By Jon Peterson
Prospects for Bay Area commercial real estate continue to be high, and a pair of well-known investors are betting on the region’s future. Boston-based Beacon Capital Partners and its capital source, the California State Teachers Retirement System (CalSTRS), are planning an office development project in Oakland located at 1956 Webster Street, according to city planning documents and public business records.
Beacon declined to comment, and CalSTRS did not respond to an email seeking comment for this story.
The proposed development in Oakland, which has seen a resurgence of interest for commercial space over the last few years, is looking to deliver over 100,000 square feet of new space, according to a preliminary proposal filed with the Oakland Planning Commission. This new property would offer a mix of office space, as well as ground retail or restaurant space.
Presently, 1956 Webster is a four-story office building that totals 42,300 square feet, as described in the Oakland city filing. This property would need to be demolished to make room for the new development project.
CalSTRS has been the owner of the existing building since 2016, according to public records. The pension fund had acquired the property for $10.75 million. That same year CalSTRS also acquired the 1999 Harrison high-rise and one-story building in Oakland for $224.75 million, showing it had a strong conviction for the economics of this market.
CalSTRS and Beacon have an extended financial relationship and a long history of investing capital in some of the major office markets around the United States. The two entities have partnered across markets on the West Coast such as the San Francisco Bay Area, Seattle and Southern California.
The investments between the two firms have been conducted primarily through two main structures. These are separate account joint ventures and commingled funds raised by Beacon. One of the most recent investments issued by CalSTRS to Beacon was for $650 million into the BCal II joint venture. This capital was issued to the manager in the second half of 2020.
The pension fund considered this investment to be a core relationship with a strategy to invest in assets around the country. CalSTRS holds a 95 percent ownership position in the joint venture with the balance held by Beacon.
The venture has some flexibility in the types of office assets in which it can invest and the level of acceptable risk. This can include a combination of office, medical office and life science properties. The transactions can also include acquisitions of existing assets at core plus returns and doing a build-to-core strategy that can produce double-digit returns.