By Meghan Hall
A major residential office project in the Lake Merritt neighborhood of Oakland is finally gearing up to break ground, and will do so once it can clear one final hurdle, one that is common to many Bay Area projects: procure financing. The development, proposed by UrbanCore Development LLC and National Real Estate Advisors LLC are looking to find an additional joint venture common equity partner for LakeHouse. The fully-entitled project will total 270 units and is expected to break ground in 2020.
LakeHouse will include a mix of studio, junior one-bedroom, one-, two- and three-bedroom residences, with the smallest units averaging about 520 square feet. The largest units will total about 1,400 square feet in size. The building’s amenities package is also extensive: a 20th floor sky lounge, coffee bar and kitchen, fitness center, yoga room, pool, a dog run, and a pet wash station, among others, are included in the plans.
The property is currently just under an acre, and is an unimproved parcel in Lake Merritt, about half a mile from the Lake Merritt BART Station and less than one mile from Downtown Oakland. Upon completion, the Class A building will be the only new multifamily community in Oakland at the edge of Lake Merritt, according to an offering document by Cushman and Wakefield obtained by The Registry. The brokerage firm has been retained by the project sponsors to help raise the needed equity for the project.
According to UrbanCore’s website, construction costs are slated to run around $200 million, and the equity commitment of the developers’ new partner could vary widely, according to sources familiar with the project. Depending on the capital contribution, the new partner could obtain as much as 90 percent interest in the development.
LakeHouse has been in the development pipeline for some time; UrbanCore’s website indicates that the project was originally slated to break ground in 2017. Initial entitlements approval came in June of 2016, and UrbanCore then entered into its Disposition and Development Agreement (DDA) with the City of Oakland in 2017. The DDA requires the closing of financing and land transfer by August of 2020, as well as the use of 100 percent Unionized Labor.
Other finance mechanisms include developing adjacent, on-site affordable housing — which will be developed on an adjacent parcel and total around 90 units — with EBALDC to receive tax credits and bond financing. However, the new joint equity partner would not have ownership in the affordable building, which will be located next to the tower. UrbanCore and NREA are also anticipating HUD Loan Firm Commitment approval by the end of January 2020; the loan will be at a 40-year fixed-rate and will be fully amortizing, not including the up-to-three-years of interest-only fixed-rate term during the project’s construction.
When financing is secured, construction is anticipated to begin in July of 2020, with delivery expected for the fourth quarter of 2022. The project team also includes Clark Construction as the general contractor and AVRP Skyport as the project architect.
UrbanCore has been working on several projects throughout the Bay Area since its founding in 2012 and generally focuses on urban-infill and public-private development projects. The Oakland submarket, in particular, is anticipated to take off over the next several years, making developments like LakeHouse a stable investment opportunity for interested parties. Since 2010, Oakland has seen its resident population grow to 42,173 residents, while the city has only added 6,037 multifamily units; Cushman and Wakefield notes that over the same period of time, no market rate apartment units have been delivered to the submarket where LakeHouse will rise. While around 4,300 units will come to market in 2020, with 528 and 534 units delivered in 2021 and 2022, a supply and demand imbalance will likely persist. In 2022, LakeHouse is just one of three expected deliveries, a schedule likely to benefit the developers.
Additionally, Oakland’s employment base is anticipated to rapidly evolve thanks to growing corporations and credit tenants establishing themselves within the City. Square, Credit Karma, Oracle and others have leased nearly two million square feet of office space in Oakland. Currently 1.5 million square feet of office development is in the pipeline, with the number of jobs expected to grow by 53 percent in the coming years. This will continue to put pressure on Oakland’s housing stock, and rents are expected to grow by 17 percent in 2024, the fastest in the Bay Area when compared with Berkeley and San Francisco, where rents are expected to increase by 16 and 12 percent, respectively.
