OAKLAND, CA—Tenants continue the migration from San Francisco. This influx of tenants has driven the vacancy rate of the Oakland CBD market down to 4.1%, with a class-A vacancy rate of 2.6%, the lowest in the nation, according to CBRE's first quarter Office MarketView.
And, the influx of retailers to downtown has been a significant factor in the revitalization effort. The city boasts a renewed retail environment with many popular shopping districts such as Jack London Square, Chinatown, City Center, Rockridge District, Historic District, Old Oakland and Piedmont Avenue. The influx of both tenant types, coupled with the fact that Uptown is the hottest neighborhood in Oakland, means investor interest is following suit.
KKR and Harvest Properties seek to capitalize on recent capital improvements and the strong downtown leasing momentum with the recent acquisition of 95% leased 180 Grand Avenue, a 15-story 279,000-square-foot office building located in Lake Merritt. Square Mile Capital Management LLC originated the $95.2 million in financing loan secured by 180 Grand. The financing was used to fund the acquisition, capital improvements and future leasing costs.
“This transaction gives us the opportunity to provide financing at a secure basis on a well-leased asset and establish a lending relationship with a premier team in KKR and Harvest Properties, which combine extensive Bay Area experience with one of the world's largest private equity firms,” says Square Mile principal Michael Mestel. “Between the owners' track record, the building's desirable location and the strong office market fundamentals in Oakland, we believe 180 Grand Avenue is very well positioned to take advantage of the narrowing gap between rents in San Francisco and downtown Oakland.”
The seven-year floating rate non-recourse loan was arranged on behalf of the borrowers, Harvest and KKR. The loan was arranged by Brad Zampa, Michael Walker and Megan Woodring of CBRE's San Francisco debt and structured finance team.
CBRE capital markets also arranged the sale of 180 Grand. Russell Ingrum, Seth McKinnon and Tyler Meyerdirk of CBRE's investment properties team represented the seller on the disposition and also brought in purchasers, Harvest Properties and KKR.
“The debt capital markets remain highly liquid and robust, particularly for quality assets like 180 Grand that sit in primary and secondary markets with strong fundamentals. Despite the fact the Fed raised short-term rates for the third time last week, spreads have compressed significantly this year and all-in coupons remain at near historic lows. The strength of the asset, the market and the top-tier sponsorship created an extremely competitive financing process and in the end, both Harvest and KKR received a successful execution in terms of leverage, term, interest only and spread while still offering flexibility,” said Zampa.
180 Grand is currently leased to a multi-tenant roster that includes AMEC Foster Wheeler, Health Net of California, Marqeta, Bank of America, Charles Schwab and Deloitte. In addition to more than $3.8 million in recent tenant improvements, the LEED Platinum-certified building has recently undergone a substantial $4.7 million renovation, which has further solidified the building's stature as one of the elite buildings in the CBD. The property also includes an adjacent 10-level, 381-stall parking garage.
The property is located at the corner of Grand Avenue and Harrison Street, directly across from Lake Merritt and Lakeside Park, the 122-acre public park, allowing for unobstructed views of the lake as well as Berkeley and the Oakland Hills. The property is located within one block of a Whole Foods Market with indoor/outdoor seating and the 19th Street BART station. Tenants also have proximity to Uptown's entertainment and other dining options in the area such as True Burger, Hawker Fare, Ike's Place, Unami Burger, Pican, Ozumo, Farley's and Luka's Taproom. In addition, The Hive includes a Drake's brewpub.
Located adjacent to 180 Grand Avenue is the Broadway Valdez District Specific Plan, GlobeSt.com learns. The district straddles both the Uptown and Lake Merritt Districts, and the plan will develop strategies to provide destination retail and mixed-use development along Broadway between Grand Avenue and Interstate 580. Broadway is viewed as Main Street and is significant due to its proximity to downtown, two BART stations, an AC transit bus route, the medical campuses of Kaiser and Summit/Alta Bates, the Piedmont Avenue retail street and the edge of Lake Merritt. The goal of the plan is to build upon the district's many assets and to facilitate its transformation into a vibrant neighborhood that combines destination retail, housing, transit and walkable streets.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
