Exhibits:

1. Diagram of Leasehold Area

2. Lease

Introduction of Ordinance Approving a Lease and an Option to Purchase and Authorizing the City Manager to Execute Documents Necessary to Implement the Terms of a 10-Year Lease and Option to Purchase with Natel Energy, Inc., a Delaware Corporation, for Building 23 located at 2401 Monarch Street at Alameda Point. (Base Reuse 819099)

To: Honorable Mayor and Members of the City Council

From: Elizabeth D. Warmerdam, Interim City Manager

Re: Introduction of an Ordinance Approving a Lease and Authorizing the City Manager to Execute Documents Necessary to Implement the Terms of a 10-Year Lease and Option to Purchase with Natel Energy, Inc., a Delaware Corporation, for Building 23 located at 2401 Monarch Street at Alameda Point

BACKGROUND

Natel Energy, Inc. (Natel) designs and manufactures innovative hydropower systems that generate renewable energy. The premises at Building 23 will be used as office, research and development, and light manufacturing.

With funding from the United States Department of Energy and the Small Business Innovation Research Program, Natel has been allowed to grow and commercialize their invention, thus prompting their expansion and relocation.

Together, with existing clean energy companies like Wrightspeed, Makani Power, Saildrone, and Kai Concepts, Natel is creating a niche for the clean tech industry at Alameda Point. Much like Spirit’s Alley, the City greatly welcomes this clean tech cluster that is growing on the base.

DISCUSSION

Natel previously occupied Building 400A and currently occupies Building 19 at Alameda Point under a license agreement ending in December of this year. At Buildings 400A and 19, Natel quickly grew from 4 to 20 employees. At their new location at Building 23, Natel is expected to expand to approximately 150 employees.

Building 23 consists of approximately 65,000 square feet of rentable space with adjacent parking in front of the premises. The current rent is $29,250 per month. The proposed 10-year lease with Natel for Building 23 requires payment of $35,100 monthly for year one and year two of the term with an escalation for future years. The lease contains the standard insurance, indemnity, assignment and termination clauses the City of Alameda requires in all its leases.

...

The Natel Lease also includes an option price of $8 million. It is Cushman & Wakefield’s opinion that the option price of $8 million represents a reasonable market price for this building. Assuming 50% building to land coverage based on the 55,000 square foot building footprint, the extra land of 120,868 square feet valued at $25 per square foot is worth $3,021,700. The balance of $4,978,300 applied to the 55,000 square foot footprint equates to $90.51 per square foot, which exceeds the value for comparable class C manufacturing space; however, the higher price is justified in this case given the views that the site offers. The price significantly exceeds the minimum infrastructure allocation for this parcel.

At this time, Natel plans on investing approximately $10 million in Building 23.

FINANCIAL IMPACT

The monies from the new lease will be deposited into the Base Reuse Department lease revenue fund and are limited to uses permitted under the Economic Development Conveyance Memorandum of Agreement (EDCMOA) with the United States Navy. The option price will be used to fund infrastructure pursuant to the Alameda Point Master Infrastructure Plan and EDCMOA.

MUNICIPAL CODE/POLICY DOCUMENT CROSS REFE
This action has no impact on the Municipal Code.

ENVIRONMENTAL REVIEW

This action is exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15301(c) (Existing Facilities).

RECOMMENDATION

Approve an ordinance authorizing the City Manager to execute documents necessary to implement the terms of a 10-year lease and option to purchase with Natel Energy, Inc., a Delaware corporation, for Building 23 located at 2401 Monarch Street at Alameda Point.

Respectfully submitted,

Jennifer Ott, Chief Operating Officer - Alameda Point

By,

Nanette Mocanu, Assistant Community Development Director

Financial Impact section reviewed,

Elena Adair, Finance Director

Exhibits:

1. Diagram of Leasehold Area

2. Lease