Selling a valuable commercial building at Alameda Point may have to wait, and leasing can be the bridge to the future, according to Base Reuse and Economic Development Director Abby Thorne-Lyman.
On Tuesday, October 20, 2026, the City Council will consider leasing a former Navy aircraft hangar, Building 11, to Poseidon Aerospace. The startup company plans to begin manufacturing pilotless cargo planes in 2027 with up to 100 employees. Its business model is to own and operate a fleet of planes, with limited commercial operation beginning next year, pending regulatory approval.
Background
The Building 11 hangar at the end of West Tower Avenue has been vacant since late 2020. The City passed up two offers from Alameda Point developer srmERNST to purchase the building in 2022, first for $22 million and then for $24.9 million, according to the 2023 Keyser Marston report (page 57) on leasing versus selling. Instead, city staff unsuccessfully attempted to lease this hangar in 2023.
Poseidon Aerospace started moving into Building 11 in August 2026 under a six-month license agreement as the City drafted a lease agreement. The staff-authorized early move-in was approved in order to avoid potentially losing the company to a private landlord in the region that could act quickly without going through an elected body for approval, according to the staff report.
Economic ramifications of long-term lease
The initial term of the lease being considered now will be seven years with an average yearly rent of $1.8 million. “The lease rate exceeds other lease rates at Alameda Point,” said Thorne-Lyman. If the company exercises two 5-year renewal options, it would bring in an additional $29 million.
Having a tenant lease this hangar for potentially 17 years would not short-circuit the City’s ability to sell the building, according to Thorne-Lyman. “A buyer could purchase the building with tenants in it, and this is quite common especially among property sales to investors rather than operating businesses,” said Thorne-Lyman. “A tenant actually provides a stable source of revenue for a buyer, which is a bonus.”
Some businesses seeking to locate at Alameda Point are not in a financial position to buy a building, according to Thorne-Lyman. “They are more often than not young companies, backed by venture capital investors who are not in the real estate asset world,” said Thorne-Lyman. In the case of Poseidon Aerospace, the company recently secured $60 million of investment capital to ramp up production.
“Owning a building would be a distraction from their main operation and not a good outlay of their limited funds when they are trying to prove their core business model,” continued Thorne-Lyman. “The 17-year duration gives them ample runway to justify investment in the building to tailor it to their needs, and exceeds the typical length of a commercial/industrial lease.”
While the company plans to invest its own money into building upgrades, the lease revenue will not go toward new street and utility infrastructure upgrades, as only sales revenue funds infrastructure.
Poseidon targets commercial and military market
Poseidon’s current product line features two versions of cargo planes. The Egret plane has wheels for landing on paved and unpaved runways, and the Heron is a seaplane for landing on water. The planes are being marketed for both commercial cargo deliveries and military cargo deliveries.
While civilian cargo delivery may be the first application to go into service, the company is hoping the Department of Defense will see the value of its planes for delivering material to “contested and austere environments.” An animated graphic on the company’s website depicts one of those contested environments, encompassing the region around Taiwan, under its marketing slogan “Bringing America’s Arsenal to Our Adversaries’ Doorstep.”
The price of securing a tenant not incidental
The 382-page lease agreement is being handled through an exclusive listing agreement with Jones, Lang, Lasalle to provide the City with commercial brokerage services. The City will pay an up-front commission of $828,905 for the transaction. It will require a separate resolution on Tuesday’s agenda to add funds to the budget for brokerage services.
Originally published on the Alameda Post.
