Blogging Bayport Alameda

October 26, 2015

A warehouse is not a home

Filed under: Alameda, Alameda Point, Business, City Council — Lauren Do @ 6:06 am

There’s a great moment in last week’s City Council meeting that I want to talk about but will wait till I get a chance to splice through some video, because it really needs to be watch to fully appreciate.  But in the meantime I wanted to talk about the discussion that occurred around the new, really exciting food and beverage maker space.  Now given that it’s pretty much exactly what people say they want to see in new businesses, of course you would think this would have been a relatively short discussion (love it, yay! move on)  But naturally with this Council that was not meant to be.

Everyone was completely on board with it with the exception of Trish Spencer.  Why?  Because she had an issue with the option for purchase price.

Remember these are buildings that have been neglected for years, calling it Class C Commercial is probably a generous description.  Plus the option to purchase would generate $68 per square foot for one building and $74 per square foot for the other.  According to Trish Spencer this was too low because residential properties are going for way over that.

Yeah.

Our mayor said that.

Look I know she’s not a real estate agent but really?  Really?  Comparing residential real estate per square footage rates to Class C commercial rates and saying that because they’re not aligned that the negotiated price is deficient is just seriously wacky.  I can understand if she asked staff to explain the difference between the two, but throwing down and making the implication that the price was too low because residential real estate is so high is completely absurd.  She actually said that because homes were selling for $1 million for 2000 or 3000 that there needed to be more analysis on the price for purchase.

Or she could simply ask the commercial real estate experts in the audience what current commercial rates for Class C Commercial buildings are going for.  Or she could have asked Google.

This is completely embarrassing and micromanage-y considering that the City Council gave direction for staff to negotiate these leases with the lessee and Trish Spencer wants to, instead, negotiate from the dais without being informed about comparable commercial sale prices or even having a basic understanding that commercial buildings have different costs than residential buildings.

I suppose Trish Spencer is trying to appear like she’s fiscally prudent by trying to extract every nickel possible, but she comes off looking completely out of her depth and uninformed when she speaks from her gut instead of using actual information.

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8 Comments

  1. I attended the meeting and while I think the Mayor had good intentions with some of her questions, I think she went in the wrong direction in criticizing the food and beverage leases. Clearly, this is the kind of project we’ve all been waiting for!

    In addition, she should know that Cushman Wakefield is one of the largest real estate services companies in the country, and they have a large institutional knowledge of the bay area commercial market including Alameda. They have made a huge commitment to Alameda, bringing us Penumbra, VF Outdoors, and a number of other leases that were mentioned at the CC meeting. So there is not need to re-invent the wheel here – it’s working!

    I also want to give a huge shout out to Nanette Mocanu who I think gave a great presentation on the leasing strategy. It was nice to hear the history behind the base leases, and hear the strategy for going forward.

    I think the City leasing policy and the Site B policy is definitely going in the right direction – my main concern was the Matson lease. I strongly believe that the site they just leased is a prime site (with great views of the Marad Ships and the Hornet) and we should be very selective with this particular site. Let’s remember this is the main reason that WETA chose Alameda for their new Central Bay Operations & Maintenance Facility. I was at their meeting when they described this corridor of the Alameda Point shipyard, and they said “this is where you want to be”!

    Comment by Karen Bey — October 26, 2015 @ 7:48 am

  2. I was skipping through the video trying to find something else and happened on this item. The people who want to lease are Alamedans and they want to sink millions into a lease improvements. I know nothing about anything in terms of commercial real estate, but did hear figures of $5 a sq foot for renting in Oakland and $10 in SF. Amazing the delta is that wide. Staff mentioned that with developments in Oakland we can expect “upward pressure” on the market. The food partner has put up $4 million investment and the potential partner I watched speak is an organic micro-brewery guy who talked about regionally grown malt. There was an article in the Chronicle about bio-regionally produced blue jeans which would be from local sustainably grown cotton ( non-GMO) which would happen to be sewn in Alameda. Artisanal blue jeans for only $600 a pair. This malt discussion sounds much more viable.

    Comment by MI — October 26, 2015 @ 9:08 am

  3. I think you’re being a bit too rough on Mayor Spencer regarding this issue. Her intentions were to make sure we don’t give space away, but rather generate the best possible deals without losing leases to other cities. The Mayor if fine with being criticized at times, as long as she is forcing everyone to improve productivity.

    Comment by nyborn2013 — October 26, 2015 @ 9:27 am

  4. (1) She didn’t have a problem with the lease rates, which generates — at maximum — $7.08 per square foot a year and (2) she said — not implied or hinted at — that because residential homes were going for $1 million a year for 2000 – 3000 sq ft homes that something was wrong with the structure of $68-78 per square foot for an option for sale with the understanding that the lessee would be putting millions of dollars into improvements into the buildings. Buildings that the City has been unable to perform routine maintenance on, let alone make wholesale improvements.

    The lack of understanding about commercial vs residential property is a problem for a City Council member who is attempting to micromanage the lease terms and not taking the advice of the actual experts. I’m not sure how pointing out a clear deficiency of knowledge is being “too rough.”

    Comment by Lauren Do — October 26, 2015 @ 9:47 am

  5. Well there are four other council members to keep things on course. Thankfully.

    Comment by John P. — October 26, 2015 @ 10:00 am

  6. Tony likes to showcase his wonkiness on stuff like this. Was there any push back from any of them, with specifics ? The brewer commented that brewing and food processing are water intensive and they have plans for water recycling. Meanwhile the City has had trouble keeping up with water infrastructure because of cash flow, right?

    Comment by MI — October 26, 2015 @ 10:27 am

  7. They were all supportive, even Tony Daysog, the only exception was the Trish Spencer fixating on the comparison with residential home sale costs, but she eventually voted for it anyway.

    Comment by Lauren Do — October 26, 2015 @ 10:36 am

  8. If the mayor came at it with a little more humility or a coherent argument it would not be as bad. She just doesn’t have the leadership or rhetorical skills to match her high levels of skepticism over staff’s motives and work ethic. It is perfectly fine to ask questions about whether we are getting the best deal we can. Her style is so ineffective though. Had she broached the subject in a productive manner we might have learned more about the process. How, perhaps we are capitalizing on a hot market to get these troubled properties off of our balance sheets as liabilities and into productive properties that generate tax revenue. Maybe we would learn that we are giving a discount on the property to get the special type of tenants that the community has expressed an interest in. That we are creating a special mix out there that will help make the point a true destination that will reap benefits down the line. Maybe we would hear staff say they don’t care and “you caught us.” We will never know, because her approach is not clear or well thought out.

    The other line of questioning that the mayor tried to raise, but did it in a hamfisted way that makes sure nobody joins in her cause, was about the commissions we are paying to Cushman & Wakefield to put these leases and sales together. It seems there is some truth to the fact that it isn’t their amazing marketing skills and market knowledge that is generating the interest in these deals. The folks already out there are doing all the marketing for us, creating the culture the point is coalescing around (clean energy tech and food & beverage niche). Maybe we are overpaying for this service. Going back to the mayor’s housing market analogy, we sure do overpay for broker services on home transactions. On the other hand, I’m sure it is important that we are doing these deals “the right way” and in the end, the inflated commissions we might be paying are small change when it comes to keeping the train of the Point’s development on the preferred track.

    She definitely has a forest vs. trees issue sometimes.

    Comment by BMac — October 26, 2015 @ 11:48 am


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