LOCAL PLAYERS HOPE CHINESE FIRM’S INVESTMENT IN THE COMPLEX WILL SPUR OTHERS TO CONSIDER PUTTING MONEY TO WORK IN CITY
For years, many in the real-estate world balked at investing in Oakland because of its high crime and unemployment. Now, Oakland boosters are trying to use a new investment in a sprawling $1.5 billion waterfront complex to persuade developers and investors to take another look at the city.
Chinese investment firm Zarsion Holdings Group announced earlier this month that it would help fund the city’s Brooklyn Basin, a planned 65-acre complex on the Oakland estuary with housing, retail shops and parkland that has been in the works for more than a decade.
Zarsion and its Oakland-based partner, Signature Development Group, didn’t disclose the terms of their agreement or the sum of Zarsion’s investment, but Signature described Zarsion’s share as substantial enough for the firm to be described as a “co-developer.”
“The growth of the city, Oakland, is very good,” says Shan Weixun, Zarsion’s chairman, adding that he is “very optimistic” about the project.
Now, local developers are pointing to the deal as evidence of Oakland’s appeal and a reason for retailers to lease space near the site and for institutional investors to put funds into other nearby projects.
“The real-estate community in Oakland is very excited,” says Mike Ghielmetti, president of Signature Development Group. “It’s an affirmation of what most of us already know, but coming out of the recession we’re just getting our mojo back.”
With funding secured for Brooklyn Basin, builders are expected to break ground on the project in late 2014 or early 2015, Mr. Ghielmetti says. The first residents and retail tenants would move in by late 2016, he adds.
That has developers and others looking to capitalize on the promised influx of residents and businesses. Helen Bulwik, who advises national department-store chains on location decisions as a partner at the advisory firm Newport Board Group, says she has been trying for years to sell retailers on Oakland—a city of 396,000 that, unlike nearby cities, lacks a thriving downtown retail area.
Now, she says she is telling clients that Zarsion’s investment provides even more reason for them to consider opening up shop on the Broadway corridor that runs from the waterfront near Brooklyn Basin to the northern part of the city. The Zarsion deal has led to “a renewed interest in saying yes” to Oakland, she says.
Developers of Jack London Square, an Oakland waterfront area adjacent to the Brooklyn Basin that is known for its restaurants and bars, are also trying to capitalize on the deal. They are telling retailers who are considering leasing some space that Brooklyn Basin—which will include 3,100 housing units—will attract an influx of residents in need of basic amenities like a grocery store and pharmacy, which the area currently lacks.
Jack London Square’s office space is 95% leased, but its retail space is less than half full, says Will Miller, senior vice president at Ellis Partners LLC, an operating partner at Jack London Square.
“When you’re sitting and talking to prospects about all these plans, they say, ‘Yeah, yeah, great,’ because it’s all just a plan,” Mr. Miller says. “But when they hear that it’s getting funded and the developer is moving forward, it brings a sense of reality and I think will assist us in moving those conversations forward.”
Oakland still has many problems. Crime remains rampant, with 1,365 robberies so far this year through April 21, up 22% from 1,117 at the same time last year, according to the Oakland Police Department, which has experienced layoffs amid budget cuts. While other crimes, including murders and rapes, are down from last year, the overall crime numbers remain higher than those of other Bay Area cities like San Francisco and San Jose.
Meanwhile, Oakland’s proposed budget for the 2014 fiscal year released by Mayor Jean Quan last week revealed the city’s finances are still in poor shape, with an expected shortfall of $12.3 million on revenue of $430.2 million, absent some cost-cutting measures Ms. Quan and the city administrator have proposed. And the city’s unemployment rate of 11.8% in March is higher than San Francisco’s 6% and San Jose’s 7.9%, according to the California Employment Development Department.
Scott Johnson, the assistant city administrator, acknowledges the city must address those issues but points to factors like growing sales-tax revenue as evidence that Oakland is seeing a “renaissance.”
The city’s problems have kept Charmaine Curtis, a San Francisco developer, from investing in Oakland since she built a 16-unit condominium building there in 2008. Still, she says San Francisco’s soaring prices have encouraged her to look across the Bay for better deals. The Zarsion deal has given her an added boost, as she realized it could spur other developers to eye Oakland.
“Brooklyn Basin could be the tipping point for Oakland,” says Ms. Curtis, who plans to go for a drive in Oakland to scope out some neighborhoods that might be on the cusp of growth. “It’s a herd mentality—once a few cows go into the pasture, everybody’s going to run in and start sniffing around. My desire is to try to get a little ahead of the herd.”