Title
Introduction of Ordinance Approving a Lease and Authorizing the City Manager to Execute Documents Necessary to Implement the Terms of a Lease with Faction Brewing Company, LLC a California Limited Liability Company, for a Ten-Year Lease with Two Ten-Year Extension Options for Building 22, Bay 200 Located at 2501 Monarch Street at Alameda Point. [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: Elizabeth D. Warmerdam, Acting City Manager
Re: Introduction of Ordinance Approving a Lease and Authorizing the City Manager to Execute Documents Necessary to Implement the Terms of a Lease with Faction Brewing Company, LLC a California Limited Liability Company, for a Ten-Year Lease with Two Ten-Year Extension Options for Building 22, Bay 200 Located at 2501 Monarch Street at Alameda Point
BACKGROUND
Faction Brewing Company LLC. (Faction) is a local brewery led by a team with extensive brewing experience throughout northern California. Faction has occupied Bay 200 of Building 22 since 2012. A 20-barrel brew house, Faction produced 6,500 barrels in 2016 and 4,500 in 2015; they offer a tasting room and both an indoor and outdoor seating area for patrons. Faction produces a variety of beers some of which include Pale Ale, IPA, Red, Pilsner, and Stout.
In August 2012, Faction entered into a lease agreement to occupy Bay 200 of Building 22 which is located along Spirits Alley at Alameda Point. Building 22 is shown on Exhibit 1 and is not in the way of redevelopment efforts at Alameda Point. This proposed lease intends to retain an existing tenant and will replace Faction’s existing lease once approved.
DISCUSSION
Alameda Point’s first local brewery, Faction currently occupies a portion of Building 22 located along Spirit’s Alley. In 2012 Faction was a new brewery, but they are now a well-known, local Bay Area brewery serving approximately 1,000 customers per week. Patrons from all over the region come to Faction to enjoy their beers and to partake in the views of the San Francisco skyline. Faction has also participated as a host during the San Francisco Beer Week which attracted patrons from all over the region to come to Alameda Point.
Located at 2501 Monarch Street, Building 22 is a large high bay hangar with office space located on the second floor. Faction will continue to occupy a portion of the Building, Bay 200, which consists of approximately 32,500 sf. Exhibits 2, 3, and 4 depict the premises, land, and parking, respectively, as shown in the exhibits from the proposed Lease.
The proposed lease is for ten years with two ten-year options to renew and a right of first offer for lease of Bay 100, also located inside of Building 22, if the Bay were to become vacant during the Term of this lease. The rent under this lease will begin at $20,150 in year one, $20,754.50 in year two, $21,377.14 in year three, $22,018.45 in year four, $22,679. In year five, $23,359.37 in year six, $24,060.15 in year seven, $24,781.96 in year eight, $25,525.42 in year nine, and $26,291.18 in year ten. The new rent rates under this proposed lease brings the amount to market rate and represents more than a 60% increase compared to the rates being paid under the current lease.
Tenants and owners who front or will front new East Bay Utility District (EBMUD) water infrastructure must pay all applicable fees, including EBMUD’s System Capacity Charges (SCC) and the Wastewater Capacity Fees (WCF), which are typically due when a business obtains water service before they open their business. The City Council authorized the use of its EBMUD fee credits for existing tenants, and as a result, the lease allocates an SCC credit of not to exceed $125,460 and a WCF credit not to exceed $27,727.
Faction will be required to provide a security deposit in the amount of $12,025. The new lease agreement contains the standard insurance, indemnity, assignment and termination clauses the City of Alameda requires in all its leases and is summarized below. The following summarizes the major business terms of the lease amendment agreement:
|
Terms |
2501 Monarch Street, Suite 200 (Building 22) |
|
Square Footage |
32,500 |
|
Uses |
Brewery, tasting room and production, sales and office uses related thereto |
|
Length of Term |
10 years |
|
Extension Options |
Two ten-year options to extend the Term |
|
Right of First Offer |
Right of First Offer to lease Bay 100 if the premises should become vacant. |
|
Security Deposit |
$12,025 |
|
Monthly Base Rent |
$20,150.00 - $26,291.18 |
|
1-12 |
$20,150.00* |
|
13-24 |
$20,754.50 |
|
25-36 |
$21,377.14 |
|
37-48 |
$22,018.45 |
|
49-60 |
$22,679.00 |
|
61-72 |
$23,359.37 |
|
73-84 |
$24,060.15 |
|
85-96 |
$24,781.96 |
|
97-108 |
$25,525.42 |
|
109-120 |
$26,291.18 |
|
*subject to abatement pursuant to section 4.1 (b) of the lease which is 50% of the Base Rent for the first two (2) full calendar months of the Term. |
FINANCIAL IMPACT
The monies from the leases will be deposited into the Base Reuse Lease Revenue Fund (Fund 858) and are limited to uses permitted under the Economic Development Conveyance Memorandum of Agreement with the United States Navy (Navy).
There is no impact to the General Fund or Base Reuse Fund as a result of any future allocation of SCC and WCF credits to Faction. EBMUD processes the SCC and WCF credits based on the City’s request.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action does not affect 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 a Lease and authorize the City Manager to execute documents necessary to implement the terms of a lease with Faction Brewing Company, LLC. a California Limited Liability Company, for a ten-year lease with two ten-year extension options for Building 22, Bay 200 located at 2501 Monarch Street at Alameda Point.
Respectfully submitted,
Jennifer Ott, Base Reuse and Transportation Planning Director
By,
Nanette Mocanu, Assistant Community Development Director
Financial Impact section reviewed,
Edwin Gato, Acting Finance Director
Exhibits:
1. Aerial Map of Building 22
2. Premises
3. Land
4. Parking
5. 2012 Lease
6. New Lease