Oakland Bay-Front Project Makes Strides
Submitted April 1, 2010, 10:38 PM
If so, only an appellate court challenge would stand between Oakland Harbor Partners and the redevelopment of the former industrial site south of Jack London Square.
A joint venture of Bay Area homebuilder Signature Properties and East Bay commercial property developer Reynolds & Brown, Oakland Harbor Partners wants to build 3,100 homes, 200,000 square feet of ground-floor commercial space, 3,500 structured parking spaces and about 32 acres of parks, trails and open space. It also is seeking to renovate and expand two marinas and to create a wetlands restoration area.
“It is an important project and a beautiful piece of property, both from a financial standpoint and from a public policy standpoint,” said Mike Ghielmetti, president of Signature Properties.
The partnership in February gained approval for seller financing of the $18 million purchase price from the Port of Oakland. The sale is not expected to close until the first half of 2011, however, as the partners and the port await the outcome of the court case.
Under the February agreement, a revision of a previous understanding, the developer expects to pay 25 percent of the purchase price, or $4.5 million, in 2011 and the remaining 75 percent, $13.5 million, on or before June 1, 2015, according to port documents. Payment due dates are linked to the court decision, however, meaning they could be earlier or later.
Oakland Harbor Partners has worked since 2001, when the city issued its request for proposals for the property, to make their plans a reality, said Pamela Kershaw, acting director of commercial real estate for the Port of Oakland. But since 2006, the project has been under legal challenge from opponents who contend its Environmental Impact Report was inadequate.
An Alameda County Superior Court judge approved the city’s EIR revisions and rejected the plaintiffs’ petitions in August 2009, saying they were without merit. But project opponents appealed in October 2009 and a decision by the State Court of Appeal is pending.
The lower court ruling allowed work on the project to resume, leading to the port’s February approval of the revised purchase agreement with Oakland Harbor Partners, Kershaw said.
From the close of escrow until the final payoff of the purchase price, when the deed is transferred, the developer would be the owner of the development parcels and the ground lessee of the open space and marinas. The developer also would be responsible for management and maintenance of the property. The developer would pay the port the equivalent of 75 percent of the property’s net revenue annually. That payment is an estimated $847,500 a year, according to documents.
The developer proposed revising the payment schedule. “It is difficult to get debt in real estate today, not impossible but more difficult,” said Ghielmetti. “A lot of transactions around the country are being reworked as seller financing.”
The revised deal is low risk for the port, Kershaw said. If Oakland Harbor Partners fails to live up to the agreement, the port would take back the land and keep all payments made up to that date, only losing whatever future payments remained, she said.
But the port is confident that the developer will complete Oak-to-Ninth, she said. “They have been working at this a long time and they have a significant investment in the project thus far. I think they would like to see the project through to fruition.”
That “fruition” should be several steps closer in a few months, Ghielmetti said. The development company has been working with the state Department of Toxic Substances Control on an environmental remediation plan, which they hope to get approved in the next couple of months. Remediation costs were most recently estimated at $23 million, according to port documents. In addition, the Bay Conservation and Development Commission must sign off on the project’s plans for public access to the waterfront and the State Lands Commission must decide whether the developer has met obligations under the Tidelands Trust.
“By the end of June we expect to have an approved project,” Ghielmetti said.
After that, the developer will focus on defending the project in appeals court and waiting for a final decision, he said.
