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Tour of the Enterprise District (Formerly Site B) at Alameda Point [Departs WETA Facility at 6:30 p.m. and returns at 7:15 p.m.]; and
Recommendation to Authorize Staff to Market a 23.9-Acre Portion (Phase 1) of the Enterprise District (Formerly Site B) for Redevelopment Consistent with the City’s Goals and Objectives for Commercial Development at Alameda Point. (Base Reuse and Community Development) [Council deliberation at WETA Facility following tour]
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To: Honorable Mayor and Members of the City Council
From: Eric Levitt, City Manager
EXECUTIVE SUMMARY
With the commencement of development of Site A at Alameda Point, critical infrastructure improvements are underway that are an important prerequisite to marketing and redevelopment of the Enterprise District (formerly Site B). The Enterprise District is the sub-area of Alameda Point Town Center and Waterfront Precise Plan shown in Exhibit 1 that is zoned for new commercial development and uses that will create an employment center adjacent to the future ferry terminal at the Seaplane Lagoon. This staff report describes the 82-acre Enterprise District, and its four development blocks which total 67 net developable acres, and recommends that the City Council authorize staff to market, through Cushman and Wakefield, Phase 1 of the District, a 23.9 gross acre parcel adjacent to Main Street, and bordered by Pacific, Orion and West Ticonderoga.
BACKGROUND
Land area within the Enterprise District boundary (District) totals approximately 82 gross acres. The commercial development opportunity within the District totals approximately 67 net developable acres comprised of four blocks ranging from 9.1 to 23.9 contiguous acres. The Enterprise District is bounded by Site A to the north, Main Street and Central Avenue to the east, and Seaplane Lagoon to the west. A map of the Enterprise District is attached as Exhibit 2. The Enterprise District is entitled for commercial development and it is anticipated that over 2 million square feet of new development will be built, and over 4,000 jobs created during the next 10years.
From 2009-2014, the City, acting as “master developer”, undertook a number of initiatives to add value and reduce uncertainty to maximize the success of redevelopment at Alameda Point.
These efforts included:
• Preparing a number of planning documents, including a Town Center and Waterfront Specific Plan, General Plan Amendment, Zoning Amendment and Master Infrastructure Plan (MIP);
• Establishing a Community Facilities District (CFD) as part of ensuring fiscal neutrality;
• Certifying an Environmental Impact Report (EIR);
• Obtaining a commitment from the Water Emergency Transportation Authority (WETA) to build a ferry terminal at the Seaplane Lagoon and securing grant funding for a portion of the project;
• Adopting a Development Impact Fee (DIF) to help fund the required infrastructure improvements; and
• Receiving permits for key backbone infrastructure projects.
As a result, Alameda Point is entitled for mixed-use development that includes up to 1,425 residential units (25% of which must be affordable to very low-, low- and moderate-income households), five and one-half million square feet of commercial development (including live/work), adaptive reuse of existing buildings, over 300 acres of parks and open space (including the Northwest Territory), and a ferry terminal at the Seaplane Lagoon.
In 2014, with these key approvals in place, the City Council directed staff to issue two separate Requests for Qualifications (RFQs) from developers for both Site A and Site B (now the Enterprise District). The City received four qualified responses from developers to the Commercial Project Enterprise District RFQ. The City Council subsequently directed staff to negotiate key business and financial terms with two developer finalists, Mission Bay Development Group and Catellus Development. During the negotiations, the developers were not willing to commit to upfront infrastructure, land payments, or a milestone schedule for implementing development due to the uncertainty of the commercial market in Alameda and high cost of infrastructure. As a result, the City Council approved postponing any decisions on the Enterprise District until 2015, when it was believed that there would be more certainty about the development of infrastructure surrounding Site A that would also benefit infrastructure connections and capacity required for the Enterprise District.
In 2016, with the approval of the Disposition and Development Agreement for Site A, the City Council approved a “new approach” for development at the Enterprise District that focuses on attracting major commercial businesses or “end users”, instead of utilizing a master/commercial developer who then solicits “end users”. This new approach would provide flexibility in marketing and revenue-producing interim use of the site until an interested commercial end user is identified. The Council approved utilizing Cushman & Wakefield (Cushman) to market the Enterprise District in order to leverage its existing knowledge and experience at Alameda Point and Bay Area markets as a whole. Cushman is actively marketing the property within the Enterprise District and has helped the City execute a lease with Astra Space, Inc. (Astra), an aerospace company, who is working to expand within the District. The Council is also actively considering a lease with Nautilus, a green technology data server company. Both of these uses could be catalyst projects for attracting additional development to the Enterprise District, as well as help to offset the total cost of public backbone infrastructure under either a future land sale or net present value long-term ground lease alternative.
With the commencement of backbone infrastructure that will support development at Site A, and benefit the Enterprise District, there is renewed interest in development within the Enterprise District. As a result, staff is recommending that Council review its goals and objectives for redevelopment of the Enterprise District and consider directing staff to market a 23.9-acre, Phase 1 portion of the District consistent with those goals and objectives. Exhibit 3 is a map of the 23.9-acre, Phase 1 area.
DISCUSSION
The approximately 82-acre Enterprise District is situated between Site A and the Bay Trail open space area called out in the adopted Town Center and Waterfront Precise Plan. The District is entitled for commercial uses and falls within the Waterfront Town Center and Enterprise zoning sub-district of Alameda Point (See Exhibit 1). The City and Alameda community envision a premier waterfront development that consists of high-quality transit-oriented design due primarily to the District’s adjacency to the proposed new Seaplane Lagoon Ferry Terminal and Waterfront Park to be developed adjacent to the west end of the District as part of the Site A project.
Based on market potential, retail, hotel, R&D, light industrial, and office/campus uses are highly encouraged uses within the District. Zoning within the District would allow up to approximately two million square feet of commercial development and must be consistent with the MIP which establishes the requirements and standards for public backbone infrastructure to support redevelopment and reuse of Alameda Point. Within the 82-acre District, there are four blocks that lend themselves to redevelopment as stand-alone parcels. Exhibit 2 depicts the four blocks. The two northern-most blocks comprise approximately 34 developable acres.
Astra is currently located in Building 397 and is interested in expanding its business footprint by leasing Building 360 which is located on 18 acres in the northeastern block. If Astra is successful in leasing Building 360, it could become the District’s first campus user. Astra designs, tests, manufactures, and operates next-generation launch services that will enable a new generation of global communications, earth observation, precision weather monitoring, and navigation. This type of business is aligned with a key economic sector identified in the City’s Economic Development Strategic Plan (EDSP). As a high-tech company it has the ability to create a synergy to attract similar businesses and it employs high skill/high wage workers. As it commercializes its launch equipment, it will create skilled manufacturing jobs. The balance of the northern parcels will support new development once the existing environmental contamination is successfully remediated and property is conveyed from the Navy, or if/when smaller end-users are identified.
The 9.1-acre parcel immediately adjacent to the future Seaplane Lagoon Ferry Terminal is the highest value parcel in the District. Building heights of 100 feet are permitted in this area to accommodate employment densities that will support the new ferry service. This block is considered the most desirable for a high-end commercial campus user. To maximize the value of this property, staff and Cushman believe that it should be marketed only after other commercial development has occurred to create a critical mass of development and amenities, such as ferry service, along with the requisite infrastructure.
The fourth block is a 23.9-acre parcel adjacent to Main Street that is sized and located in a way that makes it an appropriate first phase to be marketed for development, either by a land developer, an end-user, or a team that can deliver both the required backbone infrastructure improvements and the commercial users. Building 530 is an existing building within the block. The City Council is actively considering leasing this building to Nautilus, a green technology data server business. Staff and Cushman believe this block can be successfully marketed whether or not Building 530 is leased. Furthermore, Nautilus could be a catalyst business, that on its own does not have a large number of employees, but may be an amenity that will attract other businesses with high wage/high skill employees who might not otherwise locate at the Base, and/or provide a service that will allow existing businesses in the Adaptive Reuse area to take advantage of the data server.
In addition, this parcel could be the catalyst development that leads to the development of the higher-value nine acres immediately to the west of the block. This parcel would have less dense development and new buildings would step up from Main Street and the residential neighborhood immediately to the East. It would provide a buffer from the higher-density development anticipated on the nine-acre parcel. The block is optimally sized to finance, from land sale proceeds, the initial required infrastructure to jump-start the Enterprise District’s development. At 23.9 acres, with a minimum land sale price of $1.3 million an acre, $31 million would be generated to pay for the currently estimated $26 million in Phase 1 backbone infrastructure improvements (Exhibit 3). The ability to generate enough land sale proceeds to cover required backbone infrastructure makes this block’s development potentially financially feasible. The MIP estimates that the total infrastructure cost for the 82-acre District is currently projected at approximately $126 million (this is an updated estimate as of April 2019). In addition to proceeds generated from the 23.9-acre parcel, if Astra and Nautilus proceed, DIF payments will be made that will help to off-set the total infrastructure cost burden.
Consistent with the City’s approach to the balance of the Base, it is appropriate to market the Enterprise District in a phased manner, completing essential backbone infrastructure, creating value as development happens, and accepting property from the Navy after it is environmentally remediated. Therefore, staff recommends that it be authorized to work with Cushman to market the 23.9-acre parcel described above as Phase 1 of the Enterprise District. This approach does not preclude the development and/or phasing of other blocks in the District should an opportunity present itself, but it will assist the City in prioritizing its efforts to focus on securing a developer/end user that can jump-start commercial development with a development parcel that can support the initial infrastructure improvements and be a catalyst for higher value development in the future.
FINANCIAL IMPACT
There is no financial impact to the City’s General Fund or Community Development Department budgets (Fund 858) to marketing Phase 1 of the Enterprise District for development. Should such marketing efforts result in land sales and future development, those actions would have a positive financial impact on the Base Reuse budget.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This report references strategies that are consistent with the Community Reuse Plan, the General Plan Amendment, the Zoning Plan Amendment, and the Alameda Point Conceptual Planning Guide, and the District Approach to Development.
ENVIRONMENTAL REVIEW
On February 4, 2014, the City Council certified a Final Environmental Impact Report (State Clearinghouse No. 201301243) for the Alameda Point project (including the Enterprise District), in compliance with the California Environmental Quality Act (CEQA).
RECOMMENDATION
Authorize staff to market a 23.9-acre portion (Phase 1) of the Enterprise District (Site B) for redevelopment consistent with the City’s goals and objectives for commercial development at Alameda Point.
Respectfully submitted,
Debbie Potter, Community Development Director
Exhibits:
1. Alameda Point Sub Area Illustration
2. Map of the Enterprise District
3. Map of the Enterprise District (4-Block Area + Phase 1 infrastructure improvements)