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2005-03-02 ARRA MinutesAGENDA Special Meeting of the Governing Body of the Alameda Reuse and Redevelopment Authority * *** ** ** Alameda City Hall Council Chamber, Room 391 2263 Santa Clara Avenue Alameda, CA 94501 1. ROLL CALL 2. Public Comment on Non - Agenda Items Only. Wednesday, March 2, 2005 Meeting will begin at 5:30 p.m. City Hall will open at 5:15 p.m. Anyone wishing to address the Board on non - agenda items only, may speak for a maximum of 3 minutes per item. 3. ADJOURNMENT TO CLOSED SESSION OF THE ARRA TO CONSIDER : 3 -A. CONFERENCE WITH REAL PROPERTY NEGOTIATOR: Property: Alameda Naval Air Station Negotiating parties: ARRA, U.S. Navy, and Alameda Point Community Partners Under negotiation: Price and Terms 3 -B. CONFERENCE WITH REAL PROPERTY NEGOTIATOR: Property: Alameda Naval Air Station Negotiating parties: ARRA and Alameda Point Community Partners Under negotiation: Price and Terms Announcement of Action Taken in Closed Session, if any. 4. ADJOURNMENT Notes: • Sign language interpreters will be available on request. Please contact the ARRA Secretary, Irma Frankel at 749 -5800 at least 72 hours before the meeting to request an interpreter. • Accessible seating for persons with disabilities (including those using wheelchairs) is available. • Minutes of the meeting are available in enlarged print. • Audio tapes of the meeting are available for review at the ARRA offices upon request. AGENDA Regular Meeting of the Governing Body of the Alameda Reuse and Redevelopment Authority * * * * * * ** Alameda City Hall Council Chamber, Room 390 2263 Santa Clara Avenue Alameda, CA 94501 1. ROLL CALL 2. CONSENT CALENDAR Wednesday, March 2, 2005 Meeting will begin at 7:00 p.m. City Hall will open at 6:45 p.m. Consent Calendar items are considered routine and will be enacted, approved or adopted by one motion unless a request for removal for discussion or explanation is received from the Council or a member of the public. 2 -A. Approval of the minutes of the regular meeting of January 5, 2005. 2 -B. Approval of the minutes of the Special meeting of January 20, 2005. 2 -C. Recommendation to approve certain assignment and assumption of subleases and Legally Binding Agreements among housing providers at Alameda Point. 2 -D. Recommendation to Authorize the Executive Director to Approve Lease(s) at Alameda Point. 3. PRESENTATION 3 -A. Presentation/update on Alameda Point Navy Negotiations and Land Use Planning. 4. REGULAR AGENDA ITEMS 4 -A. Recommendation to approve a 10 -year lease agreement with Nelson's Marine for Building 167. 4 -B. Recommendation to approve a 5 -year lease, with a possible 3 (5 -year) options with Nelson Marine for 400 linear feet of Pier 1. 5. ORAL REPORTS 5 -A. Oral report from APAC. ARRA Agenda — March 2, 2005 Page 2 5 -B. Oral report from Member Matarrese, RAB representative. 6. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) (Any person may address the governing body in regard to any matter over which the governing body has jurisdiction that is not on the agenda.) 7. COMMUNICATIONS FROM THE GOVERNING BODY 8. ADJOURNMENT This meeting will be cablecast live on channel 15. The next regular ARRA meeting is scheduled for Wednesday, April 6, 2005. Notes: • Sign language interpreters will be available on request. Please contact the ARRA Secretary, Irma Frankel at 749 -5800 at least 72 hours before the meeting to request an interpreter. • Accessible seating for persons with disabilities (including those using wheelchairs) is available. • Minutes of the meeting are available in enlarged print. • Audio tapes of the meeting are available for review at the ARRA offices upon request. UNAPPROVED MINUTES OF THE REGULAR MEETING OF THE ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY Wednesday, January 5, 2005 The meeting convened at 5:46 p.m. with Mayor Johnson presiding. 1. ROLL CALL Present: Beverly Johnson, Mayor, City of Alameda Tony Daysog, Boardmember, City of Alameda Doug DeHaan, Boardmember, City of Alameda Frank Matarrese, Boardmember, City of Alameda Marie Gilmore, Boardmember, City of Alameda Absent: None. 2. CONSENT CALENDAR 2 -A 2 -A. Recommendation to approve an amendment to Consultant Agreement with LFR, Inc. For environmental consulting services at Alameda Point in the amount of $175,130 for a total agreement amount of $249,000. 2 -B. Recommendation to authorize the Executive Director to execute sublease(s) at Alameda Point. Member Matarrese motioned for approval of the Consent Calendar items. The motion was seconded by Member Gilmore and passed by the following voice vote: Ayes — 5; Noes — 0; Abstentions — 0. 3. PRESENTATION 3 -A. Presentation/update on Alameda Point Navy Negotiations and Land Use Planning. None. 4. REGULAR AGENDA ITEMS None. 1 G: \Comdev \Base Reuse& Redevp \ARRA\MINUTES\2005 \01 -05 -05 Regular.ARRA minutes.doc 5. ORAL REPORTS 5 -A. Oral report from APAC. Chair Lee Perez noted that they did not hold a business meeting during December, although a very nice social gathering was held. He noted that there was no discussion, and that the next meeting would be held on January 19, 2005. He noted that they would decide how to carry out the ARRA's wishes at that time. Member DeHaan noted that while he was not part of the decision made at the last ARRA meeting, he supported that decision. He was concerned that the process took much longer than anyone could have anticipated, and that when he was Chair of EDC, he ensured that they were up to speed on Alameda Point issues. He recalled several team members (Al Clooney and Dan Meyers) who had passed away during this process. Mayor Johnson noted that she and Member Daysog had been members of the BRAG as well. Chair Perez noted that three active former BRAG members sat on the City Council, and that hoped that their dedication would reach Sacramento and Washington, D.C. He noted that it had been an honor to serve in this capacity, and acknowledged that change was necessary. 5 -B. Oral report from Member Matarrese, RAB representative. There was no report. 6. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) None. 7. COMMUNICATIONS FROM THE GOVERNING BODY Member Matarrese recalled previous discussions to bring the redevelopment of the Point to the mainstream consciousness of Alameda. He noted that the very light turnout at the ARRA meetings did not meet that goal. He requested that the regular meeting time be changed to 7:30 p.m. in order to encourage more community participation. He noted that the closed session could be held before the regular meeting. Mayor Johnson suggested agendizing that item for the next meeting, and noted that a 7:00 start time could be tried. A special meeting would be held on Thursday, January 20, 2005, at 7:30 p.m. Member DeHaan requested an update on the Consultant Agreement to be placed on the next agenda. Chair Perez did not anticipate that there would be any further amendments to current consultant contracts. He added that they could make an updated budget presentation at the next regular meeting. They had anticipated some changes to the consultant contracts, and that they did not 2 G: \Comdev \Base Reuse& Redevp \ARRA\MINUTGS\2005 \0I -05 -05 Regular.ARRA minutes.doc impact their contingency or any other line items contained in the ARRA -led predevelopment budget. 8. ADJOURNMENT TO CLOSED SESSION OF THE ARRA TO CONSIDER CONFERENCE WITH REAL PROPERTY NEGOTIATOR: 8 -A. Property: Negotiating parties: Under negotiation: Alameda Naval Air Station ARRA, Navy, and Alameda Point Community Partners Price and Terms Announcement of Action Taken in Closed Session: The ARRA received a briefing from the Real Property Negotiator; no action was taken. 9. ADJOURNMENT Mayor Johnson adjourned the open session meeting at 6:11 p.m. Respectfully submitted, IIa Frankel ARRA Secretary 3 G: \Comdev \Base Reuse& Redevp \ARRA\MINUTES\2005\01 -05 -05 Regular.ARRA minutes.doc UNAPPROVED MINUTES OF THE SPECIAL MEETING OF THE ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY Thursday, January 20, 2004 The meeting convened at 8:19 p.m. with Mayor Johnson presiding. 1. ROLL CALL Present: Beverly Johnson, Mayor, City of Alameda Doug DeHaan, Boardmember, City of Alameda Tony Daysog, Boardmember, City of Alameda Frank Matarrese, Boardmember, City of Alameda Marie Gilmore, Boardmember, City of Alameda 2. Public Comment on Non - Agenda Items Only There were no speaker slips. 3. CONSENT CALENDAR 3 -A. Amending Resolution No. 010 establishing rules and procedures for Alameda Reuse and Redevelopment Authority meetings by amending the starting time of regular meetings from 5:30 p.m. to 7:00 p.m. (requested by Boardmember Matarrese) Member Matarrese motioned for approval of the Consent Calendar items. The motion was seconded by Member Gilmore and passed by the following voice vote: Ayes — 5; Noes — 0; Abstentions — 0. Member Matarrese noted that this item is approved with the intent to increase public participation. 4. ADJOURNMENT TO CLOSED SESSION OF THE ARRA TO CONSIDER CONFERENCE WITH REAL PROPERTY NEGOTIATOR: 4 -A. Property: Negotiating parties: Under negotiation: Alameda Naval Air Station ARRA and Navy Price and Terms The ARRA received a briefing from the Real Property Negotiator; no action was taken. 5. ADJOURNMENT Mayor Johnson adjourned the open session meeting at 8:21 p.m. Res.ectfully sub fitted a Fran ARRA Secretary G: \ComdevV3ase Reuse& Redevp\ARRA\MINUTES\2005 \1 -20 -05 Special.ARRA nunutes.doc City of Alameda Alameda Reuse and Redevelopment Authority February 18, 2005 To: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority From: Re: Background William C. Norton Interim Executive Director 2 -C Recommendation to Approve Certain Assignment and Assumption of Subleases and Legally Binding Agreements among Housing Providers at Alameda Point As required by the federal Base Closure and Community Redevelopment and Homeless Assistance Act of 1994, the Alameda Reuse and Redevelopment Authority (ARRA) worked with the Alameda County Department of Housing and Community Development (County) and an organized group of homeless service providers, known as the Alameda County Homeless Providers Base Conversion Collaborative (currently known as the Alameda Point Collaborative (APC)) to determine the quantity of residential and commercial square footage that would constitute a reasonable accommodation of the homeless at the former Alameda Naval Air Station (Alameda Point). On May 3, 1995, the ARRA adopted the Standards of Reasonableness that provide general commitments related to future reuse goals at Alameda Point. In July 1995, the Alameda County Homeless Provider Base Conversion Collaborative submitted a Request of Property at Alameda Naval Air Station. The requests were considered by staff, and following negotiations, specific allocations of property were included in the Housing Element of the NAS Alameda Community Reuse Plan approved by the ARRA in January 1996. Two hundred existing housing units at Alameda Point were allocated to several non - profit housing providers (Providers) for use by clients transitioning from homelessness. There are no emergency shelters or shelters at the APC per the Standards of Reasonableness for Homeless Uses at Alameda Point. In addition to providing housing, it was expected that the Providers, through the APC, would coordinate the delivery of various support services and property management to their residents. Many residents are coping with medical, social, psychological or physical challenges and receive related services from the Providers, the APC Community Service Center and other agencies. In 1996, the ARRA approved the form of a Legally Binding Agreement and Property Lease (LBA) to be used by the Alameda Point Collaborative and each Provider that was allocated housing units to accommodate its clients. The 59 -year term of each LBA was to begin once the Dedicated to Excellence, Cornmitted to Service Honorable Chair and Members of February 18, 2005 Alameda Reuse and Redevelopment Authority Page 2 underlying real property was conveyed by the Navy to the ARRA. Believing that the Navy would soon convey the real property, the Providers began to raise funds to rehabilitate their units. The ARRA subsequently entered into Interim Subleases with the Providers, in order to permit them to establish "site control" necessary to retain their federal and state grant funding. In 2001, in order to facilitate the Providers' further applications for funding, the APC requested, and the ARRA approved, an amended form of a 59 -year LBA and Property Lease that includes "cure" provisions and mortgagee provisions required by private lenders. In December 2001, the ARRA entered into an LBA with University Avenue Housing for forty -five (45) units of housing. Pursuant to their sub - leases, Dignity Housing West and Resources for Community Development have requested that the ARRA consent to the assignment of their Interim Subleases to the Alameda Point Collaborative. In addition, University Avenue Housing has requested that the ARRA approve a transfer of its LBA to the Alameda Point Collaborative. Discussion The Interim. Subleases and form of the LBA contain provisions for the assignment and/or transfer of the agreements to other housing providers. In particular, when the form of LBA was approved, it was intended that APC would be a likely recipient of future assignments and special provisions and findings were included in the form of the LBA to facilitate such assignments. Dignity Housing West and RCD have requested that their Inerim Subleases be assigned to APC. UA Housing has requested that its LBA be assigned to APC. All three providers believe that their residents and the larger APC community would benefit from the assignment. The primary mission of these providers is to develop housing and they feel that this mission has been fulfilled by rehabilitating and leasing their units. These assignments will provide a better economy of scale for operations and management activities at the APC community. APC has the financial capability, management expertise and operational capacity to assume the two subleases and the LBA. Therefore, the City Attorney's office has prepared and approved as to form the attached form of Assignment and Assumption Agreement for subleases (Attachment A) and the form of Assignment and Assumption Agreement for the Legally Binding Agreement (Attachment B) which will be used for each Provider assignment requested at this time. Upon execution of these agreements with Dignity Housing West, Resources for Community Development and University Avenue Housing, the APC can begin its transition process and move forward with its next step of closing on the necessary loan documents to secure Federal Home Loan Bank Board grant funds. Dedicated to Excellence, Committed to Service G:\Comdev \Base Reuse& Redevp \ARRA \STAFFREP\2005 \3 March \2 -C\2 -C Assignment Assumption of Subleases.doc Honorable Chair and Members of February 18, 2005 Alameda Reuse and Redevelopment Authority Page 3 Fiscal Impact There is no fiscal impact to approving the assignments and assumptions requested at this time. Recommendation It is recommended that the ARRA approve the assignment and assumptions, based on the attached form of Agreement, between Dignity Housing West and APC and Resources for Community Development and APC and approve the assignment and assumption, based on the attached form of Agreement, between University Avenue Housing and APC and authorize the Executive Director to execute the Agreements. Leslie Little Development Services Director By: FYebbie Potter Base Reuse and Redevelopment Manager Attachment A: Form of Assignment and Assumption Agreement (subleases) Attachment B: Form of Assignment and Assumption Agreement (Legally Binding Agreement) Dedicated to Excellence, Conainitted to Service G: \Comdev \Base Reuse& Redevp \ARRA \STAFFREP\2005 \3 March \2 -C\2 -C Assignment Assumption of Subleases.doc EXHIBIT A FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT (Sublease of Buildings ) This Assignment and Assumption Agreement (Sublease of Buildings ) (the "Agreement ") is dated as of , 2005 ( "Effective Date "), and is entered into by and among the Alameda Reuse and Redevelopment Authority, a joint powers authority formed under California law (the "ARRA "), , a California nonprofit public benefit corporation (" "), and Alameda Point Collaborative, Inc., a California nonprofit public benefit corporation ( "APC "), with reference to the following facts: A. The ARRA, as sublessor, and , as subtenant, entered into that certain Agreement of Sublease, Sublease of Housing Units at the Former Alameda Naval Air Station for the Sublease of Buildings and Adjacent Open Space and Parking Area at Alameda Point dated , as amended by that certain Amendment to the Sublease between the ARRA and for the Sublease of Certain Portions of Naval Air Station Alameda, located in Alameda, California (collectively, the "Sublease "). B. The subleased premises have been rehabilitated and have been continuously operated by and managed by APC since C. desires to assign to APC and APC desires to accept the assignment from of all of 's rights and obligations with respect to the Sublease. D. The consent of the ARRA to the assignment of under the Sublease is required pursuant to Section 5.1 of the Sublease. 's rights and obligations NOW, THEREFORE, in consideration of the foregoing and the mutual promises of the parties hereto and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties mutually agree as follows: 1. Assignment by . As of the Effective Date, hereby assigns and delegates to APC all of 's rights, title, interest and obligations under the Sublease. 2. Acceptance of Assignment. As of the Effective Date, APC hereby accepts the foregoing assignment and delegation and hereby assumes and agrees to perform each and every of 's duties, obligations, covenants, and agreements under or pursuant to the Sublease, and further agrees to be bound by the terms and provisions of the Sublease. Any reference to in the Sublease shall hereafter be deemed a reference to APC. 3. Consent to Assignment. The ARRA hereby consents to the foregoing assignment and delegation of the Sublease from to APC. 4. Representations and Authorization. (a) and APC represent and warrant that all of the financial and other information required by Section 5 of the Sublease has been provided to the ARRA. (b) Further, and APC represent and warrant that the foregoing assignment and delegation shall not jeopardize funding sources for rehabilitation and/or operations of the subleased premises and that and APC have obtained all necessary consents and completed all required documentation for the transfer and continuation of all such funds concurrent with the foregoing assignment and delegation. (c) has full power and authority to enter into this Agreement, and to otherwise perform its obligations hereunder without the consent of any other person or entity. The execution, delivery and performance of this Agreement, the fulfillment of and compliance with the terms and provisions hereof and the due consummation of the transactions contemplated hereby have been duly and validly authorized and approved by all requisite corporate and other actions, all of which are in full force and effect. 5. Captions. The captions of this Agreement are inserted only as a matter of convenience and for reference. They do not define, limit or describe the scope or intent of this Agreement and they shall not affect the interpretation hereof. 6. Governing Law. This Agreement and all matters relating to it shall be governed by the laws of the State of California. 7. No Other Modifications. Except as modified by this Agreement, the Sublease shall continue unmodified and in full force and effect. 8. Counterparts. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 2 a California nonprofit public benefit corporation B y: Name: Its: APC: Alameda Point Collaborative, Inc., a California nonprofit public benefit corporation B y: Name: Its: ARRA: Alameda Reuse and Redevelopment Authority, a joint powers authority formed under California law By: Approved as to form: Name : Title: By: Name: Title: 3 N:\A\Alamc \Hh \docs \w -RCD Sublease Assign EXHIBIT B FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT (UA Housing) This Assignment and Assumption Agreement (UA Housing) (the "Agreement ") is dated as of , 2005 ( "Effective Date "), and is entered into by and among the Alameda Reuse and Redevelopment Authority, a joint powers authority formed under California law (the "ARRA "); the Community Improvement Commission of the City of Alameda, a public body, corporate and politic (the "CIC "); the City of Alameda, a municipal corporation ( the "City "); Alameda County, through its Department of Housing and Community Development, a political subdivision of the State of California (the "County "); UA Housing, Inc. a California nonprofit public benefit corporation ( "UA Housing "); and Alameda Point Collaborative, Inc., a California nonprofit public benefit corporation ( "APC "), with reference to the following facts: A. In connection with certain funding the City, the CIC and UA Housing entered two (2) separate Affordable Housing Covenants, each dated as of August 1, 2000 (collectively, the "Covenants "). B. In connection with the use of HOME funds, the City and UA Housing entered into a Contract, dated August 1, 2000 (the "Contract ") and a Regulatory Agreement dated August 2000 (the "Regulatory Agreement "). The Contract, Regulatory Agreement and all other agreements by and between the City and UA Housing with respect to the use of HOME funds shall be referred to herein collectively as the "HOME Documents "). C. The Covenants and the Regulatory Agreement are to be recorded concurrently with the LBA (as defined below). D. The ARRA, the County, UA Housing and APC entered into that certain Legally Binding Agreement and Property Lease dated December 17, 2001 for certain premises located at Alameda Point, Alameda, California (the "LBA "). E. The leased premises have been rehabilitated and have been continuously operated by UA Housing, as Provider under the LBA, and managed by APC since F. UA Housing desires to assign to APC and APC desires to accept the assignment from UA Housing of all of UA Housing's rights and obligations with respect to the LBA, the Covenants, and the HOME Documents. 1 G. The consent of the ARRA and the County to the assignment of UA Housing's rights and obligations under the LBA is required pursuant to Section 6(a) of the LBA. NOW, THEREFORE, in consideration of the foregoing and the mutual promises of the parties hereto and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties mutually agree as follows: 1. Assignment by UA Housing. As of the Effective Date, UA Housing hereby assigns and delegates to APC all of UA Housing's rights, title, interest and obligations under (a) the LBA, (b) each of the Covenants, and (c) the HOME Documents. 2. Acceptance of Assignment. As of the Effective Date, APC hereby accepts the foregoing assignment and delegation and hereby assumes and agrees to perform each and every of UA Housing's duties, obligations, covenants, and agreements under or pursuant to (a) the LBA, (b) each of the Covenants, and (c) the HOME Documents, and further agrees to be bound by the terms and provisions of (a) the LBA, (b) each of the Covenants, and (c) the HOME Documents. Any reference to UA Housing in (a) the LBA, (b) each of the Covenants, and (c) the HOME Documents, shall hereafter be deemed a reference to APC. 3. Consent to Assignment of Covenants. The City and the CIC hereby consent to the foregoing assignment and delegation of each of the Covenants from UA Housing to APC. 4. Consent to Assignment of HOME Documents. The City hereby consents to the foregoing assignment and delegation of the HOME Documents from UA Housing to APC. 5. Consent to Assignment of LBA. The ARRA and the County hereby consent to the foregoing assignment and delegation of the LBA from UA Housing to APC. 6. Representations and Authorization. (a) UA Housing and APC represent and warrant that all of the financial and other information required by Section 6 of the LBA has been provided to the ARRA and to the County. (b) Further, UA Housing and APC represent and warrant that the foregoing assignment and delegation shall not jeopardize funding sources for rehabilitation and/or operations of the premises subject to the LBA and that UA Housing and APC have obtained all necessary consents and completed all required documentation for the transfer and continuation of all such funds concurrent with the foregoing assignment and delegation. 2 (c) UA Housing has full power and authority to enter into this Agreement, and to otherwise perform its obligations hereunder without the consent of any other person or entity. The execution, delivery and performance of this Agreement, the fulfillment of and compliance with the terms and provisions hereof and the due consummation of the transactions contemplated hereby have been duly and validly authorized and approved by all requisite corporate and other actions, all of which are in full force and effect. 7. Captions. The captions of this Agreement are inserted only as a matter of convenience and for reference. They do not define, limit or describe the scope or intent of this Agreement and they shall not affect the interpretation hereof. 8. Governing Law. This Agreement and all matters relating to it shall be governed by the laws of the State of California. 9. No Other Modifications. Except as modified by this Agreement, (a) the LBA, (b) each of the Covenants, and (c) the HOME Documents, shall continue unmodified and in full force and effect. 10. Counterparts. This Agreement may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. UA HOUSING: UA Housing, Inc., a California nonprofit public benefit corporation By: Name: Its: 3 APC: Alameda Point Collaborative, Inc., a California nonprofit public benefit corporation B y: Name: Its: ARRA: Alameda Reuse and Redevelopment Authority, a joint powers authority formed under California law By: Approved as to form: Name : Title: By: Name: Title: CIC: COMMUNITY IMPROVEMENT COMMISSION OF THE CITY OF ALAMEDA, a public body, corporate and politic By: Approved as to form: Name : Title: By: Name: Title: 4 CITY: CITY OF ALAMEDA, a municipal corporation By: Approved as to form: Name : Title: By: Name: Title: COUNTY: ALAMEDA COUNTY HOUSING AND COMMUNITY DEVELOPMENT, a political subdivision of the State of California By: Approved as to form: Name : Title: By: Name: Title: 5 N:\A\Alamc \Hh \docs \w -UA Housing LBA Assignment City of Alameda Alameda Reuse and Redevelopment Authority February 17, 2005 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: William C. Norton Interim Executive Director SUBJ: Report from the Executive Director Recommending the Approval of Sublease(s) at Alameda Point Background At the December 2004 ARRA Board Meeting, the ARRA elected to review and approve all subleases at Alameda Point. Discussion Attachment "A" describes the business temis for the proposed sublease(s). Fiscal Impact The rent for: CAMETOID TECHNOLOGIES is $48,180 annually or $0.55 per square foot. Recommendation It is recommended that the Alameda Reuse and Redevelopment Authority approve the proposed sublease(s). By: LL /NB:dc ttle Development Services Director Nanette Banks Finance & Administration Manager Dedicated to Excellence, Committed to Service G: /Banks /ARRA Staff Reports /Cametoid Technologies Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority ATTACHEMENT "A" PROPOSED SUBLEASE BUSINESS TERMS March 2, 2005 Page 2 TENANT BUILDING SIZE (SF) TERM RENT Cametoid Technologies 32 7,300 3 years $4,015/mo. G:/Banks /ARRA Staff Reports /Cametoid Technologies Dedicated to Excellence, Committed to Service City of Alameda Alameda Reuse and Redevelopment Authority February 17, 2005 To: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority From: Re: Background William C. Norton Interim Executive Director Report from the Executive Director recommending the Approval of a 10- year lease with Nelson Marine for Building 167 In August 2004, the ARRA considered the proposed lease with Nelson Marine as presented by PM Realty Group. At that meeting a law film representing regional boatyards made a presentation stating that the ARRA would lose $34 million in revenue by entering into the lease. The ARRA directed staff and PM Realty to examine the law firm's calculations and assumptions and report back with a recommendation. More specifically, the ARRA directed staff not to consider boatyards throughout the region, but instead those within the City of Alameda to ensure equitable rental rates. Since that time, PM has been working to collect the data used by the firm. In addition, the boatyards changed legal counsel, so it has taken a bit of time to perform the lease comparisons. Attachment 1 is the most recent correspondence received by the boatyard counsel. Nelson's Marine is one of the original tenants at Alameda Point, operating a boatyard in Building 167. Building 167 is a structure located in the Tidelands Trust property; Nelson Marine is a compatible use for the site. The lease commenced in June 1997 and expired in September 2002. In July 2002, APCP, acting as property managers, executed a lease amendment for a month -to month lease at $16,000 /month and began renegotiating a 20- year lease for Building 167. Under the existing lease, the tenant has the first right to negotiate a new lease for the premises at 90% of fair market value upon expiration of the initial term. Discussion The boatyards raised four issues for the Nelson Marine lease: rate, percentage rent, recapture provision and term. Rate: PM Realty was able to secure lease information on two of the Alameda boatyards used as comparison by the attorney group. The attorneys required PM to sign a "Dedicated to Excellence, Committed to Service" Honorable Chair and Members of the February 17, 2005 Alameda Reuse and Redevelopment Authority Page 2 confidentiality form, so our analysis will refer to boatyards 1 and 2. Attachment 2 outlines PM's analysis of the boatyards. Essentially, of the two boatyards, the best comparison is boatyard 1 because it has a similar site coverage ratio. Boatyard 2 consists of a very small structure on a large land surface. In addition, the lease structure for the three leases are different, Nelson's Marine is a net lease (tenant pays rent and all expenses) while the two Alameda boatyards are gross leases (tenant pays rent and landlord pays all expenses, including property taxes), which attributes to the difference in the rental rates. Nelson pays possessory interest taxes to the county and city fees. Percentage Rent: The current lease with Nelson allows the ARRA and Nelson to share the cost of an appraisal to determine the correct "market value" for the lease. As a result, the financial terms of the Nelson Marine lease are based on a rental survey /appraisal performed by Dunn & Associates (Attachment 3). The appraisal was initiated and managed by PM Realty Group, the ARRA's property manager. The appraisal looked at several lease structures, including a percentage rate lease, in which the landlord receives a percentage of the gross annual sales. The appraisal recommended a straight per square foot rate lease in order to avoid fluctuations in the market. However, the new lease with Nelson does allow for the ARRA to collect a percentage of sales, when 6 percent of Nelson's gross annual sales exceed their current rent. Therefore, Nelson would have to exceed approximately $3.4 million in annual gross sales before the ARRA would receive its 6 percent profit share. In order to monitor the profit breakpoint, PM Realty will require quarterly sales reports from Nelson. Recapture Provision: The attorneys argued that Nelson Marine was benefiting from having subtenants from which the ARRA had no financial gain. Under the proposed lease, Nelson will pay "50% of sums or other economic considerations that exceed in total the sums which tenant is obligated to pay landlord under the lease." For example, if the tenant's rent was $1000 and they collect $1500 rent from subtenant, the tenant would pay the landlord $250. Subtenant sales also are included in the definition of "gross sales ", thereby increasing the opportunity to trigger the ARRA's percentage rent share mentioned above. Term: The final issue with the boatyard attorneys was the term of the proposed lease. Originally, the new lease was to be a 20 -year term. Due to new discussions between the developer and Nelson Marine about the future development plan, the proposed lease teini has been reduced to ten years. Also, the lease reserves the right to reduce the leased premises with 90 -day notice to make the land available for development. Fiscal Impact The proposed base rent for the property is: Years 1 -5: $16,943 /month $203,316 /annually Years 6 -10: $18,637 /month $223,644 /annually "Dedicated to Excellence, Conunitted to Service" Honorable Chair and Members of the February 17, 2005 Alameda Reuse and Redevelopment Authority Page 3 Recommendation The Interim Executive Director recommends that the Alameda Reuse and Redevelopment Authority approve the proposed 10 -year lease with Nelson Marine. Respectfully submitted, Leslie Little, Development Services Director By: Nanette Banks Finance & Administration Manager PB /SP/NB:dc Attachments: 1. Letter from Attorneys 2. PM Realty Analysis of Nelson Marine Lease 3. Dunn & Associates Rental Survey /Appraisal "Dedicated to Excellence, Committed to Service" Stanley L. Gibson G. Geoffrey Robb Peter A. Lindh Joshua E. Kirsch Michael J. Cummins Jennifer T. Sanchez Michelle L. Tommey Marker E. Lovell, Jr. Roxanne Chester Christopher A. Burnham GIBSON ROBB & LINDH LLP 100 First Street, 27th Floor San Francisco, CA 94105 November 8, 2004 "ATTACHMENT Telephone (415) 348 -6000 Facsimile (415) 348 -6001 Direct Dial (415) 979-2340 BOATYARDS' SECOND SUBMISSION REGARDING PROPOSED TERMS OF SUBLEASE RENEWAL WITH NELSON'S MARINE [November 18, 2004 Agenda] TO: Honorable Chair and Members of the ALAMEDA REUSE AND REDEVELOPMMENT AUTHORITY FROM: Four Concerned Bay Area Boatyards, on behalf of themselves And the Public Interest SUBJECT: Review of Other Leases of Boatyards Operating within Alameda to Bring the Rental Terms for ARRA's Renewed Sublease with Nelson's Marine to Fair Market Value A REVIEW OF THE RELEVANT ALAMEDA BOATYARD LEASES DEMONSTRATES THAT THE PROPOSED LEASE TERMS GROSSLY FAIL TO REALIZE THE PROPERTY'S FAIR MARKET VALUE. At the first hearing addressing the terms of the proposed sublease, a Motion was adopted by the Commission requesting the Appraiser, with Dunn & Associates and/or the PM Realty Group, to review the leases of the two other boatyards doing business in Alameda to make the terms of the renewed Sublease with Nelson's Marine competitive with those other leases. A review of those two Alameda leases, Svendsen's Boat Works and Mariner Boat Yard, reveals that if the current form of proposed Sublease were to be approved by this Commission, the ARRA and the taxpayers of Alameda would stand to lose more than $36 million dollars over the proposed 20 year term of the lease. Three primary factors result in this dramatic disparity between the proposed lease and the other Alameda yard leases which establish the true Fair Market Value of the property: (1) Grossly disparate lease rates per square foot and percentage of gross revenue provisions; (2) The lack of annual Consumer Price Increases [ "CPI "] in the proposed lease; and (3) The excessive proposed lease term [the length of the lease]. Honorable Chair and members of the ALAMEDA REUSE AND REDEVELOPMMENT AUTHORITY November 8, 2004 Page 2 (1) THE LEASE RATE IN THE PROPOSED LEASE IS ONLY 20% OF THE PROPERTY'S FAIR MARKET VALUE BASED ON THE LEASE RATE CHARGED IN THE TWO COMPARABLE PROPERTIES. The relevant leases do not follow the same form. Exhibit "A" details the relevant provision in the two Alameda leases in which the Board expressed an interest, and discusses discrepancies in the proposed Nelson's lease. Svendsen's Boat Works Lease • As detailed in Exhibit "A," Svendsen's is paying $ 0.17 (seventeen cents) per sq. ft. for its yard space and $ 0.57 (fifty seven cents) per sq. ft. for its buildings. • For comparison purposes, since the Nelson lease proposal does not provide for a different rate for yard and buildings, on a blended basis Svendsen is paying an average of $ 0.31 (thirty one cents) per square foot for its entire leasehold versus the proposed rate of $ 0.06 (six cents) per square foot for Nelson's. On a percentage basis, the proposed Nelson rent is less than 20% of the rent Svendsen pays. Mariner Boat Yard Lease As detailed in Exhibit "A," Mariner Boat Yard is paying $ 0.20 (twenty cents) per sq. ft. for the yard space and $ 0.75 (seventy five cents) per sq. ft. for its buildings. • In addition to the fixed rent specified above, the "Marine Center Lease" also contains a provision for the Tenant to pay fees based on its annual gross revenue. For example, last year Mariner Boat Yard paid an additional $39,000 in rent. Accordingly, to arrive at the actual amount of rent paid you must divide this amount equally through the year and add this to the above fixed rental. • For comparison purposes, since the Nelson lease proposal does not provide for a different rate for yard and buildings, on a blended basis Svendsen is paying an average of $ 0.30 (thirty cents) per square foot for its entire leasehold versus the proposed rate of $ 0.06 (six cents) per square foot for Nelson's. On a percentage basis, the proposed Nelson rent is 20% of the rent Mariner pays. (2) THE LACK OF CPI INCREASES IN THE PROPOSED LEASE LOCKS IN UNREALISITICALLY LOW LEASE RETURNS WITHOUT ANY UPWARD ADJUSTMENT. Despite CPI increases in comparable leases in Alameda, including annual increases and a CPI provision in another sublease between the ARRA and the same lessee, the subject lease inexplicably excludes the customary CPI adjustment provision. The result is to grossly squander public assets and to compound the severe competitive disadvantage which would be suffered by other business in the area if the proposed lease were adopted. Honorable Chair and members of the ALAMEDA REUSE AND REDEVELOPMMENT AUTHORITY November 8, 2004 Page 3 Svendsen's leases have annual CPI provisions for increasing its rental rates. The Mariner Boat Yard also has annual CPI provisions in its leases. The ARRA's Sublease of Premises `Building 66" to Nelson [which is not currently being renegotiated because its 10 term does not expire until 2009], also contains annual increases in the rental rate averaging 6.25% over the first five years of the lease term, and a provision for an annual CPI increase for the last four years. In contrast, the proposed Sublease terms for Building 167 contains a fixed rental rate provision over each of four five year periods, with very modest increases at each five year interval over the twenty year term, and the rates remain fixed once again for each five year interval. The economic impact of this is dramatic. If the ARRA were to elect to adhere to the proposed 20 year term of the Sublease, this discrepancy in comparison to the CPI that the two other Alameda boatyards are paying would result in the ARRA and the taxpayer of Alameda losing income in the range of $36,918,000, when combined with the marked inequity in the rental per square foot rates. The combined financial impact of these terms is depicted in the attached Exhibit `B ". 3) THE PROPOSED LEASE'S TWENTY YEAR TERM DRAMATICALLY INCREASES THE LOST INCOME EFFECT TO THE CITY'S TAXPAYERS. The Mariner Boat Yard lease has a length of 10 years. Svendsen's Boat Yard's original lease term was for 7 years and it was extended to 15 years. Long term leases are not inherently problematic as long as rent discrepancies which typically occur over extended terms are accounted for with annual CPI adjustment provisions. There is no such adjustment in the proposed lease. The proposed lease also varies from the other leases of comparable properties in granting a renewal option at a discount from "fair market value." Neither of the comparable leases contains such a provision. It is fundamentally unsound fiscal policy to tie the City down with a 20 -year term without annual lease increases based on the CPI. The lack of such a provision in the proposed lease will exacerbate the loss of income to the City in what are projected to be particularly difficult fiscal tunes. The unwarranted lease advantage that would be granted Nelson would also totally destroy any competitive balance among boats yards in Alameda and throughout the Bay. CONCLUSION The attached article in "Boat & Motor Dealer" (Exhibit "C ") details how Nelson's Marine has become "a waterfront service mecca" and credits them with creating "a marine complex that is among the largest in California, with a relatively small investment ". The facility is described as a "marine mall" in which Nelson's sub - leases space to nine other marine Honorable Chair and members of the ALAMEDA REUSE AND REDEVELOPMMENT AUTHORITY November 8, 2004 Page 4 businesses. Not only does Nelson's charge its subtenants rent, it also receives 15% on the sales it refers to those sub - tenants. The article makes it clear that Nelson's Marine is in the real estate business as much, if not more, than in the boat repair business. The City of Alameda owns this prime Bay Front property. It is the City, as prime landlord, which should be getting a fair market return on its real estate assets. The boat repair business is a small industry. In the immediate Bay Area there are only 11 boat yards. This submission speaks for four of those yards. Those boatyards, having reviewed the proposed terms of the ARRA's renewal of its sublease to Nelson's Marine, unanimously agree that the proposed terms will be detrimental to fair market competition in the marine repair industry. The above analysis also demonstrates that the proposed lease will dramatically reduce the Fair Market return that the City and the taxpayers of Alameda can reasonably expect to realize from this Prime Bay Front Property and will result in tens of million of dollars in lost revenue to the taxpayers of the City of Alameda over the proposed 20 year term of the sublease. In the interest of fair competition, and in the interest of fiscal responsibility, we respectfully urge the Board to reject the proposed lease. Respectfully submitted, GIBSON ROBB & LINDH LLP By Peter A. Lindh Exhibits: (A) Summary of Alameda Boat Yard Leases (B) Summary of Loss (C) Article from "Boat & Motor Dealer" August 2003 (D) Comparable Alameda Boat Yard Rent Exhibit "A" SUMMARY OF ALAMEDA BOAT YARD LEASES Svendsen's Boat Works • This lease is dated 17 September 1993. It was to have expired in November of 2000 but was extended until April 2015. There are no provisions for extensions or discounts from "fair market value" if the lease were to be renewed. • The base rent was $20,000, which increases each year by the CPI after 2000. This translates into approximately $21,730 in 2004. (We do not have the exact amount to the penny Svendsen is paying). • This rental portion of the lease in not broken down between yard and buildings. Nor are there any breakdowns on a dollar per square foot basis. Although the lease does not specify the price per square foot, it can be calculated by taking the total rent currently paid and dividing by the square feet rented. • The parcels of this lease consist of Building 12 with an area of 16,188 sq. ft (2nd and Mezzanine floors have not been included as they are reportedly dilapidated and "unusable ") and Building 36 with an area of 4,995 sq. ft. This totals 21,183 sq. ft. for the two buildings. • The total yard area is calculated at approximately 60,000 sq. ft. • The lease was modified in October of 1996 to include additional space at the rate of $6,000 per month, to increase each year by the CPI after 2000. This should result in additional rental in the range of $6,519 per month in 2004. • The modification included additional "dock space" with an area of 6,210 square feet at $2,000 per month or approximately $0.32 per sq. ft. per month, in 2000. • The modified lease also includes Building 34 which has 8,040 sq. ft. of space rented at the rate of $4,000 per month or $0.49 per sq. ft. per month, in 2000. • There is a second lease for Building 33, with rental space of 8,040 sq. ft. which expires in November 2005. The rent started at $3,800 and increased each year by CPI, which translates into approximately $4,128 in 2004. • The sum of the Buildings; # 12, # 36, # 34 and # 33 equals 37,263 sq. ft. 1 EXHIBIT "A" • The sum of the yard space, 60,000 sq. ft., plus the "dock space," 6,210 sq. ft., equals 66,210 sq. ft. • The total lease payments adjusted by CPI should be approximately $32,378 per month [the Appraiser stated that it was paying $32, 596 so our estimate is very close.) If you "back into" the price per square foot for yard space this equals approximately $. 017 per sq. ft. for the yard space and $. 0.57 per sq. ft. for the buildings. • As a simple means of making a comparison between the Svendsen and Nelson's leases, if the total square feet rented is divided by the rent paid, this produces a per square foot rent of $0.31 for Svendsen versus $0.06 for Nelson. On a percentage basis, the proposed Nelson rent is less than 20% of the rent Svendsen pays. Mariner Boat Yard Lease • This lease is dated 15 February 1996 with a term of 10 years. There are no provisions for extensions or discounts from "fair market value" if the lease were to be renewed. • The "Marine Center Lease" consists of office & shop space identified as #10.23, #10.24 and #10.25 with a total of 1,205 square feet. At the inception of the lease the price per sq. ft. was $0.50. The yard space is not specified in sq. ft. but it is reportedly 44,000 sq. ft. The lease identifies the starting rate for the yard space in February 1996 as $5,600 per month or approximately $0.13 per sq. ft. The lease identifies 240.5' of lineal dock space at a starting rate of $1,322.75, or $5.50 per foot, which is now renting for $6.00 per linear foot. • There is a second lease consisting of office & shop space identified as #10.1D with 971 square feet. At the inception of the lease the price per sq. ft. was $0.50. The base rent was $485.50 at the inception and has increased to $728.00. • The sum of the office & shop space rented in both of the two leases equals 2,176 sq. ft. The current rent for this space is $1,632 or $0.75 per sq. ft. • The sum of the yard space rented equals approximately 44,000 sq. ft. The current rent for this space is $8,910.25 or $0.20 per sq. ft. • In addition to the fixed rent specified above, the "Marine Center Lease" also contains a provision for the Tenant to pay fees based on its gross sales which, "shall include all sales made...received by Lessee for all other sources of income derived from the business conducted on the premises." Mariner is paying 6% of gross revenue that exceeds $750,000. Mariner Boat Yard informs us that its sales for 2003 were $1,400,000, Deducting the $750,00 threshold leaves $650,000. Applying the 6% to the $650,000 in revenue above the threshold results in an additional $39, 000 rent for the year. On a percentage basis, the fixed rent paid by Mariner Boat Yard is 16.5% of the gross revenue threshold. [Annual rent per sq. ft, $126, 504 (not including berthing), divided by threshold gross revenue, $750, 000]. As discussed below, the recommendation for 2 EXHIBIT "A" adoption of the lease is misleading in suggesting that the Nelson and Mariner leases are similar because they each provide for a percentage of gross income above a certain threshold. • As a simple means of making a comparison between the Mariner and Nelson's leases if the total square feet rented is divided by the rent paid, this produces a per square foot rent of $0.30 for the Mariner lease versus $0.06 for the Nelson lease On a percentage basis, the proposed Nelson rent is 20% of the rent Mariner pays. The Proposed Terms of the Nelson's Sublease • As to the sublease pertaining to Premises "Building 167" [The Sublease that is the subject of these hearings] there are discrepancies between the prior lease and the proposed lease in terms of square feet rented. The prior lease listed the "Building" as having 55,400 sq. ft. of space versus the proposed at 53,785. The "Land" is stated to be 201,275 sq. ft. versus the proposed sublease figure of 186,872 sq. ft. The following calculations have been based on the prior figures but may easily be adjusted once the discrepancies have been explained and the accurate figures have been ascertained. 1 • The proposed lease does contain language requiring the tenant to pay a percentage of gross sales above a fixed threshold, based on the square feet rented. • However, the rent charged on the fixed threshold is 6% in the proposed Nelson lease, versus the 16.5% rent charged in the Mariners lease. (a) The Mariner Boat Yard lease specifies that when the gross sales exceed $750,000, Mariner pays 6% of excess revenue in addition to its fixed rent. As detailed above, the $126, 504 fixed rent paid in the Mariner Boat Yard lease represents 16.5% of the threshold gross sales figure of $750,000; (b) In the Nelson lease, however, the same 6% of gross sales rent is charged on both the threshold and the excess gross sales. If the 16.5% of a threshold gross sales formula used in the Mariner Boat Yard lease were used in the proposed Nelson lease, the corresponding threshold for Nelson based on a market value monthly rent of $69,0002 would be $$4,908,845, and the annual fixed rent would be $828,024, not the $203,316 proposed. (c) Based on the revised averages of the two comparable Alameda boat yards, Nelson's monthly rent should be $85, 752 per month or $1,029,024 per year. (See attached Exhibit "D') I Nelson's advertises "132,000 sq. ft indoor facility on 15 acres ". The two leases state however that Building 167 contains 55,400 sq ft. and Building 66 contains 28,542 sq. ft., which total 83,942 sq. ft. or 1.92 acres. Where is the other 48,058 sq. ft. of indoor space? The lease for the "Land" is 201,275 or 4.62 acres. If the indoor space is added to the "Land" this is a total of 6.54 acres. Where are the other 8.46 acres? This discrepancy should also be addressed and resolved. 3 EXHIBIT "A" 4 EXHIBIT "B" SUMMARY OF LOSS Proposed Extension vs. Fair Market Appraisal Year One - Mo. Pmt. Year Two - Mo. Pmt. Year Three - Mo. Pmt. Year Four - Mo. Pmt. Year Five - Mo. Pmt. Year 6 - Mo. Pmt Year 7 - Mo. Pmt. Year 8 - Mo. Pmt. Year 9 - Mo. Pmt. Year 10 - Mo. Pmt. Year 11 - Mo. Pmt Year 12 - Mo. Pmt. Year 13 - Mo. Pmt. Year 14 - Mo. Pmt. Year 15 - Mo. Pmt. Year 16 - Mo. Pmt. Year 17 - Mo. Pmt. Year 18 - Mo. Pmt. Year 19 - Mo. Pmt. Year 20 - Mo. Pmt. Sum Of Rent Pmts. Over 20 Years As Proposed Before ARRA Adjusted Every 5 Years Based on Fair Market Following Prior Lease Adjusted Annually $ 16,943 $ 85,752 $ 16,943 $ 91,652 $ 16,943 $ 97,957 $ 16,943 $ 104,697 $ 16,943 $ 111,900 $ 18,637 $ 119,599 $ 18,637 $ 127,827 $ 18,637 $ 136,622 $ 18,637 $ 146,021 $ 18,637 $ 156,067 $ 20,501 $ 166,805 $ 20,501 $ 178,281 $ 20,501 $ 190,547 $ 20,501 $ 203,656 $ 20,501 $ 217,668 $ 22,551 $ 232,644 $ 22,551 $ 248,649 $ 22,551 $ 265,756 $ 22,551 $ 284,041 $ 22,551 $ 303,582 $ 4,717,920 $ 41,636,680 City of Alameda will loose $36,918,760 with this proposal. L Iow Nelson's Marine 'toned empty Navy hangars into a 3aterfront service mecca -,. :...,FORD 1..FATXE An oasis of boating servi f y les on a former tlte 1Vcsterlint41t tip of Alameda 1,1and, iniles rrom the nearest marina. Custoini:rs who Cattle by 1111(1 would I ' de. 111;1% have seemed a little have to wend their way through a inafe a/.% it tirst. MOS( good ideas of street, and a ,ceminely endless , Take a thrivifte boat repair wilderncy, it asphalt runways, past lots in It heart id the Inistlirql beinn ',kiwi:, reclaimed by nature. Thai and transplam 1 to was if the% came ;It all. • a ft tii huildine, or the Naval Air Statiom Changing times and fortunes T„ „.a. at iiJie ;0:!!!,-, the In 1995, when On, idea First ,uticed. ; ;; •. Nelson's \-larnle as, boa!, LIi a former industrial waterIvont ,ite The ;in,: a location had provided a steady stream or work }cm!' a(.11:1;:cnI t.() the hind strine iit i iL ItL MC the CNI1.1■IrV hek■ct'il Oak land and the much quieter Command', Naval Supply vessels island community id` Alameda. Carl loonane acer lk' barren %aril_ there Nelson had started the husiness tell to he seen, year, earlier, at the tee of 25. and it had ThCre tt Mild also he no marine busi- crown steadily, earnin;.! about SI nut- Iie;ir!i\ a the site was located at lion in revenues that tear, • $1.5-2 ny base ,\'Uleotr\ rnrrintains 1000 feet of ..rvirr -dock space on a water - (rut audergoing a major—and h i e turic— transforntatiati. t 1..![ ,1 W;:S starting feel the limitations of its location. There were few buildings on the prop- erty, so all the major work had to be done outside. This put severe restric- • on their painting operations. and slowed them down during Northern California's notoriously wet winters. C'alitornia's economy was also boom- ing. in the mid -'90s and Carl and his father, Hal (who had .joined him in the venture).. sate nothing but growth on the horizon for boating in the Bay Area. Meanwhile. as Nelson's was expand- ing.. the Alameda Naval Air Station, at the opposite end of the island, was slowly sinking into an uncertain fate as a result of the military's consolidation that began in the 1980s. By 1995, much of the facility was empty, and only helicopters were using the hangars and runways. Top: r1 view from the catwalk at the edge of a former hangar. showing one of Nelson's Mar'ire'.v general service bays. Middle: .1 single bay from the old hangar facility provides ample space for their small, Ma diverse, new -boat offerings. Boitom: The Lively, a Fort-65, is currently undergoing a complete rebuild, c.rlinutted !,, tike Ntst r,tv'e• n r fr ■07■! ,'r,:/ /Mighty Floating an idea In the fall of that. year. John Platt, a sales rep for West Marine, mentioned to Carl that the Navy was rumored to be plan- ning to lease some of its unused land, including a complex of aircraft hangars. The lure of those expansive facilities and the wide -open spaces around them would prove to be irresistible. ell anti had to ctetii n a facility for a boat yard. I think an airplane hangar is 1Ia per'fec't thing," says Carl. —Idle old Ittci1ity was totally inadequate for indoor work. ft had only about half the outdoor space of what was available on ,' Navy's land. So we contacted the .._,.tnagenlent team that the City of Alameda had put in charge of develop- ing the site. We got a very positive reception from the city, and we ended up signing a five -year lease. We were 1ietited to that short time -span because • Navy was still involved with the •etse, they were still in transit. t' ;y hadn't really defined what tl were going to do.' Nothing ventured, nothing gained... \ \'hen Nelson's began moving into the airplane hangars in the spring of 1996, the' l -:SS Carl Vinson was still docked nearby. Helicopters made regular flights into and out of'the base. provid- ing a daily reminder that Nelson's \•arine had a tenuous grip on that land. The Navy could easily change its mind. and the entire facility would he uproot- ed after five _years. was "Iwas a big risk," Carl recalls. "Th,-r• was no 1)1;111, not illtich w'atcr- i3Or,, :",vHlt[He on the Bay, If this hadn't \c orl:ed ,nn. there'd really he no place lc) It v, t.ts a leap of faith that would leave the Nelsons in an anxious state of limbo for the first five years at the new loca- tion. "We had to pat off all our major physical upgrades to the building," Carl adds. "We even put off any real land - scaping— instead, we put all the plants in pot,, and every time we went to do something, we had to ask ourselves, "How permanent is this going to he'!' Even with all that care to not over - in■ est. moving Iil Was still a costly undertaking. "Vv'e had to build our own docks and upgrade the building with electrical wiring and sprinklers." Carl says. "By the time ■ve got it all done. we had spent about $7.50,000. We never would have gotten the money out of tat investment if we had to leave after veal's." Fortunately, upgrades required on the pitysieal structure have been minimal. had predicted, the facilitie•t u'nI rust to he ideal for boatyard work. I_ar?e bays allow for many skies and shape, of boats; offices ;;re located in the same building,; balconies built on the edge of the office area bird's -eye view for keeping an eye on the facilities; and large asphalt lots sur- round the building, providing plenty of space for moving and storing boats. Still, their careful budgeting has not prevented Nelson's from running a full- m 0 17 seri tee ing to Art 1 eat, l_' , been die yard manager for 1`. :r, �\e can repair almost every - ti \A, don't cove•. ,iirico hue.. r ot:a to one of ti. ;Hoe', not Egos'(, thev I,. r. 'si.,son'..'. 3vc!fiscs the folloi., er\ ,es on their \\eb kite: !:ibei lepair: prop and shaft work: rep,iir and r.liilds: rigging: woUCi v�a'1..: shill paintirlg services: and rerun and Ill,t,lilat!i. ns. \rill to 111. the mice -I'. sees je—tle-,.tion. \\ Inch et)•;rs .tl \. i.':ose , . I.:I:ht', • cutlass be:iri11 :.. Si ��, il, . 'tlEdl...nd rigging. ing pot CC�fYi' s Et 2aSt !sees ru!::il :",a1 \ersion pro\ed . iii..,!llplie-:ted. the Nelson (.gees another :t'.illenge •- -ho\\ top her flu :r,: ss , to join tlleul. The k.ne:w the site had great potential. hilt they also brew it \voulct only be fully realized \vith more marine busi- nesses in the area. C'u,ton,crs. aster all. 1. would need good reason to drive thty;e roads ti;rouell the old base `ii,'niesses ..,, :i d only come u1 ner,u:id,:di that many ,5:.td loin them. It would take a t.::!1! :,m, cajoling. and perhaps somi.• blind Inch, hill if enough people belie . :. t1 oho,: dust% hangars represent-- .. a ;t,,, ;I hostnes • i)ppt,l'itlllity, n(,ihe\ \\me1(1 :pit•, lets lies. r: .r's. wooden hot; builders. ,.ativi,s :.lh ;l ii e'. r,. solli bak- ers. and i/o:ti h:i :1•.er. None were Lune h� :sines : un their own. 1)1, v. hen They east their hots in \yid) Nelson's. they 10011(1 tIie1ioelye, in 12.iH)(1 company, id, !room - - if :I steady stream of le e1,1:11)1,A. alga hire ;old provide alt the se: iri'.i ,stag company:' For one, 'nelson', tltld neither the time nor the mono, to ilve.,l in such an arrantiot.l personnel expansion; and secondly, the till— o—familiar shortage of skilled .•.,,r` -.erg. especially for the often ego. tsar!. ;riots in•.0I\ed ill high -end 'sight made this oath ini ractical. -1::::ner tioiii , ir, to h .vervthin:. !ieu1'ed it was more Impo-tant t,5, ,I, to locus on what we were good nt. • („',•l says, and we'd firing nailer htls!rl;`tisc; 111 to cover the other areas. 1`ilat . \told keep the duali- rt ii1 lit f1l1' 1 e1)." father :doses that seri To 1U1. i:v. :\ •7a'.5 IbIl ; >�+r,rlin,� \I)). " ))i ?CI1- (c 1C16.1 ' "'nt ornr adding. "(.)rganii.ing a lot of highly .killed boat workers can be a little bit like tr\ inc to herd cats." This he says. is especially true with a facility such as Nelson's that serves a wide range of craft, from classic wooden sailboats to high- performauee racing boats. as well as all kinds of powerboats, ..Labor is :: constant problem." he continues. •'heealse people \yho work on boats are a special breed. Some of the most skilled ones are very inde- pendent- minded people. You give them space and some freedom to run their own shops and they do a great job. Boat- customers can he much more demand- ing than automotive customers, simply because they know a lot snore. "There's no room for error, and that level of quality is hard to maintain if you have to manage a large ,hop." A marine mall is born "It was difficult to et the tint two busi- nesses to come There.' Carl recall:. •'\Vu had nothing to show. jut some ware- houses and a big empty lot. But once they moved in. \ve got the Travelift led operating, so 11 Carle easier to sub -lease the space." "Today Nelson's Marine shares the facility with nine other marine busi- nesses: Fred Anderson \\oodchi Boat\vorks: Jack D. Sculii,)n Yacht >ervieea: Metropolis Metal Works: Neptune b'larine Towing: UK Sail Makers: .Pal: Cal Canvas; Christine Fic.gert, marine :waist: Drake Marine: and Hansen Rigging. Jaek Scullion was one of the first of the sub - tenants to move in, In fact. his shop was up and running at the new .1!i!rough if Ni', 1!,lr , 001" ,r ..u;c'!l,,'year7i,uJ iii,' ,'1,mpl,..v, .! It "fi Spa - ehnl l t nl,tt4 Jr to : ' , 1,0; Rill -Sc') riot rig- ging ; work on !£)1::;c'";ifl I11.,• loa tttzorl before Nelson's had complet- ed their move. While Jack's rigging and electrical service shop is as large as many independent repair shops, it occupies only a third of one of the hays. Next to him. to the east. is Fred :Anderson Wooden I3o;uworks (which today contains an old teak Chinese junk in the yard for rc'.fil1. To the west is it space that Nelson's is using for a long- term project "This set -up has worked quite well for one," Jack says. "I've got my niche in the local community. and being here exposes me to more potential cus- tomers. It also gives Nelson's the opportunity to use hoe a. a subcontrac- tor. or refer people to me tor the skills they don't have. For instance. with the boat I'm working on now. J subcon- tracted the hull painting to Nelson's. We follow the accepted industry -stan- dard 15 percent discount for subcon- tracting. 1 do work for Fred : \nder,nn well. We all end up doing worts: for each other•, so everybody's busy." Making the best of the location The Nelsons' ambitious plan has (vorked. and provided them with some unforeseen opportunities. Shortly after Iiln■ing u) the 0i\\ base. Carl began :. yacht brokerage. rind in 21)01 it merged \vith Perfection Marine, which had been one of his tenants. Under the name of Nelson's Yachts, the brokerage now offers some 90 boats, 30 of which are kept on display out of the water at the yard. In 2000, the■ also began sell - ing new boats. infertile two foreign brands. Bavaria and Sydney, and a small line of trailerable sailboats. Bill Xavier, who ran Perfection Marine before merging with Nelson's. says. "We have a strong brokerage, so it minimizes the overall risk. Thai allows 1.0 take other risks in selling these lines that are new to the American mar- ket. That means we rnay be getting in on the ground floor of something big. And no [muter what happens, we've always got the brokerage to fall back on when new-boat sales slack off. The bro- kerage has been steady all along." The rare privilege of having "sur- plus" space has not been lost on Carl, and he's done everything he can to make the most of it—always, though, with a keen eye towards bringing more people out to the facility. He's offered dry storage but combines this with a do-it-voursel I repair area. There, boaters can make almost any repair imaginable. \vith the exception of spray imd welding„And, by the way, it's not unusual at all for do-it-your- selfers to end up requiring the profes- sional services of Nelson's or one of their tenants. ,A perfect example of the advantages of the size and diversity of the Nelson's N'farinc complex is the work being done on a hiyh-speed cruiser, currently underyoing a complete rebuild. The Farr 65 Lircty is owned by John Townsend, a custom-home builder who describes himself as "very meticulous." He sa■.--. he shopped around all over California before settling on Nelson's For this massive job. By the tune the work is complete. Live/y will have been in the yard for over a year. t didn't like the boat's interior lay- out. so they've literally taken the boat down to a bare hull,- Townsend says. "They've also re-powered, and re- plumbed the vessel. I chose to come here because they offer so many servic- es at one location, and the quality of all the work is high. They vere also able to keep the boat indoors throughout the project, \vhich [nom facilities: can't offer. And. they understood my meticu- lous nature and were willing, to work with that." Looking ahead In the relatively brief history of .Nelson's Marine, there have been risks, and some have been hip. But for the most part, the steps have been measured, and the busi- ness model has rested on solid founda- tions. They have imn,ied to create a marine compieN 11).,1 is iimong the iii (aliforni:1 \-\ ill) a relatively invesiinent. -1They've also made )!)sine inroads into new-boat sales, all the while preserving a solid Ibunda- tion of brokerage sales. And so there are no huge floorplans that -might cripple .the company in a downturn. When we visited in May and Carl gave us a tour of the facility, he was proud to point out that he may finally he able to set aside some of his more cost-conscious ways. He had just re- signed his lease. guaranteeing the busi- ness a home at that location for the next 25 years. "It's a big weight oft our shoulders." he said, "and it means we can start doing a lot of little things we've had to put on hold." In addition. the City of Alameda has approved a developer's plan for the rest of the old base, which includes an MO- slip marina to be built in the same lagoon as the boatyard's docks. This plan will bring housing and many more boaters to the area, And when they come. Nelson's will already be there, ready to service the new boating com- munity. Then. it's likely that the risks the Nelsons have taken and their frugal approach to business will pay a greater dividend than they ever iri,agined. st, Vi/6:440itn _ 1.1 Top tvlarine:Agri .„ ;from Sin 1 it e NI a itise. I)calec 1)1i evt lr,ni (he Manulacittrel • . . . . . . . • • • • ORDER FROM US, WE CAN Sri 1111 C TO VOL) 1 I IODAY to SIGN UP for your DEALER ACCOUNT, or visit our website 3t www.marinedealerdirect.c ©m marine dealer 0 I fl E C T CIRCLE 114 1 0 0 0 m L). rsi 0 Exhibit "D' COMPARABLE ALAMEDA BOAT YARDS - BASED ON SQUARE FEET RENTEE Dock Area Price per ft. 270' $5.67 per ft. mo. 400' $6.00 per ft. mo. in cn $5.83 per ft. mo. Office/Shop Area Price per ft. 37,263 sq. ft. $0.57 sq. ft. mo. 2,176 sq. ft. $0.75 sq. ft. mo. . = ci u) a) n- N',.. en •t-- 6 E 6. th clo (0 ci *A- Yard Area Price per ft. 66,210 sq. ft. $0.17 sq. ft mo. 44,000 sq. ft. $0.20 sq. ft mo. 55,105 sq. ft. d E ci- C17 C) 11... 0 10 Tenant Svendsen's Marine Mariner Boat Yard (Average of Comparable Yards in Size Average of Comparable Yards $ Per Sq. Ft. a. E ci 0z 0 C\I (Y) NELSON'S MARINE RENT BASED UPON COMPARABLE BOAT YARD RATES TO ESTABLISH MARKET VALUE, INCLUDING 1O% DISCOUNT Dock Area Price per ft. 400' $5.25 per ft. mo. 6 E cT; ci. 0 CNI- L: >, 'Li 0 - (C.I Office/Shop Area Price per ft. 55,400 sq. ft. $0.59 sq. ft. mo. $32,686 per mo. $392,232 per yr. Yard Area Price per ft 201,275 sq. ft. $0.17 sq. ft. mo. $34,216 per mo. $410,592 per yr 6 E L. o CNI 0 CD Crc CD (13. $828,024 per yr. >, ,.. 0 a 0 0 0 „... 0 CNI ta $1,029,024 per yr. $85,752 per mo. Nelson's Area Based on Lease Comparable Alameda Boat Yards, Less 10% Monthly Rent Based On Sq. Ft. Rented !Yearly Rental On Sg. Ft. Rented COMPARABLE MONTHLY RENT - Per. Ft. COMPARABLE ANNUAL RENT - Per. Ft. COMPARABLE PERCENTAGE OF GROSS RENT ITOTAL COMPARABLE ANNUAL RENT DUE TOTAL COMPARABLE MONTHLY RENT DUE TO: FROM: SUBJECT: DATE: M Realty Group "ATTACHMENT 2" MEMORANDUM Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority David A. Jaber Regional Vice President Nelson Marine Lease Renewal February 17, 2005 A proposal to approve the lease for Nelson Marine for Building 167 was submitted to the ARRA Board on September 1, 2004. When this lease was negotiated, five (5) important goals were achieved. 1. Offer a lease term long enough to provide an incentive for the tenant to invest significant capital into building improvements. 2. Guarantee the ARRA a steady income stream over the life of the lease, starting at 90% of Fair Market Value (FMV). This was one of the renewal requirements of the existing lease. 3. Provide the ARRA with the opportunity for additional income should the tenant's sales exceed a certain threshold (percentage rent). 4. Allow the ARRA to generate additional income by including a clause in the lease, which requires the tenant to share with the ARRA, 50% of their net proceeds derived from sublease income. 5. Provide the future developer the right to decrease the total leased area, when necessary, so as not to negatively impact the future development. Four Concerned Bay Area Boatyards opposed the Nelson lease on behalf of themselves and the "Public Interest" ( "Four Boatyards "). The attorney representing the Four Boatyards, at that time, raised concerns with regard to a June 10, 2004 Rent Survey that was conducted by Mike Dunn of Dunn & Associates, an MAI appraiser, on behalf of PM Realty Group. According to the calculations of the Four Boatyards' approval of the lease transaction would result in a $34,308,941 loss to the City of Alameda during the proposed 20 -year lease term. At the conclusion of this agenda item at the ARRA Board Meeting, PM Realty Group was asked to analyze the rent differential provided by the Four Boatyards' attorney so that the City could be certain that the terms of the Nelson Marine lease are competitive with other boatyard leases within Alameda. The initial attorney representing the Four Boatyards has subsequently been replaced. The new attorney is now contending that the proposed 20 -year lease would result in a loss of $36,918,760 to the City of Alameda over the term of the lease. According to the Four Boatyards' attorney, the three primary factors that result in the disparity between the proposed lease and the other Alameda boatyard leases, for establishing the fair market value of the property are: 1. Grossly disparate lease rates per square foot and percentage of gross revenue provisions; 2. The lack of annual Consumer Price Increases [ "CPI "] in the proposed lease; 3. The [excessive] proposed lease term the length of the lease] Based upon the direction provided by the ARRA Board, and taking into consideration the recent memorandum from the Four Boatyards' attorney, PM Realty Group, working with Dunn & Associates, has completed the analysis that compares the Nelson Marine lease with those of two Alameda Boatyards. The best alternative to responding to the ARRA Board's directive is to address the specifics raised by the Four Boatyards' new attorney. The following sections will address the three concerns and then provide a summary at the end. Lease rates per square foot and percentage of gross revenue provisions The steps that were implemented for analyzing the Nelson Marine lease to that of the other two Alameda Boatyards were as follows: 1. Determine the site coverage ratio for each of the properties. 2. Determine the adjustment for gross rent to net rent. 2 3. Compare the rent for each lease. Site Coverage Ratio Site coverage ratio is a calculation used to determine what percentage of the land is covered by improvements. The use of site coverage ratio allows for the comparison of different size properties, since each is broken down to a percentage of the total coverage for that particular site. In addition, the ratio allows for adjustments for the rent per square foot depending upon whether or not the comparable property is either superior or inferior to the subject property based upon the respective site coverage ratio. It should be noted that the land used for the calculation is all land including that which contains improvements. Site Coverage Ratio = Total Building Area / Total Land Area The lease for Nelson Marine specifies that Building 167 is 53,785 square feet and the land contained in the lease is 186,872 square feet. This results in a site coverage ratio of 29% for the Nelson Marine lease. The leases and information provided by the Four Boatyards' attorney did not specify the total land for each lease. Instead building space and yard space were provided. Therefore, in order to provide some comparison between the Nelson Marine lease and the two Alameda Boatyards we have included an attachment that indicates our calculation of the site coverage ratio for all three properties. To make the comparison equal, we have added the building square footages to that of the yard leases for the two comparable Alameda Boatyards. The leases for the two comparable Alameda Boatyards were not specific as to the amount of yard square footage and the information used in our analysis was provided directly by these tenants. Nelson Marine has a similar site coverage ratio to Alameda Boatyard #1 (29% to 33 %). Alameda Boatyard #2 is not a good comparable since the site coverage ratio is significantly below the ratio of the other boatyards. However, in an effort to include Alameda Boatyard #2 as a comparable in the rental survey per the ARRA's request, the rental rate per square foot of building space will need to be adjusted downward to reflect the disparity in the site coverage. The discount or adjustment applied to the rental rate will be 84 %. This discount rate is reflective of the difference between the site coverage ratio of Alameda Boatyard #2 and Nelson Marine. Gross Rent to Net Rent Adjustments In order to compare any lease it is important to make certain that the lease types are either similar or adjustments are made to compensate for the difference in the lease terms. The two primary types of leases used and a simple definition are as follows: 3 Gross Lease — Tenant pays rent and landlord pays all expenses. Net Lease — Tenant pays rent and all expenses. There are some variations to these types of leases so a review of the lease terms was necessary to determine the differences between the Nelson Marine lease and those of the two other Alameda Boat Yards. After review of all three leases it was determined that the Nelson Marine lease is a net lease while the leases for Alameda Boatyard #1 and Alameda Boatyard #2 are modified gross leases. The primary difference between the two lease types is establishing who is responsible for the payment of real estate taxes, property insurance and maintenance of the building. In order to compare the Nelson Marine lease to the two other Alameda Boat Yards, an attachment has been prepared which shows both a range and an average cost per square foot for taxes, property insurance and maintenance. These numbers, which are based upon industry average, were provided by Dunn & Associates. The `gross rent' to `net rent' conversion is $0.45 per square foot. Rent Comparison The next step in the comparison was to compare the per square foot rent for each of the properties on a net lease basis. The monthly rent provided by the two Alameda Boat yards included pier rent. Since pier rent is not included in the Nelson Marine lease, an adjustment was made to remove the pier rent for the two comparables. The monthly rental payment was then broken down to a rent per square foot of building improvements. Because of the lower site coverage ratio of Alameda Boatyard #2, a discount of 84% was applied to the rent per square foot. After applying the discount the adjusted rate per square foot for Boatyard #2 is $0.79 on a gross rent basis. After determining the adjusted rent per square foot for each of the leases the conversion to net lease could be performed. This was accomplished by deducting the gross to net rent expense of $0.45 from each of the gross leases. On a net rent basis the range from the three leases was from $.34 to $.38 per square foot. The Nelson Marine lease is in the middle of the range when the rate is adjusted for 100% of fair market value. Percentage Rent The Nelson Marine lease contains a clause requiring the tenant to pay 6% of sales in excess of $3,388,600 in addition to the monthly fixed rent. Alameda Boatyard #1 does not have a percentage rent clause in their lease. Alameda Boatyard #2 has a clause requiring the tenant to pay 6% of all sales in excess of $750,000. 4 The dollar amount of sales after which percentage rent is paid, is called the breakpoint. The breakpoint in the Nelson Marine lease is $3,386,800. The breakpoint was calculated by dividing the annual rent by the percentage rent or as follows: Monthly rent - $16,943 $16,943 X 12 months / 6% = $3,388,600 This method of calculation for determining the breakpoint in the Nelson Marine lease is consistent with industry standards or "market" for determining the calculation for percentage rent. This was confirmed with Dunn & Associates as well as representatives of Cushman & Wakefield. The percentage rent calculation for Alameda Boatyard #2 is identical to Nelson Marine with the exception of the calculation of the breakpoint. The dollar amount in which percentage sales are then calculated is below the breakpoint calculation for Alameda Boatyard #2. This has resulted in Boatyard #2 paying a higher effective percentage rent. Since the renewal is subject to an existing lease clause that requires the calculation of "market rent", consideration was only given to the standard market calculation of determining the breakpoint for the Nelson Marine lease. Adjustments in rental rate The Nelson Marine lease includes a fixed increase of 10% in the monthly rental every 5 years. The leases for Alameda Boatyards #1 and Alameda Boatyard #2 contain annual increases based upon the Consumer Price Index ("CPI"). The use of either a CPI or fixed rate calculation has no impact on determining the market rate. The fixed rate increase is a common means of calculating increases in industrial real estate. Further, the average of all local CPI increases over the last ten (10) years, as derived from the Bureau of Labor and Statistics, is 2.4%. In fact, if one were to consider only the last few years, the recent CPI average would be even lower. As mentioned previously, one of the primary considerations when negotiating this lease, was to provide the ARRA and the developer the flexibility to downsize the total yard space provided in the lease, as needed in the future, to facilitate and preserve future development plans. This lease provides for a 76,000 square foot or 41% potential reduction in space. Therefore, given that the average annual increase of 2% (10% every 5 years) is within the range of current CPI increases, and given that this was contemplated as the trade-off for the ability to significantly downsize the space in the future (with no decrease in rental rate), it is our opinion that the 10% increase, as applied in this lease, is appropriate. 5 Lease Term The original proposed lease term for Nelson Marine was for 20 years. The Tenant requested this term in order to amortize the cost of improvements to the premises. Due to new discussions between the Developer and Nelson Marine about the future development plan, the proposed lease term has been reduced to 10 years. Alameda Boatyard #1 was previously under a seven year lease and is currently operating under a lease with a term of 14 years and six months. The lease for Alameda Boatyard #2 is for a term of 10 years. Both Alameda Boatyard #1 and Alameda Boatyard #2 are leased from landlords who have developed the property as a boatyard operation, which includes the use of equipment. Conversely, Nelson Marine, as the tenant, is undertaking the responsibility of putting the marine infrastructure in place. Please also note that the improvements are confirmed to be consistent with the long -term reuse of the property. In addition to the Nelson Marine lease, The City of Alameda has previously allowed for long -term leases on other marina sites. While Alameda Point has special considerations, `long term' is generally considered any term of 10 years or greater. More specifically, the lease for Encinal Industries at Grand Marina and the lease for Encinal Industries at Fortman Marina were both for 25 years with 25 -year options. The lease term for Nelson Marine is appropriate given the specifics of the site and is common to other City of Alameda Boatyards. Summary As indicated in our analysis, the lease for Nelson Marine is at the prevailing market rate, the rental increases are appropriate for this type of lease and the term is consistent with other Alameda Boatyards. Approval of the Nelson Marine lease is therefore recommended. 6 "ATTACHMENT 3" Dunn & Associates REAL ESTATE APPRAISERS AND CONSULTANTS RENTAL SURVEY OF NELSON'S MARINE 53,785 SQUARE FOOT WAREHOUSE ON A 4.29 ACRE SITE 1500 Ferry Point Alameda, California For Mr. Mike Hampen Property Manager PM Realty Group Real Estate Services 2175 Monarch Street Alameda, California 94501 As of June 10, 2004 1657 N. California Blvd., #208 • Walnut Creek, CA 94596 • Phone: (925) 472 -5850 • Fax: (925) 472 -5855 June 11, 2004 04 -05 -52 Mr. Mike Hampen Property Manager PM Realty Group Real Estate Services 2175 Monarch Street Alameda, California 94501 Re: NELSON'S MARINE 53,785 SQUARE FOOT WAREHOUSE ON A 4.29 ACRE SITE 1500 Ferry Point Alameda, California Dear Mr. Hampen: Al your request and authorization, I have been requested to estimate the market rental rate for Nelson's Marine located at 1500 Ferry Point, in the City of Alameda, California. The subject improvements consist of a 53,785 square foot warehouse built -out with 19% office space on a 4.29 site indicating a site coverage of 26 %. The office portion of the subject property is two -story and located on the west side of the property. In addition to the main structure, the leasable area includes a boat launch facility and a 400 linear feet of pier located across Ferry Point. The yard area is enclosed with a cyclone fence and is accessed from the northwest corner of the property facing West Oriskany. The subject is located on property which was previously the Alameda Naval Air Station at the northernmost point of the City of Alameda. The purpose of the rental survey is to estimate the market rental rate of the subject property. The function of the rental survey is to assist in establishing the market rent for use by PM Realty Group for internal decision purposes. Identification: The subject improvements consist of a steel frame structure with a wood frame exterior warehouse with an approximate 32 foot clear height. The property is accessible by slide doors located on both the north and south sides of the building. There are windows located around the perimeter of the structure, which provide ample interior natural light. The structure is improved with a flat roof with composition cover which is assumed to be in average condition. The interior of the warehouse is improved with concrete floors, open beam ceilings with overhead sodium vapor lighting as well as skylights. The warehouse area is used for boat repair as well as a showroom DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 1 for newer, smaller vessels. The interior of the office space consists of painted sheetrock walls and ceilings with carpet flooring and overhead fluorescent lighting. There are restrooms on each floor of the office space. The improvements consist of 53,785 square feet consisting of 43,600 square feet of warehouse and 10,185 square feet of office space. The improvements cover 26% of the site and the improvements are built out with 19% of office space. The warehouse is accessed by side sliding doors which are atypical of the market and lack utility. The overall layout of the improvements is ideal with the two -story office space and warehouse at the rear which makes the property highly useable for an alternative user, for both single and multi - tenant occupancy. Ownership: United States of America Alameda County Assessor's Parcel No.: 074 - 0891 -001 Zoning: Improvement Size: Area Data: M2 /G, Industrial Manufacturing- Govennnent 53,785 square feet The subject property is located at the southwest comer of Ferry Point and West Oriskany in the old Alameda Naval Air Station area of the City of Alameda. The City of Alameda is located approximately fifteen miles southeast of San Francisco, between the San Francisco Bay and San Leandro Bay. The city encompasses 12.4 square miles and had a population of 74,400 as of January 1, 2004, making it the eighth largest city in the county. Over the last 22 years, the city has experienced moderate growth. Census and State Department of Finance figures indicate that the city's population increased by 11,148 from 1980 to 2004, an increase of 0.64% per year on an average annual rate. Reasons for this relatively low growth rate include the city's limited availability of land for potential development for residential uses. DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 2 According to the Alameda Chamber of Commerce, there are approximately 28,000 of jobs in the City of Alameda. The local economy is dominated by service sector jobs with manufacturing employers leading all employment sectors. Some of the largest employers in the City of Alameda include Ascend Communications with 620 employees, the Alameda Hospital with 456 employees, Alameda Unified School District with 446 employees, City of Alameda with 718 employees and Wind River Systems with 282 employees. Other major employers in the City of Alameda include Faralon Computing, Weyerhouser Company, Roach Molecular Systems, Cybex, Kaiser Foundation, Lucky Stores and Intrepid Systems. Transportation systems near the City of Alameda include Highways 580 and 880 to the west in the City of Oakland. These highways provide access throughout Alameda County in the north/south direction. In addition to the freeway service, air transportation is available at the Oakland International Airport and approximately 30 miles west at the San Francisco International Airport. In general, expectations for the City of Alameda are that the city will continue to experience slow growth and be reasonably well supported by a diversified economic base. The city's centralized location and well educated population in close proximity to the major employment hubs of the cities of Oakland and San Francisco has enhanced the attractiveness of the city as a residential community. DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 3 PROPERTY DESCRIPTION Site Description: Location: 1500 Ferry Point Alameda, California Site: 4.29 acres, or 187,000 square feet Shape: Rectangular Topography: Level Utilities: All standard utilities are available to the site, delivered above and underground by the following: Utility Provider Electricity Alameda Power and Telecom Gas Alameda Power and Telecom Water East Bay Municipal Utility District Sewer City of Alameda Telephone AT &T Police City of Alameda Fire City of Alameda Street Improvements: The subject property is located at the southwest corner of Ferry Point and West Oriskany Avenue in the Alameda Naval Station, across from Piers 2 and 3, which is the docking location of the USS Hornet. Both streets consist of two lanes of traffic, one in each direction. The streets are asphalt paved and have no concrete curbs, gutters nor sidewalks. DUNN & ASSOCIATES IIP L A CHANNEL • Naval Air Station Property Acquisition Map (CO;8290 24 -101 See 81k. 890 uR iot.Pvnv2_.�._ S PIER 3 oval Air Station - Property Mop (CASE 500.I -51) c. of Sur. of Copehorl Quorlers -200 Unit IRS. Bk.4 P5.54) EC. of. SM. (w5. ek✓ Pj.42) 890 mended Rea. of Sv,(R,S.Bk.4 Pa. B6) " (RS. 8k.5 Pq.lB) 0 0 N i 6t ------ri. ---/- -- / 'na {,eon, tea O 050.604 A. t„ t or aca. I II m A AN 21-0 475 "71 480 t, 480 a eera.v..�'i" RQ 482 1 PACIFIC AVE. 10 \ T 22. 1025 21 Sear' 10 1310 nr; / Plat Map DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 5 Site Improvements: Building Description: The uncovered portion of the site consists of asphalt and concrete paved yard area which is enclosed by a cyclone fence. The subject improvements consist of a steel frame structure with a wood frame exterior warehouse with an approximate 32 foot clear height. The property is accessible by slide doors located around the perimeter of the structure. There are windows located on the west and east sides of the warehouse as well as along the two story office space consisting of single pane windows which provide ample interior natural light. The structure is improved with a flat roof with composition cover which is assumed to be in average condition. The interior of the warehouse is unproved with concrete floors, open beam ceilings with overhead sodium vapor lighting as well as skylights. The warehouse area is used for boat repair as well as a showroom for newer, smaller vessels. The interior of the office space consists of painted sheetrock walls and ceilings with carpet flooring and overhead fluorescent lighting. There are restrooms on each floor of the office space. The improvements consist of 53,785 square feet consisting of 43,600 square feet of warehouse and 10,185 square feet of office space. The improvements cover 26% of the site and the improvements are built out with 19% of office space. The warehouse is accessed by side sliding doors which are atypical of the market and lack utility. The overall layout of the improvements is ideal with the two -story office space and warehouse at the rear which makes the property highly useable for an alternative user, for both single and multi -tenant occupancy. Condition/Utility: The subject property was built in 1960 and has an actual age of 44 years old. The structure is somewhat atypical of the market compared to other warehouse buildings that are generally equipped with overhead grade level doors. In addition, most competing warehouse space is either concrete tilt up or metal exterior. Overall, the subject property is considered to be in average condition. DUNN & ASSOCIATES 225 FT. t 218 FT. NELSON'S MARINE 1500 FERRY POINT BUILDING DIAGRAM DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 7 VIEW OF SUBJECT PROPERTY LOOKING SOUTH ACROSS THE INTERSECTION OF FERRY POINT AND WEST ORISKANY (PHOTO NO. 1) VIEW OF SOUTH SIDE OF SUBJECT PROPERTY LOOKING WEST (PHOTO NO. 2) DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 8 VIEW OF EAST SIDE SUBJECT PROPERTY LOOKING NORTH (PHOTO NO. 3) INTERIOR VIEW OF WAREHOUSE SPACE USED FOR BOAT REPAIR (PHOTO NO. 4) DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 9 INTERIOR VIEW OF WAREHOUSE AREA USED FOR BOAT SALES (PHOTO NO. 5) VIEW OF LAUNCHING RAMP ACROSS FERRY POINT (PHOTO NO. 6) DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 10 VIEW OF 400 FEET OF PIER AREA ACROSS I+'ERRY POINT (PHOTO NO. 7) INTERIOR VIEW OF OI+FICE SPACE (PHOTO NO. 8) DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 11 Zoning: According to Dave Valeskas, in charge of federal facilities, the subject property is zoned M2 /G, Industrial Manufacturing /Govermnent. Permitted uses under the general industrial zoning include box and cooperage manufacturing, breweries, cork production manufacturing, dye casting, electrical equipment manufacturing, foundries, furniture manufacturing, and other manufacturing uses. According to Mr. Valeskas, there are no anticipated changes negatively impacting the subject property. DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 12 VALUATION In order to estimate the market rental rate for the subject property I have obtained rental information from both recently executed industrial leases in the subject's market, as well as boat yard lease comparables throughout the Bay Area. I will first analyze the industrial lease comparables followed by the boat yard lease comparables. Industrial Lease Comparables I have obtained eight recently executed lease comparables which range in size from 20,000 to 233,640 square feet, reflecting an unadjusted rental rate range of $0.20 to $0.26 per square foot on a triple net expense basis. The comparables are summarized on the following page. The comparables reflect office build -outs ranging from 1.8% to 5.7% and were leased with no tenant improvements. The comparables reflect site coverages ratios ranging from 9% to 30 %. The comparable leases were executed on terms ranging from 26 months to 120 months. All of the comparable leases were executed within the last 12 months under similar market conditions. All of the comparable leases represent arms- length transactions and warrant no adjustments. The real estate market for industrial space over the last 12 months has been fairly consistent, and all of the comparable leases were executed within this time frame, and warranting no adjustment for market conditions (time). Typical tenant improvements for industrial space within the subject market consists of no contribution by the lessor. None of the comparables were granted tenant improvements therefore warrant no adjustment. As previously indicated, the comparable leases reflect office build -outs ranging from 1.8% to 5.7 %. All of the comparables have an inferior office build -out to the subject property, therefore warranting upward adjustments. The comparables reflect site coverages ranging from 9% to 30 %. The subject property as a site coverage of 29 %. Comparable Nos. 1, 4 and 6 reflect site coverages ranging from 30% to 30.3% which is similar to the subject property and warrant no adjustments. Comparable Nos. 2, and 5 reflect site coverages, of 20.4% and 8.7 %, respectfully, therefore warranting downward adjustments. Comparable No. 3 has an estimated site coverage of 80% which is inferior to the subject property, therefore warranting an upward adjustment. DUNN & ASSOCIATES COMPARABLE INDUSTRIAL LEASES Gr.( Cf) r‘ 0 a) 0 z a) 0 z 0 0 z 0 0 z COVERAGE est. 30% c> N est. 80% os".Z c; rn esf'f: o<> est. 30% EXPENSE BASIS R i R i R i STARTING RENT /SF N 64 N EA N 69 C> N 6/4 tn N 6A ,•.0 .-, 69 W a, ■—■ Cn VD s"'" 2.14% C:> 1 . C> c>6 N vi 0 0 s.c VD 00 . ,-, C) N 0 • 4 C> et c4 N ....9 s: 1/40 N Cs VD 0 ‘.0 4 N CD •V> VD cn •er tes -:t. N cn C> ,—. ,.. cn C> ,—., ,--, cn <0 ,—.■ ..--, rn ,.0 LOCATION Penn Logistics Citcom Evolution Furniture Eagle Bay Xyan Printing Gold Coast Warehouse DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 14 This analysis estimates the industrial rent of the subject warehouse, including the amenity of its boat launch facility and pier rights. After adjusting the comparable leases for their various differences in comparison to the subject property, I have concluded with an adjusted rental rate range of $0.30 to $0.35 per square foot on a triple net expense basis. In consideration of the subject property's size, average location on the naval air station in the City of Alameda, age and average condition of the improvements, 29% site coverage, 19% office build -out, 32 foot clear height and overall site utility, I have concluded with a rental rate in the higher end of the adjusted range, or $0.35 per square foot. Therefore, the estimated market rental rate based on the industrial lease comparable, as of June 10, 2004 is: 53,785 square feet x $0.35 = $18,825 per month DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 15 Boatyard Lease Comps As previously stated, I have also analyzed boatyard lease comparables from the Bay Area in order to estimate the market rental rate for Nelson's Marine as reflected on the following page. The comparable leases of the boat yards are atypical of the market given that they are generally current rental rates and the details of the leases were difficult to obtain and were confirmed when possible by both the lessee and the lessor. Comparable Lease No. 1, the Berkeley Marine Center is a 50 year lease that started in 1978 and expires in 2028. The tenant is currently paying $1,700 per month versus 5% of gross sales. This lease is adjusted every five years and in addition has a percentage sale of 2.5% on alcohol sales. This is a triple net lease. The property consists of 4.5 acres and is a ground lease, which has been improved with approximately 8,000 square feet of improvements. This lease was confirmed by Cliff Marchetti with the City of Berkeley. This comparable has fair access and is in average condition. Comparable Lease No. 2 is Svendsen Marine located in Alameda, California. This represents a twelve year lease which commenced in 2001 and expires in 2013. The tenant is currently paying $31,065 per month for a 1.78 acre yard and 26,000 square feet of improvements plus an additional $1,531 per month for nine slips, indicating a total rent of $32,596 per month. This is agross lease with lessor paying taxes, insurance and maintenance. This lease was confirmed by Sean Svendsen, operator. This comparable has average access and is in good condition. Comparable Lease No. 3 is the Mariner BoatYard located at 2021 Alaska Packer Place in Alameda, California. I was informed by Rochella, the operator's assistant, that the improvements consist of one shop and three offices estimated area of 20,000 square feet. The property is leased for 6% of gross sales plus $14,000 per month. She was unable to provide any other details on this lease. We have pulled county records to indicate that this site is 1.6 acres. This comparable has fair access and is in average condition. Comparable Lease No. 4 is the San Francisco Boat Works leased by Mike Denmen from the Port of San Francisco. According to Rich Ravetti, representative with the Port of San Francisco, this is a 20 year lease that began in 1987. It is a triple net lease with the tenant paying $10,000 per month versus 8% of alcohol, and bar sales, 6% of food sales, 20% of boat storage, 10% of any sub - leasing and 10% of all other uses. There are adjustments every five years on this lease. The operator, Mr. Mike Denmen, indicates that he is in overage rent 9 out of 12 months per year. This comparable has good access and is in average condition. DUNN & ASSOCIATES - • rvnr L. VV(L41.11•c: r,rl•vua , \"-s,4 __ J(S' II/ `( t:Y_'t .) 0; �� \, • Vallejo r ; San Geroninto El.. 300 t IPAL TEN TRICT FL. 350 Woodacro /0 20, `�C EL. 120 • Fairfax San Ansiro 45 L. Ketiflaid k . "12 TAMALTPAIS Larkspur' lt. J3 EL. 2571 Corte EL. 7 IT. 12 Santa Vetiotla, CHINA CAMP • L7. J4 San > Pt \'•. Moru\\ o EL. 40 \\istnnd`'.`\ ,%i CU. dat li MAI?IIIMEI Y RI:NK:I l i •,.....w ACRD. (C.S.U.) • 1 ti sl: Ric >.t 1.r i ' Pork. (t� EL. r3 Q,,47 t rockolI C0 3tc ! rn Rodeo . J: j� CUd CAPITOL. S. t. Pinolo FL. 27 t' 1I L. 711\ Pt' t & Sann ) r Son Pocko Pdbior� >`�y� , r 5 ! ;O! 23 Pt. San Pablo 1\c.. :'f 20 _ 5 tiroorae r.\ t....',3 6 f c? ' I`. "q,r`1i 1 Sari `� t;.1. (Month) SANQUENTlNl, CU 'HUG EL.11 0 Hercules �`� EL. 47 /OLIN MUM El Z)1E.Oft NA'17,. iHIST C) �[? pL(I4Me, Vi t.LEY SobrL n ,�+ 1. 1.0 I W l.acnT q „n �� • F(' i{ •'� ( !r, lr,nr•s Rr± L Qrr�tQ to i t�,..,.5 {:\ Madam MITI Valley, r 1T. ]AMALPAIS sr.LL2 EL 70 013 ' (,t.. 43 PRISON s•F.. 1;4 1 Richmond �=' w : l'� \ E4.. 10 \- Lima. 1.. •• c� �� Tiburon {, Marini 1 • . ANGEL Alban City J'. i = Vqder ISLANU , . 61.. O i :, l Q srPARI[ E.Asgts.1OH Mti((1" Et_ 0 ." S) "ATE S Beach OO1d31s'N OA'l'!s Sc , . 0 PARK ' EL. 10 \NATL. ltt:'C. 6 ' ' ' Ef.. Twasuro \EmeryvIllQ, 'AIWA VI Alcamo IsiaU,d ) r, NV.S1APT. 1s E.L, 43 '1 t I \ 7 !'r 13QNtrit •�_Pt. 13o,irlu (.0((t`! `" 1 LKIIHHOUSE dot` 1 "1' 1.5. '_g.[' Iriltl7'IAII'' ttuL +1 . aN 1l.;S. lISY; 7;1(.1' .i, Land's• 1. • * .. (i \ �` h\ r;1 MILE ROCK L, E/tcl .r,Fr 1 101 e` �YY Y t- lGftTSlit >rt''..0ON :4.1." I nCI11C Wi Kensln ton Scv- San^��^► nth, GIiNlY Ul. a.1an Francisco z__ ^, GA l e py� 1 'inn Oak' r EL.61.10 .9PK. �at4 1 5ublect . , . : ,� ,� Alameda IU.C.. (LDENRED I3E111 . K. °Berkeley t.f.. 152 ‘10.4 Et.) P1 i1. He. mon . %/- REDWOOD EO.'<. X00 0 s. Urr r lit ANT ION ` >Cti� MOOT 1� 'Sa L • n �o 1 HORNION 1 umv ,>�I +' RX) STATE. IJEACII :`w ) -.Brislyi 10 Daly, T ;olma , City •. SGM N.Sr" MIN S EL. 4001 ''? ; 2 lAl3K '.- Pacifica; . FL 90 �� 3�sn PACIFICA STATE BEACH,. I V \ 1\ San Pedro • • G \?' ;cui2 Pt. I. y� .1,11 vim r:9 ?e F. r/,r• �' EL. •l GILIYWHALECOVF \ - E 13EAC1I Ccl 'EL.30 ( UUC \,i 6` ones OAKLAND ) ��$* 1NTL. AIRPORT `r-,0, !'n t (� • ,Huntors Pt. U yi CANVLESIICKPT. C':t A11=44 .w.._G So:San Francisco an Bruno j + .SiM N{,fn a ORT ;15 ��( illurae EL. 48 {' Burlin ame B MON1ATIA STATE. LILAC!! Montara EL. 100 -' Pr MON TAI L1� r.IGI -I1 HOUSE HALE MOON RAI' T.t AIRPORT 1 . ,. �• LL. 40 EL. 41 St EL:'400 Moraga CANYON Eft HO lytt' s . (1/11)1' son 1.1,(1 tJz ` EL San Lorenzo o rtAlW`Ain TERMINAL G �\ \ EL. 34' [HIP ;b. • ur h n P:1■Ircti,•s EL. 3? J San ' '$•iY r ' ''' ~ EL. 100 ,� /.nutrt' Mass L'. ,:■T;rr • r+t3oilcll yn'i;i " EL. 00 (: L. 211 4�', QEI Granada EDEN it LANDING ECOL.. HES. 0 DON I ED ARDS DETAIL 4.5 Acres. around lease approx. 3.000 sf building Direct water access Confirmed: CliffA•far•chette, City of Berkeley 1.7 Acre yard 26,000 sf Buildings Direct water access 9 Slips ($1.531 /month) Confirmed: Sean Srendsen. Operator cst. 1.6 Acres est. 20,000 sf bulling Direct water access Confirmed: Rachel/a. assistant est. 4.0 acres est. 7,000 sf building Direct water access Boat yard and Restaurant Confirmed: Mike Denmen. operator and Rich Fervent. Port of S.F Facility Handles 9 Dry Dock Boats Direct water access 2 -3 Boats in water est. 4.000 sf building Confirmed: Phil II%estcott. Operator Facility Handles 9 Dry Dock Boats Minimal Improvements Direct water access 2 -3 boats in water Confirmed: Mike Winder. opertor 2 -3 acres est. 6,000 sf improvements Direct water access Confirmed: Ron Anderson. operator EXPENSES Taxes - Lessor Insurance - Lessor Maintenance - Lessor R • RENT $1,700 /mo. vs. 5% of gross sales Adjusted every 5 years 2.5% based on sales $31,065 /month Slips $1,53lhnonth Total $32,596 /month Escalations: Annual CPI 6% of gross sales plus $14,000 /month for land $10,000/Month verses 3% alcohol and bar sales, 6% food sales, 20% boat storage, 10% sub - leases, 10% all others Monthly rent Annual escalations Monthly rent Annual escalations Monthly Rent 2001 -2013 14,000 sf structure and land 2000 -2005 2 small buildings Not Available 20 Year lease Short Term 3 Years Month/Month Short Term Berkeley Marine Center I Spinnaker Way Alameda, California Mariner Boat Yard 2021 Alaska Packer Place San Francisco, California San Rafael, California Sausalito, California Sausalito, California N r 7 vi & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 17 In addition to the four boatyard lease comparables, I was able to obtain general information on three other boat yards within the Bay Area. According to Phil Westcott, the operator of Westmore Marine located at 145 Third Street in San Rafael, he is currently paying a monthly rental rate with annual escalations. He has room for nine boats for dry dock and two to three boats in the water. He has direct water access and a small shop area. This boatyard has good access and is in average condition. Bayside Boat Works located at 2360 MarinShip Way, Sausalito, California is on a month -to -month lease with annual escalations. This facility has room for eight to ten boats for dry dock and two to three boats in the water and has minimal shop space. This lease was confirmed by Mike Winder, operator. This boat yard has average access and is in fair condition. According to Ron Anderson, operator for Anderson's Boatyard, he is currently leasing his facility on a short term lease. Mr. Anderson is paying a monthly triple net rent. This boat yard has average access and is in good condition. In general, three of the comparable boatyard comparable leases were leases on a percentage rent and four were leased on a base monthly rent basis. Given that the subject property consists of a 53,785 square foot warehouse built -out with 19% office space with a 26% site coverage, its average location, average condition, indirect access to the water, and use of 400 linear feet of pier area. I have concluded with a base rent of $0.35 per square foot, or $18,825 per month versus a percentage rent of 6% of all annual gross sales based on a typical lease term of ten years. Assuming a 10% escalation in the 61st month of the lease. This is a triple net lease with the lessee paying all expenses. DUNN & ASSOCIATES Rental Survey: 1500 Ferry Point, Alameda Page 18 If major improvements were required, which would be necessary for the lessee to amortize the improvements over the term of the lease, a longer lease would be considered. I do not see that there were any major improvements necessary for the current operation. Respectfully submitted, DUNN & ASSOCIATES Michael E. Dunn, M / I, CCIM Certified General Real Estate Appraiser State of California #AG002882 DUNN & ASSOCIATES ADDENDUM Exhibit A. Photographs of Comparable Industrial Leases Exhibit B. Photographs of Comparable Boatyard Leases Exhibit C. Engagement Letter Exhibit D. Zoning Ordinance Exhibit E. Qualifications EXHIBIT A PHOTOGRAPHS OF COMPARABLE INDUSTRIAL LEASES PHOTO OF COMPARABLE LEASE NO. 1 PHOTO OF COMPARABLE LEASE NO. 2 PHOTO OF COMPARABLE LEASE NO. 3 PHOTO OF COMPARABLE LEASE NO. 4 PHOTO OF COMPARABLE LEASE NO. 5 PHOTO OF COMPARABLE LEASE NO. 6 EXHIBIT B PHOTOGRAPHS OF COMPARABLE BOATYARD LEASES PHOTO OF COMPARABLE LEASE NO. 1 PHOTO OF COMPARABLE LEASE NO. 2 PHOTO OF COMPARABLE LEASE NO. 3 PHOTO OF COMPARABLE LEASE NO. 4 PHOTO OF COMPARABLE LEASE NO. 5 PHOTO OF COMPARABLE LEASE NO. 6 PHOTO OF COMPARABLE LEASE NO. 7 EXHIBIT C 1171 Realty Group REAL ESTATE SERVICES May 13, 2004 Mike Dunn Dunn & Associates 1657 N. California Blvd., Ste 208 Walnut Creek, CA 94596 Dear Mr. Dunn: This letter will confirm the telephone conversation between David Jaber, Regional Vice President PM Realty Group, and yourself held Tuesday, May 11, 2004, to engage your company to conduct an MAI appraisal of lease rates at Nelson's Marine located at 1500 Ferry Point, Alameda, CA 94501. The scope of work to be provided is a current market rate lease appraisal of the above building, the surrounding yard area and associated private marina space. Once begun, the appraisal shall be conducted and a report prepared in a three (3) week time frame. The agreed upon cost for this work is Four Thousand and No /100ths Dollars ($4,000). Please signify your agreement to the terms described herein by affixing your signature below and returning to my office at 2175 Monarch St., Alameda, CA 94501, Attention: Mike Hampen. If you have any questions, please contact me by telephone at (510) 749 -0304 or by electronic mail at mhampen(o7pmrealtygroup.com. Sincerely, Realty Group as agent for eda Reuse and Redevelopment Authority ike Hampen roperty Manager I hereby agree to the terms describ- - - ein. ike Dunn 2175 MONARCH STREET ALAMEDA, CA 94501 510/749-0304 FAX: 510/749-1095 HOUSTON LOS ANGELES CHICAGO SAN FRANCISCO ATLANTA DALLAS DENVER DETROIT ORLANDO PHOENIX NEW YORK HONOLULU NEWPORT BEACH WASHINGTON DC CINCINNATI SEATTLE LAS VEGAS pm realtygroup.com EXHIBIT D MAY 26 2004 12:25PM CITY OF ALAMEDA PLANNING 5107476804 p.1 http: / /www.ci.alameda .ca.us /gov /municipal_code.html Chapter 30, Section 30 -4 Subsection 30 -4 -17 G, Special Government Combining District. a. General. The G District classification shall be combined with the district classifications applied to all lands in the ownership of the U.S. Government or the State of California. b. Prior to the use of any lands by any private or public entity other than the United States or State of California, through purchase or pursuant to lease from the U.S. Government or State of California, rezoning procedures shall be completed to remove the G classifications and to consider further appropriate district classification changes. c. Notwithstanding the provisions in subsection (b) herein, interim uses by private or public entities other than the United States or State of California of lands owned by the U.S. Government or State of California may be allowed, subject to a Use Permit, pursuant to subsection 30 -21.3, if the following additional findings can be made: 1. The interim use is approved for a limited time, not to exceed the maximum time frame set forth in the interim leasing program criteria; 2. The interim use utilizes existing facilities and does not require substantial new development; 3. The interim use will not disrupt on -going operations of the governmental entity should the interim use occur concurrent with continuing operations by a governmental entity; 4. The interim use will not be detrimental to the ultimate redevelopment of the property or the potential resumption of use of the property by the governmental agency; and 5. The interim use is consistent with an interim leasing program adopted by the City. d. An interim leasing program shall be adopted by the City prior to interim use, as provided in subsection (c) herein. The interim leasing program shall be for a specific parcel or parcels, shall specify permitted land uses, consistent with the underlying zoning district, and shall specify the maximum time frame for which a Use Permit may be granted. In the absence of an adopted interim leasing program, all interim leases shall require rezoning. (Ord. No. 2658 N.S. §1: Ord. No. 535 N.S. §11 -1374; Ord. No. 1277 N.S.) Post -It° Fax Note 7671 Ca. /Dept. Phone # Fax #1iS. Z, 5151s— Page 1 of 1 Dates1/46 4 paves 0. 3 Fr fiC -4 ! CPA 1.1°■8 EAPILY Co. Phone # 74 [ h g to Fax # MAY 26 2004 12:25PM CITY OF ALAMEDA PLANNING 5107476804 p.2 http: / /www.ci.alameda .ca.us/gov /municipal_code.htxnl Chapter 30, Section 30 -4 Subsection 30 -4-12 M-2, General Industrial (Manu-facturing) District. a. General. The following specific regulations and the general rules set forth in Section 30 -5 shall apply in all M -2 Districts as delineated and described in the zoning map(s). It is intended that this district classification be applied in areas suitable for the least restricted use of land within the City and that the restrictions applied shall be those necessary for the public health, safety and general welfare. b. Uses Permitted. 1. Any use as permitted and regulated in the M -1 District. 2. The following and similar uses from which noise, smoke, dust, noxious fumes and gasses, glare, heat and vibration are confined within the premises or held to volumes, intensities and levels at the perimeters of individual properties which are no greater than those in the general area, and in which disposal of all waste matter and material is in conformity with local and State standards and regulations, and in which all operations are conducted principally within buildings, except that other operations will be permitted within enclosures under conditions consistent with the intent of this article if approved by the Planning Board. (a) Box or cooperage manufacturing, (b) Breweries, (c) Cork products manufacturing, (d) Die casting, (e) Electrical Equipment manufacturing, including heavy motors (one (1) horsepower and over), switch gear, transformers, turbines and similar items, (f) Enameling works, including ferrous enamel, panels, cast iron or pressed steel, sanitary ware and similar items, (g) Foundries - ferrous and nonferrous, (h) Furniture (wood or metal) manufacturing, (i) Match manufacturing (safety machines only), (j) Metal products manufacturing or processing, structural, fabricated, (k) Metal shipping drum, barrel manufacturing, (1) Paperboard container product manufacturing and processing, (m) Pickle or vinegar manufacturing, (n) Pipe and pipe fitting manufacturing, (o) Planing mill, (p) Plumbing fixture manufacturing, (q) Poultry or rabbit killing and dressing, (r) Prefabricated houses or wood structural member manufacturing, (s) Textile manufacturing, including canvas, cloth and similar items, (t) Tool manufacturing - machine, hand, (u) Transportation equipment manufacturing, (v) Wood preservation processing, (w) Trash Transfer Station. Hours of operation limited from 8:00 a.m. to 5:00 p.m. Trash burning or storage of ha?ardous materials is prohibited. 3. Uses customarily incidental to any of the above uses when located on the same premises, including an attached or detached residence for an on- premises watchperson or manager and his or her family, subject to provision of two hundred forty (240) square feet of private useable open space immediately adjacent to and accessible from the residence. Open storage of materials and equipment shall be permitted only within an area enclosed on all sides with a solid or open grill type wall, or a chain link fence and gates, all not less than six (6') feet in height and in a manner consistent with the intent of the section except that no wall or fence shall be required on the side that a property abuts a railroad right - of -way, the Estuary or U.S. Tidal Canal. A solid wall or fence not less than six (6') feet high shall be required where the proposed use adjoins property in an R District. 4. Signs: Those pertaining to the permitted and accessory uses on the property, poster panels and painted bulletins, all as regulated further in Section 30 -6 of these regulations. Page 1 of 2 MAY 26 2004 12:25PM CITY OF ALAMEDA PLANNING 5107476804 c. Uses Requiring Use Permits. It is the intent of this paragraph that the following uses shall be reviewed by the Planning Board for their appropriateness in a specific location, or for such other factors as safety, congestion, noise, and similar considerations. 1. Auto wrecking yards, 2. Outdoor amusements, 3. Veterinary clinics and /or veterinary hospitals upon the same terms and conditions set out in subsection 30- 4.10c, 4. Any existing dwelling use as regulated by subsection 30 -4.11 c, 5. Airport and related facilities, aircraft landing areas, 6. Asphalt hatching plants, including hot mix, 7. Concrete products manufacturing, batching plants, 8. Lumberyard (wholesale), kiln, 9. Railroad yards, 10. Shipbuilding and repairing (over one hundred (100) tons), 11. Shipping terminals, 12. Permitted uses which are not conducted within an enclosed building or structure, 13. Commercial marinas subject to the requirements of subsection 30- 4.9c.15, 14. Columbariums and crematoriums, 15. Liquor stores, 16. Convenience stores located within three hundred (300) feet of any residential zoning district, 17. Hazardous materials processing, as defined by subsection 30 -2(b) of the Alameda Municipal Code, and subject to the terms and conditions of Subsection 30- 21.3(e) thereof, 18. Work/live studios subject to the requirements of Section 30 -15. d. Minimum Height, Bulk and Space Requirements. 1. Lot Area: None. 2. Lot Width: None. 3. Maximum Total Building Coverage, including accessory buildings: Eighty (80 %) percent. 4. Building Height Limit: One hundred (100') feet. 5. Front Yard: Five (5') feet minimum. 6. Side Yards: None, or where a side yard is desired, a minimum of twelve (12') feet shall be provided; provided further, that in the event the use is adjacent to an R District, a minimum of twelve (12') feet shall be maintained. 7. Rear Yard: None required, except that in the event the use is adjacent to an R District, a minimum of twelve (12') feet shall be maintained. 8. Off -Street Parking and Loading Space: As regulated in Section 30 -7 of these regulations. (Ord. No, 535 N.S. § §11- 1349 -11 -1352; Ord. No. 1277 N.S.; Ord. No. 1356 N.S.; Ord, No. 1400 N.S.; Ord. No. 1802; Ord. No, 2174 N.S.; Ord. No. 2289 N.S.; Ord. No. 2407, N.S., §9; Ord. No. 2422 N.S. §2; Ord. No. 2671 N.S. §5; Ord. No. 2700 N.S. §4; Ord. No. 2727 N.S. §2; Ord. No. 2784 N.S. §4) Page 2 of 2 P.3 EXHIBIT E Dunn & Associates REAL ESTATE APPRAISERS AND CONSULTANTS PROFESSIONAL QUALIFICATIONS MICHAEL E. DUNN, MAI, CCIM PROFESSIONAL EXPERIENCE Dunn & Associates, Walnut Creek, California, established July 1991. Provide appraisal and consulting services for a variety of improved and vacant real estate products. Appraisal Experience appraising various residential and income producing proerties, both existing and proposed, including commercial, industrial, office buildings, apartments, shopping centers, hotels and motels, subdivisions, mixed use properties, RV parks, schools, restaurants, multi -plex theaters, assisted living facilities, live /work complexes, and vacant land. In addition, have appraised various agricultural properties including vineyards and wineries, as well as orchards, row and field crop lands, and grazing land. Appraisals have been prepared for investment, disposition, mortgage lending, loan workout, trust, condemnation and litigation support purposes. Consultation • Acquisitions, dispositions, arbitrations, mediation, competitive market analysis, highest and best use studies, project feasibility, market rent surveys, and lease negotiations. Mr. Dunn holds the MAI designation from the Appraisal Institute, a CCIM designation from the Commercial Real Estate Institute. He has been re- certified under the voluntary program of continued education of the designated members of the Appraisal Institute. Mr. Dunn is certified by the State of California Office of Real Estate Appraisers as a Certified General Real Estate Appraiser ( #AG002882) and has ben appraising commercial real estate since 1986. EDUCATION BS, Agriculture Business Management Major, June 1985 California Polytechnic State University, San Luis Obispo, California 1657 N. California Blvd., #208 • Walnut Creek, CA 94596 • Phone: (925) 472 -5850 • Fax: (925) 472 -5855 Appraisal Institute Courses Standards of Professional Practice Real Estate Appraisal Principals Basic Valuation Procedures Capitalization Theory and Techniques, Part A Capitalization Theory and Techniques, Part B Case Studies in Real Estate Evaluation Report Writing and Valuation Analysis Commercial Investment Real Estate Institute CI 101 Financial Analysis for Commercial Real Estate CI 201 Market Analysis for Commercial Real Estate CI 301 Investment Analysis for Commercial Investment Real Estate PROFESSIONAL ASSOCIATIONS AND MEMBERSHIPS Member (MAI), Appraisal Institute ( #9671) Certified General Real Estate Appraiser, State of California ( #AG002882) Member (CCIM), Commercial Investment Real Estate Institute ( #8538) Member, International Right of Way Association Affiliate Member of the National Association of Realtors (NAR) California Real Estate License ( #01029164) Currently serving as the Assistant Regional Member for Region 1 of the Ethics Administration Division of the Appraisal Institute. DUNN & ASSOCIATES City of Alameda Alameda Reuse and Redevelopment Authority February 23, 2005 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Irma Frankel ARRA Secretar SUBJECT: Memo from Peter Lindh re: Sublease Renewal with Nelson's Marine Today, I received the attached memo from Peter Lindh with a request to distribute to the ARRA Board prior to the March 2, 2005 Regular ARRA Board meeting. Thank you. attachment Dedicated to Excellence, Committed to Service Stanley L. Gibson G. Geoffrey Robb Peter A. Lindh Joshua E. Kirsch Michael J. Cummins GIBSON ROBB & LINDH LLP 100 First Street, 27th Floor San Francisco, CA 94105 Telephone (415) 348 -6000 Facsimile (415) 348 -6001 February 23, 2005 Jennifer T. Sanchez Michelle L. Tomrney Marker E. Lovell, Jr. Jonathan W. Thames t Roxanne Chester Christopher A. Burnham t Admitted only in Washington and Louisiana BOATYARDS' THIRD SUBMISSION REGARDING PROPOSED TERMS OF SUBLEASE RENEWAL WITH NELSON'S MARINE [March 2, 2005 Agenda] TO: Honorable Chair and members of the ALAMEDA REUSE AND REDEVELOPMMENT AUTHORITY FROM: Four Concerned Bay Area Boatyards, on behalf of themselves And the Public Interest SUBJECT: The Lack of Incentive to Bring The Lease Negotiations to Closure. As noted in the ARRA Memorandum dated August 19, 2004, in July of 2002 APCP, acting as property managers, executed a lease amendment for a month -to- month lease at $16,000/month with Nelson Marine. Since July 2002, lease negotiations have been under discussion, a period of 30 months, yet this matter is still unresolved. The current lease with Nelson Marine has no provision to compel either party to bring these negotiations to a close. In fact, as long as the City of Alameda continues to postpone this matter it is very much to the benefit of Nelson Marine. Over the course of the past 30 months, based on Fair Market Values, the City of Alameda has lost rental income in the amount of $ 2,236,590, which it will not recover due to these delays. Each month that passes the City of Alameda loses an additional $69,752, not including interest. The concerned parties request that the matter be resolved without further delay in the interest of competitive fairness and fiscal responsibility. Alameda Reuse and Redevelopment Authority Interoffice Memorandum February 17, 2005 To: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority From: Re: Background William C. Norton Interim Executive Director Report from the Executive Director recommending the Approval of a 5 -year lease, with one (5 -year) option with Nelson Marine for 400 linear feet of Pier 1 Nelson's Marine is one of the original tenants at Alameda Point, operating a boatyard in Building 167 with an adjacent 400 linear feet of pier space on Pier 1. The pier has served as a marina for small boats. Nelson Marine has operated a boat yard and marina at Alameda Point since June 1997. Discussion Nelson Marine pier is an existing use at Alameda Point. The premises are used for storage, repair and sales of boats. Fiscal Impact The proposed base rent for the pier is $5 per linear foot, which is $2,000 monthly or $24,000 annually. The ARRA will have a 50 percent profit share opportunity should the tenant assign or sublet pier space with prior landlord approval. Recommendation The Executive Director recommends that the Alameda Reuse and Redevelopment Authority approve the proposed pier lease with Nelson Marine. PB /SP/NB:dc Respec fully submitted, Leslie Little Development Services Director By: Nanette Banks Finance & Administration Manager Dedicated to Excellence, Committed to Service G: \Comdev \Banks\ARRA Staff Reports \3 -2 -05 4 -B Nelson Marine 5 -Year Lease.doc