The year 2007 will go down as the year downtown Berkeley’s biggest developments passed into the hands of some of America’s biggest corporations.
Two months after Patrick Kennedy and David Teece sold their seven downtown apartment complexes to Sam Zell’s Chicago-based Equity Residential, Library Gardens was sold to New York-based BlackRock properties, a financial titan with $1.23 trillion in assets, at the end of June.
“We were able to contribute another million dollars to the city budget before the end of the fiscal year,” said John DeClercq, chief operating officer of Equity Management Group (EMG), which sold the 176-unit building in June.
DeClercq said the sale represents “another commitment to the City of Berkeley, another investment by the large real estate investment community, a commitment to mixed housing with good amenities, parking and retail, all designed into the project and deemed valuable by the real estate community.”
Formerly known as TransAction, EMG involves the same players and properties, though with the sale, the firm no longer has a presence in Berkeley, DeClerq said—having decamped to Oakland.
The sale of Library Gardens represents the end of a 23-year history, which started with acquisition of the old Hinks Department Store in the southern end of the Shattuck Hotel building along with its parking structure, located just across Kittredge Street at western end of the Berkeley Public Library.
Under TransAction’s ownership, the vacant store was transformed into the Shattuck Cinemas, storefronts and a basement complex that includes the Habitot children’s museum.
But the fate of the parking structure remained in doubt.
“It had been the preferred site of a new courthouse after the state wanted the courtrooms in Berkeley consolidated into one building, so a potential cloud of eminent domain had kept us from development,” DeClerq said.
Then, in 2000, California voters approved consolidated the state’s justice, municipal and superior courts into a single superior court system, which meant that most Berkeley cases would be heard in courtrooms in Oakland or Hayward.
“We were then able to begin unfettered development,” he said.
One controversy was the fate of the 362 parking spaces in the former Hinks parking structure, slots popular with people who came to see films in downtown theaters.
Originally, TransAction was to replace all the spaces in a two-level underground lot. Then controversy erupted when the company submitted plans calling for only 116 ground-level spaces, with all but 11 reserved for tenants.
The Zoning Adjustments Board approved the project when another 124 underground spaces were added, but in the final version of plans given the city’s blessing in Feb. 2004, the number had dropped again, this time to 130.
In November, 2004, Roy Nee, who owns a spa in Marin County, had purchased the theater, consolidating ownership of the entire hotel building for the first time in decades—leaving TransAction with the site where the excavations had already removed much of the earth for the remaining underground parking.
Flush with cash, DeClerq handed the city a $1,028,000 check to pay for his building permit.
The building was ready for temporary occupancy late in 2006, then opened formally in December.
Evening before construction had been completed, GMH Communities Trust, another major national real estate investment firm, had signed a non-binding letter of intent to add the building to its portfolio of apartments geared for college students.
DeClerq said several major firms had expressed interest through a broker, but in the end it was BlackRock that came up with the cash.
“There were about a dozen companies circling Berkeley,” he said. “The crop had matured.”
The Panoramic sale—estimated at about $145 million—netted the city $2.1 million in transfer tax, with the addition of another million from the Library Gardens adding frosting to the cake at the close of the city’s fiscal year.
One estimate placed the value of the sale to EMG at about $65 million.
City Manager Phil Kamlarz said that without the sale of Library Gardens and the Panoramic Interests buildings, the city wouldn’t have been able to meet its revenue projects for the last fiscal year.
“It helped a lot,” he said.
Residential sales had fallen over the year in the downtown area, and a general sales decline is likely for the current fiscal year, given the ongoing crisis in financial markets, Kamlarz said.
Library Gardens, which dominates the block between the library and Berkeley High School, remains somewhat controversial, and Matt Taecker, the city staffer working on the development of the new downtown plan, used photos of the project as seen from the sidewalk in a presentation to the Downtown Area Plan Advisory Committee as an example of designs to be avoided.
DeClerq, a man with a ready smile despite the criticism his project generated, said he had learned two things when working on real estate development in the sometimes humid political climate of the city by the East Bay.
“You need patience and good humor,” he said, along with the help of good people.
A former employee of the state Department of Real Estate before jumping to TransAction/EMG and the private sector 23 years ago, he said Library Gardens was his first development project.
“It’s been a real education,” he said.
DeClerq said he and EMG are looking for more “good dirt” in the Bay Area to begin their next project.
“We are looking for good infill development on transit corridors,” he said..