Plan it, and the money will follow. Except in West Oakland.
Investors are skirting big West Oakland projects in favor of places such as Uptown Oakland and Emeryville, the San Francisco Business Times reported.
While Bay Area developers see West Oakland as ripe for approved projects, investors have been loath to commit cash.
Strategic Urban Development Alliance, Hensel Phelps Construction/Development and China Harbor Engineering had hoped to break ground last month at Mandela Station, a 766-unit mixed-use project around the West Oakland BART stop at 1451 Seventh Street.
The $700 million project, to include more than 380,000 square feet of offices, shops and restaurants, could breathe life into a once-thriving neighborhood.
But now Mandela Station remains eight months to a year away from groundbreaking, Alan Dones, co-founder of the Alliance, told the Business Times. The problem: the developers haven’t nailed down a capital partner that can provide funding needed for its construction.
It’s a problem not just confined to Mandela Station, Dones said. Investors seem to avoid West Oakland for places such as Uptown Oakland and Emeryville.
He sees his project — which includes 522 market-rate homes and 240 units of affordable family housing that could spur economic development in West Oakland — as appealing directly to investors looking to inject capital in socially responsible ways.
“There are some very-well intentioned people who make promises, and a lot of times they just don’t have enough appreciation of what it is actually going to take to close on that promise,” Dones said.
Other proposed projects across West Oakland have failed to nose out of the hangar because equity and financing have not followed, according to the Business Times.
They include a 1,032-unit housing project by Panoramic Interests, which wanted to replace a vacant lot at 500 Kirkham Street. The developer listed the entitled property this summer after three years of failing to find an equity partner.
The firm told the Business Times in June it felt the $300 million project had hit headwinds because of the pandemic.
Two separate projects on Fifth Street, with 643 total apartments, and a 289-unit project on Kirkham are now adrift for lack of cash.
One source familiar with the area who asked not to be identified said investors who had come to West Oakland were put off by homeless encampments and illegal dumping.
The shift in capital markets prompted by rising interest rates is another challenge to developers.
Scott Cooper, vice president at The Michaels Organization, said investors tend to be “risk averse.” They want to see first-hand how projects in the area might perform, he said. That gives way to a difficult cycle: Investors are staying away because investment isn’t being made.
“They are not trailblazers,” Cooper, who has a stalled project in West Oakland, told the Business Times. “But I think if you can prove out one or two projects and the area starts to get cleaned up, that can turn West Oakland.”
— Dana Bartholomew
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