendation to Accept a Reduction in the Exclusivity of Recreational Use Clause Included in the Original Lease. [In accordance with the California Environmental Quality Act (CEQA), this project is Categorically Exempt under the CEQA Guidelines Section 15301(c) - Existing Facilities.] [Requires Four Affirmative Votes].
BACKGROUND
The Alameda Reuse and Redevelopment Authority entered into a long term lease with Bladium, Inc. on February 1, 2000. Bladium was awarded the lease after a competitive bid process for the Building 40 hangar. Because of the investment needed to bring the building into compliance and to develop a sports facility, the lease was 35 years in term (10-year initial, a 5-year option, and two 10-year options) with an expiration of June 30, 2035. The lease included a general use provision which states, “the sole purpose for which the leased premises may be used, by the Subtenant or authorized contractors, subcontractors or licensees of Subtenant, is for light industrial use or general warehouse, office and/or recreational uses including but not limited to arena soccer, in-line volleyball, food and beverage service, go cart racing, sports tournaments, gymnastics, video games, boxing, special events and parties, retail sales and any other related uses. Bladium negotiated for an exclusivity clause to be included in their lease in order to secure the market for private sports and activities at Alameda Point and make their business more successful. City-run activities were not considered direct competition and could be conducted on the premises. If Bladium did not exercise its purchase option, the exclusivity clause would remain in effect throughout the remaining term of the lease and extinguish in 2035.
DISCUSSION
The purchase option was included in the Bladium lease and could be exercised at any time after the City gained title to the property. Ordinarily Purchase and Sale Agreements (PSA) approved under the lease are not brought to the City Council for approval. Each lease with a purchase option already contains the terms of the sale and a template of the PSA. The terms of the Bladium lease include a purchase price based on appraisals by the landlord and tenant. Based on the appraisal process pre-determined in the original purchase option in the lease, the Bladium purchase price was determined to be $7,900,000 for approximately 6.7 acres. The $7,900,000 will be used to fund much-needed new infrastructure in the adaptive reuse area, including potentially new water infrastructure required by the recently executed Water Infrastructure Agreement with East Bay Municipal Utility District (EBMUD). Additionally, Bladium agrees to comply with all restrictions and programs connected with the property including deed restrictions associated with the biological opinion as well as the Transportation Demand Management Program. Bladium also will receive the EBMUD credits of System Capacity Charges and Wastewater Capacity fees as it currently resides in Phase I of the new water loop planned for the adaptive reuse area based on City Council approval on July 18, 2017.
The Bladium PSA is being brought to Council because Bladium has requested that a reduced version of its exclusivity clause be continued at Alameda Point after the sale of the property. If the reduced exclusivity clause is not approved, Bladium would continue its activities under its existing lease and maintain a more stringent clause in Bladium’s favor for the remainder of their lease term until 2035.
Over the years the existing Bladium exclusivity clause has prevented some recreational activities from being located at Alameda Point. There have been a variety of proposed tenants with recreational uses that we have had to turn away from Alameda Point or require them to get an exemption from the exclusivity clause from Bladium. Future developments could be hindered under the existing exclusivity clause. By approving a reduced exclusivity clause, the City Council will offer security to Bladium for the successful operations of its sports facility while at the same time creating more flexibility for the City to attract other recreational users.
Existing Exclusivity: The existing exclusivity clause says that the “Sublessor (i.e. the City) agrees that it will not lease or sell any property at the Station (i.e. Alameda Point) to any other private party, person, entity or company to utilize such property that would compete with Subtenant’s Lease Premises, products or services. Competition includes and is limited to in-line hockey, arena soccer, fitness center, rock climbing, gymnastics, martial arts or any other recreational use offered by Subtenant.” This provision does not apply to public parks or facilities owned and operated by the City of Alameda. Sublessor specifically reserves the right to sublease other properties within the Station for a privately owned ice skating facility.”
New Exclusivity: The newly proposed clause states that for the Alameda Point property: “The Burdened Property (i.e. other properties at Alameda Point) shall not be used for the operation of a facility or business that includes any of the following activities: in-line hockey, arena soccer, fitness center and/or rock climbing.” The Use Restrictions shall not apply to: (i) a fitness center in a hotel that is exclusively for the use of its guests; (ii) a fitness center in an apartment or condominium building or complex that is exclusively for the use of its residents and guests; (iii) a fitness center in premises owned or leased by a single company that is exclusively for the use of such company’s employees and guests, including residents of assisted living facilities and employees of physical therapy facilities; (iv) a fitness center operated by a tenant not to exceed 2,000 usable square feet with respect to such tenant and its affiliates in a commercial building or complex for a not to exceed cumulative amount of 6,000 square feet within said building or complex with respect to all tenants that operate a fitness center; (v) public parks, including the 44-acre sports and recreational complex to be constructed on the Public Benefit Conveyance parcel of Alameda Point, whether operated by the City or a private party; or (vi) facilities owned and operated by the City of Alameda or by public or nonprofit schools (excluding any predominately sports training academies, sports camps or similar sports-oriented facilities); or (vii) hospitals, assisted living facilities, physical therapy or other physical rehabilitation facilities, owned or operated by other institutional governmental entities.”
The new exclusivity agreement gives the City flexibility to offer buildings for private use activities outside of in-line hockey, arena soccer, fitness center and rock climbing. Additionally, public parks can be used without any restriction on use even if operated by a private entity. Many of the tenants the City has turned away, which included basketball leagues, volleyball tournaments, trampoline sports and batting cages can now be offered at Alameda Point. Otherwise, the more restrictive exclusive use provision would remain in effect on the premises until June 30, 2035.
FINANCIAL IMPACT
Money from the sale of the building will be deposited into the Base Reuse Fund (Fund 858) and held for infrastructure improvements in the adaptive reuse area, including potentially new water infrastructure required by the recently executed Water Infrastructure Agreement with East Bay Municipal Utility District (EBMUD). Funds from leases and sales at Alameda Point are limited to uses permitted under the Economic Development Conveyance Memorandum of Agreement with the United States Navy (Navy). Any money from potential property tax and sales tax generated will be deposited to the General Fund.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
There is no effect on the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
In accordance with the California Environmental Quality Act (CEQA), this project is Categorically Exempt under the CEQA Guidelines Section 15301(c) - Existing Facilities.
RECOMMENDATION
Approve an ordinance for the Purchase and Sale Agreement with Bladium, Inc. for $7,900,000 for Building 40 located at 800 West Tower Avenue at Alameda Point, and a reduction in the exclusivity of recreational use clause included in the original lease.
Respectfully submitted,
Jennifer Ott, Base Reuse Director
By,
Nanette Mocanu, Assistant Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Draft Purchase and Sale Agreement
2. Premises
3. Parking Area
4. Taxiway H License Area
5. Lease Agreement