By Meghan Hall
After nearly 16 years in its current Oakland headquarters, BART is finalizing plans in its search for a new home. At a Board of Director meeting this morning, BART officials voted to execute a purchase and sale agreement with Lane Partners and Walton Street Capital to purchase 2150 Webster Street for $142 million, or about $568 per square foot. BART also requested that $85 million be set aside for tenant improvements.
“Public agencies really need to look at their real estate assets in a long-term perspective,” said San Francisco State University’s Director of Real Estate Development Hamid Ghaemmaghami, during the hearing’s public comment. “Public agencies are in real estate long term, so you have to look at a maybe 50-year span. So why lease? Why waste public money?”
BART moved into its current headquarters at 300 Lakeside Drive in June of 2003 in an effort to consolidate the organization’s office space. BART occupies 369,587 square feet on 14 floors of the Lakeside property, but also leases additional connected space for BART Board meetings. The building is home to 1,100 BART employees.
BART’s reasons for moving are several, but overall BART is hoping to consolidate its footprint while also keeping in mind rapidly rising commercial real estate costs. According to public documents, BART’s current blended base rent for the Lakeside property — owned by The Swig Company and Rockpoint Group — is $34 per square foot, plus operating expenses of about $6 per square foot. The lease expires in 2021, although BART did have the option to extend the lease for two additional five-year periods at 90 percent of fair market value, which would come in between $62 to $64 per square foot. If BART were to renew its lease, the increase in its rent would be about 60 percent, a result of tenant demand in downtown Oakland.
BART ultimately considered five different options for its future home, including staying at 300 Lakeside, but decreasing its footprint to 255,516 square feet. BART also considered leasing 264,418 square feet on floors two through 11 at 601 12th St., owned by Shorenstein and Met Life, and also considered pursuing two ground-up developments on BART-owned land at Lake Merritt and West Oakland. However, concerns about the delivery date for new development eliminated Lake Merritt and West Oakland as options, and BART found the ability to purchase and own its headquarters most appealing, as the long-term cost to the agency would be much lower compared to leasing.
According to Tom Maloney, managing director of brokerage at JLL, the decision was made early on to maintain Oakland as BART’s home city. “Ultimately, it was determined that remaining in Oakland was a primary criteria for the RFP and that was primarily based on its central location to BART’s operation control center, located here in Oakland, the Oakland Y, the center of the system, and the current employee population is highly concentrated in Oakland,” he said.
BART lists several merits of the Webster Street property, stating that it has the lowest long-term occupancy cost, thus mitigating future market risk, and would allow BART to control security and branding of the building. BART would also be the property’s sole tenant. The District plans to issue sales tax revenue bonds to pay for the building’s purchase and improvements. Documents show that the purchase price for the 244,249 square foot property would come in at $140 million, with closing costs of $2 million.
BART has been working with JLL since April of 2018 to find its new home.
Lane Partners originally acquired the Webster Street site from long-time owner from AT&T in 2015 for $44 million, or just over $192 per square foot, according to previous reporting by The Registry. After the transaction closed, Lane Partners undertook a complete renovation of the property. Renovations include all new glazing systems, new ground floor retail storefront, office lobby, new elevators, windows and structural improvements. The building also features 8,000 square feet of ground floor retail amenities and is two blocks to the 19th Street BART station.
At the end of deliberations, the Board voted 8-1 with only Director Debora Allen against, in favor of purchasing the Webster Street property. The Board also approved the proposed bond measures to finance the transaction.
“Continuing to pay private landlords for public use is not efficacious fiscally, “said Director Lateefa Simon, who represents BART District 7. “And given the opportunity to purchase something in our own back yard, geographically in the middle of our system with the information that has been presented to us, is in the best interest of the people in the Bay Area.”