OAKLAND -- A new year and new investors could be the cure for jump-starting the $400 million development in once-bustling Jack London Square, Port of Oakland officials said Monday.
Jack London Square developer Ellis Partners has already spent $130 million to renovate old buildings and construct new ones, such as a two-story office building across from port headquarters, a public parking garage and the six-story Jack London Market. But the lackluster economy and fierce competition for tenants has left many structures empty and others still on the drawing board.
An agreement headed to the port board of commissioners today would allow an investment entity led by Market Street Capital Partners JLS, LLC, and controlled by Divco West Services to assume 98.5 percent ownership of the Jack London Square development project from Ellis Partners. Divco West is a real estate investment firm with offices in San Francisco and Boston.
Ellis Partners will retain a 1.5 percent ownership share and continue its role as master developer and handle day-to-day operations. The monetary terms of the deal were not disclosed.
Representatives of Ellis Partners were not available for comment, but the port staff report said the company's lender requested that it attract new capital investment to reduce the mortgage debt and fund future tenant improvements. Port staff reviewed the agreement between the new partners and it requires the board's approval, but it does not alter the monetary terms of the original deal with the Port of Oakland, said Pamela Kershaw, real estate director.
"Timing is everything in real estate, it's not just about the location," she said. "It's really hard to get easy capital and there's a shortage of tenants out there and people are competing to keep the ones they have. The opportunity to infuse (the project) with new investment capital is hugely important. Absolutely it's our hope that we can get some new tenants and make the square (everything we expect it can be)."
Ellis Partners paid $23.6 million to the Port of Oakland for several buildings and two other undeveloped parcels between 2002 and 2005. The company pays slightly less than $1 million annually for eight long-term leases on several properties in the square, including 66 Franklin Street, 98 Broadway, Water Street 1 building and 70 Washington Street.
It has completed renovations to the Franklin Street building, which is home to popular eatery Bocanova, Miette Patisserie, and solar company Sungevity. Hotelier Joie de Vivre is also partnered with Ellis to purchase, renovate and operate the Waterfront Hotel.
The opening of the brand new six-story Jack London Market building has been delayed several times, with the latest projection in summer 2011.
The first two floors are designed to hold a variety of fresh food market stalls and restaurants, with office tenants on the upper floors. Things could be looking up. Law firm Kazan, McClain, Lyons, Greenwood and Harley PLC recently signed on as the first tenants, occupying the entire fourth floor.
Construction is expected to begin next year on a 250-room hotel, office building and retail space.
The open session of the Board of Port Commissioners begins at 3:30 p.m., 530 Water St., second floor.