The developer of one of the most contentious high-rises in Berkeley history has put the project up for sale but says his firm may not actually dispose of the building but rather use any offers to draw in new investors.
Joseph Penner, the founder of Hill Street Realty in Santa Monica, has listed 2211 Harold Way with Salem Partners, LLC, and Arbor Realty Capital Advisors, Inc., advertising that that project has been entitled and “is free and clear of any and all CEQA related litigation.” No price was listed.
“Upon completion, the Property will be the only high-rise residential development in Berkeley and will bring highly desirable and much needed residential inventory to the area,” reads the listing on the Arbor Realty website. “The building is contemplated to include an appealing amenity package for students and professionals who might otherwise seek similar accommodations in San Francisco, and for empty nesters who desire the richness and convenience of Berkeley’s prime downtown location and resources.”
The East Bay Times was the first to report that the project was for sale.
When contacted by Berkeleyside, Penner said he is listing the development, in part, to see how much it is worth and he may not actually sell the entitlements. His current backers all invested in a fund, HSR Berkeley Realty, and some may want to liquidate their holdings now while others will want to stay, he said. Salem Partners, an investment bank and wealth management firm, financed the initial $20 million acquisition of the property and is helping with the sale.
By putting 2211 Harold Way on the market and entertaining offers, Penner can set a benchmark for what the property is worth, he said. (There are no comparables in Berkeley because no 180-foot-high, 18-story building has been built in decades). Penner can then bring that information to his backers so they can decide how to proceed, he said.
The options are to sell the project, allow some investors to be bought out, or bring in an outside group to help finance and develop the 302-unit apartment complex, he said.
“We are not just for sale,” said Penner. “We are also looking for a joint venture partner.”
Penner’s explanation was met with skepticism by a number of people in the development community who asked not to be quoted by name. One person said these kinds of deals are often done out of public view, with brokers quietly soliciting buyers. The fact that Penner has hired a real estate firm that is publicly promoting it suggests he really does want to sell.
“There’s an element of truth,” to what Penner says, said one person. “But the most concrete expression of wanting to sell it is listing it.”
Critics of the project have often contended that Penner, as an out-of-town investor, planned to come in, get the project entitled, but leave before construction began.
Kelly Hammargren, who unsuccessfully sued Penner and HSR Berkeley Investments over the project’s environmental impact report, said that Hill Street Realty’s website lays out the company’s strategy.
“When you read the website of what their business is and how they describe the holdings that they have as ‘transactions,’ .. what it tells you is what they are doing is really getting property entitled and then they are trying to sell them.”
Hill Street Realty appears to have done this with 888 Devon. St, a 15-000-square-foot lot along the “Golden Mile,” of Wilshire Boulevard in Los Angeles. Hill Street Realty and Salem Investments purchased the land and got it entitled in 2015 for “26 residential 2-and-3 bedroom units in a 7-story building with the top two floors consisting of 2-story townhomes. The building will include a fitness room, community room, and roof top common area,” according to the Arbor Realty website, where it is listed for sale for $17 million.
Penner denied that his intention was to cash out quickly. It is common to take a breather to reassess how best to make a development successful, he said. His firm purchased the Old Hink’s Department store in November 2012 ago and has spent millions of dollars on planning the project and getting entitlements, he said. His group participated in more than 30 public hearings and fought off a CEQA lawsuit, he said. That shows a seriousness of intent, he said.
Penner bought 2211 Harold Way just as the country was emerging from a recession. Since then, developers in Berkeley have built, or are planning to build 2,500 housing units. The surge of construction around the Bay Area has driven construction costs to a high level, according to insiders, making it more difficult to earn a profit. Some banks are also increasingly skittish that the Bay Area economy has reached the crest of the boom and is on the way down. Penner’s decision to sell may be a response, in part, to that environment, said one person in the development community who asked not to be named.
The Berkeley City Council approved Penner’s application to build apartment towers, a new theater complex, and ground-level retail in December 2015, but two Berkeley residents, Hammargren and James Hendry (the husband of District 4 City Council candidate Kate Harrison) challenged the project’s environmental review. An Alameda County Superior Court judge dismissed the cases in October.
Critics of the project lamented its size and the fact that modern towers would surround the historic Hotel Shattuck. They also expressed concern about the fate of the Shattuck Cinemas, one of the leading cultural draws in downtown Berkeley. The initial design eliminated the theaters, but Penner brought them back after public input. However, Hammargren and the group Save Shattuck Cinemas said the planned new theaters would be inferior to the old theater complex.
Hammargren pointed out that the website listing “Berkeley Plaza,” never uses the 2211 Harold Way address, the address used in all the planning documents. She speculated that it was to hide the controversy surrounding the building.
The flyer describing the property reads: “Please be advised that Property Owner is considering a possible sale of the fee simple interest in Berkeley Plaza, 2200-2240 Shattuck Ave, 2060-2070 Allston Way, and 2065 Kittredge Street, Berkeley.”