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Recommendation to Direct Staff to Terminate the Lease for Building 92 at Alameda Point between the City of Alameda and Alameda Point Collaborative Prior to Expiration of the Lease Term in Exchange for Payment to Alameda Point Collaborative of a Lease Termination Payment of $831,470; and Commence a Solicitation Process to Sell Building 92 for Commercial Use. (Community Development 29061822) [Not heard on May 16, 2023]
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Building 92 in the Adaptive Reuse Area of Alameda Point was constructed in 1942 for use as a warehouse (see Exhibits 1 and 2) and is listed as a Contributing Historic Building within the Naval Air Station (NAS) Alameda Historic District (See Exhibit 3).
Building 92 is currently controlled by the Alameda Point Collaborative (APC) pursuant to a 59-year Legally Binding Agreement, which is effectively a lease (Lease), that was executed in December 2010 between APC and the Alameda Reuse and Redevelopment Authority, the predecessor-in-interest to the City of Alameda (City).
The City seeks to buyout the Lease with APC to advance its goals for the sale of Building 92 as a commercial use resulting in job generation and sale proceeds to fund continued implementation of new infrastructure in the Adaptive Reuse Area consistent with the Alameda Point Master Infrastructure Plan (MIP) and Water Infrastructure Agreement with East Bay Municipal Utility District (EBMUD).
APC is willing to surrender Building 92 to the City and terminate the Lease in advance of the Lease’s actual expiration date in December 2058, in exchange for a one-time payment. The one-time payment to APC is a lease buy-out payment for the remaining 35 years of Lease term and an incentive for APC to terminate the Lease in advance of its expiration date. The one-time payment requested by APC is $831,470, which represents the cumulative amount of APC’s operating deficit for Building 92 from 2018 through May 2023.
Additionally, APC has existing subleases at Building 92 with the Alameda Food Bank (Food Bank) and Red Cross Emergency Storage (Red Cross) that will end upon termination of the City’s Lease with APC. In place of those subleases, the City will execute new month-to-month license agreements with the Food Bank and Red Cross to temporarily allow them to maintain their current activities at Building 92. Staff intend to execute those license agreements concurrently with termination of the Lease termination between APC and the City both to avoid disruption in the Food Bank’s and Red Cross’ activities and ensure all standard City protections for use of City property by third parties remain in place. The City is actively working with the Food Bank and Red Cross to find suitable alternative locations for their future use so that the City can move forward with the sale of Building 92 for commercial reuse.
BACKGROUND
Building 92 in the Adaptive Reuse Area of Alameda Point was constructed in 1942 for use as a warehouse (see Exhibits 1 and 2) and is a one-story, 89,018-square-foot, industrial building on a 2.9-acre parcel. The building construction is wood frame, has eight roll-up doors and a ceiling height of 32 feet at its highest point (Exhibits 1 and 2) and is listed as a Contributing Historic Building within the NAS Alameda Historic District. (See Exhibit 3).
Building 92 is currently controlled by APC pursuant to the 59-year Lease that was executed in December 2010 between APC and the Alameda Reuse and Redevelopment Authority, the City’s predecessor-in-interest.
DISCUSSION
The City seeks to buyout the Lease with APC to advance its goals for the sale of Building 92 as a commercial use resulting in job generation and sale proceeds to fund continued implementation of new infrastructure in the Adaptive Reuse Area consistent with the MIP and Water Infrastructure Agreement with EBMUD.
APC is willing to surrender Building 92 to the City and terminate the Lease in advance of the Lease’s actual expiration date in December 2058, in exchange for a one-time payment. The one-time payment to APC is a lease buy-out payment for the remaining 35 years of Lease term and an incentive for APC to terminate the Lease in advance of its expiration date. The one-time payment requested by the APC is $831,470, which represents the cumulative amount of APC’s operating deficit for Building 92 from 2018 through May 2023.
Upon termination of the Lease with APC, the City will commence the process of competitively soliciting interest for the sale of Building 92 for commercial use. Important considerations for the City with respect to a prospective sale and reuse of Building 92 are as follows:
• The sale and future investment in Building 92 will complete the private transfer of an entire adaptive reuse block adjacent to privately owned Buildings 8 (Storehouse Lofts), 9 (Kairos and Firebrand) and 91 (Almanac). This serves as a catalytic model for attracting additional private investment;
• By agreeing to the APC early Lease termination payment, the City has the opportunity to move forward with the future sale of Building 92 to attract new businesses and building investment, and generate sales proceeds that will support new infrastructure for Alameda Point;
• Selling a building adjacent to soon-to-be completed public infrastructure in the Phase 1 Reuse Area infrastructure project allows the City to re-capture its investment in infrastructure through increased building value; and
• Selling Building 92 adjacent to new infrastructure conforms with the disposition strategy recently reviewed and discussed by City Council on March 6, 2023.
Based on the information detailed above, staff recommends terminating the Lease for Building 92 with APC prior to expiration of the Lease term in exchange for payment to APC of a Lease termination payment of $831,470 by using funds from Alameda Point Fund Balance with reimbursement from future Building 92 sale proceeds, and commencing a competitive solicitation process to sell Building 92 as a commercial use. A draft Lease Termination Agreement is attached to this staff report as Exhibit 4.
Additionally, APC has existing subleases at Building 92 with the Food Bank and Red Cross that will end upon termination of the City’s Lease with APC. In place of those subleases, the City will execute new month-to-month license agreements with the Food Bank and Red Cross to temporarily allow them to maintain their current activities at Building 92. Staff intend to execute those license agreements concurrently with termination of the Lease termination between APC and the City both to avoid disruption in the Food Bank’s and Red Cross’ activities and ensure all standard City protections for use of City property by third parties remain in place. The City is actively working with the Food Bank and Red Cross to find suitable alternative locations for their future use so that the City can move forward with the sale of Building 92 for commercial reuse.
ALTERNATIVES
• Terminate the Lease for Building 92 with APC and in exchange, pay APC a Lease termination payment of $831,470 by using funds from Alameda Point Fund Balance and commence a competitive solicitation process to sell Building 92 on the commercial market.
• Do not terminate the Lease for Building 92 with APC or pay APC a Lease termination payment, which will not allow the City to sell Building 92 and realize the revenue from that sale.
FINANCIAL IMPACT
The proposed lease termination payment of $831,740 will be paid by the Alameda Point/Base Reuse Fund Balance and will be later reimbursed to this fund from a portion of the Building 92 sale proceeds.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The proposed transaction is in compliance with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Direct staff to terminate the Lease for Building 92 at Alameda Point between the City and APC prior to expiration of the Lease term in exchange for payment to APC of a Lease termination payment of $831,470 by using funds from Alameda Point Fund Balance with reimbursement from future Building 92 sale proceeds; and direct staff to commence a solicitation process to sell Building 92 for commercial use.
Respectfully submitted,
Lisa Maxwell, Community Development Director
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Depiction of Building 92 Location
2. Pictures of Building 92
3. Outline of Adaptive Reuse Area
4. Lease Termination Agreement