Kennedy/Teece Buildings Priced at $147 Million

By Richard Brenneman
Friday February 29, 2008

Berkeley’s newest and biggest landlord paid $147,397,171 for his seven apartment buildings, making Patrick Kennedy and David Teece richer than ever. 

Included in the figures are more than $66 million in loans which the landlord’s company assumed on the property. 

The sale price paid by Equity Residential, the Chicago-based corporation run by Sam Zell, will bring a hefty profit to the Berkeley developers. 

Teece, a New Zealand native who runs a range of business ranging from investment funds to athletic clothing, can probably use Equity’s cash in light of actions now pending against him in U.S. Tax Court. 

The Internal Revenue Service contends he cheated Uncle Sam out of millions by using illegal tax dodges. 

The figures were reported in Equity’s annual report, which was released Wednesday. The exact figures look like this: 

For Acton Courtyard and its 71 apartments at 1392 University Ave., Equity paid $21.3 million, including liens of more than $9.9 million. 

For the 21-unit Artech Building at 2002 Addison St., the price was $10.8 million, including $3.2 million in loans. 

The Bachenheimer Building with its 44 units at 2119 University cost $17.3 million, including $8.6 million in loans. 

The Berkeleyan, the oldest of the seven properties with 56 rentals at 1910 Oxford St., sold for $20.4 million, including loans of $8.56 million. 

The costliest edifice was the 100-apartment Fine Arts Building at Shattuck Avenue and Haste Street, which sold for $34.3 million, including $16.2 million in liens, followed by Berkeley’s tallest and possibly most controversial new building, the 91-unit Gaia at 2116 Allston Way, at $32.7 million with $14.6 million in loans. 

The final property included in the sale was the Touriel Building at 2004 University, at $10.6 million with a $5 million loan for 25 units. 

All of the Berkeley buildings include ground floor commercial space. 

Kennedy and his silent partner, UC Berkeley business professor Teece, received much of the funding for the buildings from the Association of Bay Area Governments, the same regional entity that sets mandatory housing permit quotas for local cities and counties. 

Zell is also the publisher of California’s largest and most influential newspaper, the Los Angeles Times. The outspoken Chicagoan bought the Tribune Company, which publishes Chicago’s dominant daily as well as the Times and nine other newspapers, 23 television stations, a cable channel (Superstation WGN) and WGN-AM radio, and he’s the owner of the Chicago Cubs. 

His sometimes obscene remarks as a newly minted media baron have repeatedly landed him in the media gossip columns, along with his announced intent to downplay the Times’ traditional commitment to foreign news coverage and investigative reporting. 

According to the company’s annual report, as of the end of 2007, Equity Residential owned 507 rental properties outright, with a total of 133,189 individual units. The company was part owner of an additional 71 properties with 15,901 units and managed 3,731 units of military housing. 

In California, the company owned 43 properties totaling 12,216 units, with Berkeley counting for 418 units. 

At the end of the year, the company owned $15.7 billion in assets, which generated a net income of $990 million for investors for 2007. 

According to a story just published in Capitol Weekly, Zell could be a major beneficiary if California voters pass Proposition 98 in the June election. The measure, billed as an effort to halt eminent domain for commercial developments, also includes a provision that would end rent control throughout the state.  

Called the “California Property Owners and Farmland Protection Act,” the measure has been overwhelmingly funded by landlords. 

As reported by UC Berkeley policy analysts Frank Lester and Nick Robinson, the measure “if enacted would provide that any rent control ordinance in effect prior to January 2007 become essentially invalid.” 

But rather than end rent controls outright, the measure ends controls only as units are vacated, a step sometimes called vacancy decontrol. 

Another Zell company, Equity Lifestyle, which specializes in renting trailer parks and recreational vehicle resorts, reported in its 2006 annual report that rent controls on its California properties were costing the company $15 million a year in mandated subsidies. 

No similar figure is available for Equity Residential, but Zell has been an outspoken opponent of rent control, and according to a Thursday Capitol Weekly story, Zell has contributed $50,000 to the campaign for Prop. 98.