Memo from the Director of Community Development to the Chair and Members of the Economic Development Commission Regarding Draft Economic Development Strategy for Alameda Point, October 18 2012

To: Chair and Members of the Economic Development Commission
From: Lori Taylor
Director, Community Development Department
Date: October 18, 2012
Re: Review and Comment on Draft Economic Development Strategy for
Alameda Point

The Federal Office of Economic Adjustment (OEA), under the Department of Defense,
awarded the City of Alameda $225,000 in funds in September 2011, to prepare an
economic development strategy for Alameda Point (Strategy). OEA is the Department
of Defense’s field organization responsible for supporting local governments with
military base closures.

Through a competitive bid and selection process, the city awarded the contract to
develop the Strategy to Keyser Marston Associates (KMA). The KMA team includes the
architectural firm Field Paoli and the civil engineering firm Carlson, Barbee & Gibson
Inc. KMA is a full service real estate, financial, redevelopment, and economic
consulting firm specializing in real estate advisory, evaluation, and redevelopment
services. KMA is actively involved in the redevelopment of base closures. They have
successfully helped to attract private development and create significant jobs and public
benefits at Hamilton Air Base in Novato and the former Fort Ord in Monterey.

Job creation has consistently been one of the most important community priorities for
redevelopment of Alameda Point. The purpose of the Strategy is to create a sensible
and targeted approach to take advantage of the existing commercial tenant base and to
attract new commercial and institutional groups to Alameda Point, resulting in increased
jobs and economic activity, as well as lease revenues that will help finance future
predevelopment and implementation efforts at Alameda Point. The Strategy is
presented here as a detailed power point presentation. The comments from the
Economic Development Commission and the Planning Board will be incorporated into a
final written report presented to the City Council.

Since January, KMA completed the tasks summarized below, compiling the data and
conducting the research to support the recommendations contained in the Strategy (see
Exhibits 1 through 5):

Task 1: Commercial Market Analysis. KMA conducted a commercial market
analysis that evaluated the opportunities and constraints potential of Alameda
Point relative to other local and regional locations.

Task 2: Alameda Point Tenant Assessment and Forum. KMA worked closely
with staff to evaluate the existing tenant base and held a forum for existing
tenants to share their views on the long term development vision for Alameda

Task 3: Approach to Commercial and Institutional Groups. KMA evaluated the
potential for attracting large-scale commercial and institutional users to Alameda

Task 4: Adaptive Reuse Physical and Financial Analysis. KMA prepared
conceptual building and landscape drawings, and financial analyses for five
prototypical buildings at Alameda Point.

Task 5: Industry Feasibility Testing and Interviews. KMA interviewed a crosssection
of relevant development, business, and industry professionals to review
and "market test" proposed land use, adaptive reuse, market, and financial
assumptions developed in tasks 1 through 4.

Summary of Recommendations. The draft Strategy integrates KMA’s findings from
the above five tasks and outlines a clear direction for attracting jobs to Alameda Point.
Each recommendation in the Strategy contains specific steps for successfully
redeveloping the property for employment generating uses (see Exhibit 6, Draft
Alameda Point Economic Development Strategy PowerPoint Presentation).

1. Enhance Alameda Point’s identity and sense of place. KMA recommends a
coordinated approach to address the vast size and complexity of Alameda Point
by segmenting Alameda Point into smaller, coherent districts with distinguishable
features and business activities. KMA suggests enhancing the main entrances;
improving directional signs to help people orient themselves and find their way;
and developing on-site amenities, such as pop-up cargo container stores, to
support workers and attract visitors. KMA also recommends crafting a
coordinated marketing approach (e.g. develop a logo, redesign website, organize
tenant events) to increase the image of Alameda Point in the market. These
steps will help promote Alameda Point and the significant business activity that is
already occurring there, while responding to a perceived image that it is an
isolated place with scarce resources.

2. Capitalize on existing assets, tenants and property. KMA found that the
large surplus of vacant space in the East Bay will need to be absorbed and
market rents will need to increase before extensive rehabilitation of the major
buildings at Alameda Point becomes financially feasible. It is currently
considerably more expensive to substantially restore many of the buildings than it
is to purchase existing buildings elsewhere in the area. However, KMA points
out that there are current potential users that find the existing buildings and
Alameda Point’s location meet their business requirements. Many business
clusters have a strong presence at Alameda Point and have a high potential for
expansion. Examples include 1) the marine related industries, 2)
premium/specialty beverages and food production, 3) specialized manufacturing
of artisan goods, 4) arts, recreation and entertainment, and 5) Film/Event
ProductionThese businesses present an excellent foundation and an opportunity
for future growth. KMA recommends retaining and expanding these business
clusters.. KMA also suggests that the City may need to invest some of the rent
revenues generated by existing leases to make improvements, clean the
interiors, and remove debris in vacant buildings to make them more attractive
and marketable. Furthermore, the leasing process needs to be streamlined to be
competitive with current leasing practices in the marketplace.

3. Encourage new private sector development. Building upon the city’s work to
attract the Lawrence Berkeley National Lab’s Second Campus, KMA
recommends preparing "Development Guides" for the different districts, which
would identify important issues and constraints for potential development sites or
redevelopment of existing buildings. The information provided in the guides
would help to reduce uncertainty and risk, which is important in attracting new
investment. Using the guides as a development tool, KMA also suggests
assembling 15 to 25 acre sites that can be readily promoted for development.
KMA points out that the opportunity to partner with an experienced developer that
can oversee the development from start to finish is attractive to businesses
looking to build new facilities, as demonstrated by the relative success of Harbor
Bay Business Park. Similarly, KMA recommends issuing a tenant/developer
Request for Proposals for selected vacant buildings to attract potential new
investment. Finally, KMA recommends offering longer term leases (at least ten
years) that may provide incentive and allow easier financing to increase private
investment in the buildings.

4. Improve infrastructure. New commercial development at Alameda Point is
perceived to be expensive because of the potential need to replace aging
infrastructure and to install modern telecommunications systems. KMA found
that it is difficult for many businesses to finance the infrastructure that may be
needed at Alameda Point and the types of business that may be able to afford
such level of investment would prefer to be in the Peninsula or Silicon Valley.
The city has begun to address this concern by recently executing a contract to
prepare a flexible and incremental Master Infrastructure Plan so that the costs
may be better understood by potential tenants and developers.

Next Steps. The draft Strategy is scheduled to be presented to the Planning Board on
November 26 for their review and comment. The final written report is scheduled to be
presented to and accepted by the City Council on December 6.

The total budget for the Strategy is $250,000. Under the OEA grant requirements, the
OEA grant provided 90 percent of the funds ($225,000); the city as the grant applicant
provided ten percent ($25,000) through in-kind services, which consisted of staff time to
support the project. The OEA grant funds were used solely for the KMA contract
amount of $225,000. No additional funds were needed to complete this scope of work.

Review and comment on the draft Economic Development Strategy for Alameda Point.
Respectfully submitted,
Lori Taylor
Director, Community Development Division
By: Eric Fonstein
Development Manager

1. Commercial Market Analysis
2. Alameda Point Tenant Assessment and Forum
3. Approach to Commercial and Institutional Groups
4. Adaptive Reuse Physical and Financial Analysis
5. Industrial Feasibility Testing and Interviews
6. Draft Alameda Point Economic Development Strategy PowerPoint Presentation