The sale of the 10-tower Pacific Shores Center to Starwood Capital Group Global was heralded as one of the biggest Silicon Valley deals in years, but county and city leaders say they may be owed up to nearly $1 million in taxes on the sale.
Pacific Shores Center, on Seaport Boulevard, was built by developer Jay Paul and finished in 2002. Starwood’s purchase of the campus, home to high-tech heavyweights such as PDI/Dreamworks and Open Wave, was completed in the fall of 2006 for an undisclosed sum.
By that time, PDL Biopharma, a biotech firm founded in Fremont, announced its plans to move into two towers at Pacific Shores this fall. Starwood sold those towers to Shorenstein Properties in April 2007, according to Shorenstein spokesman Andrew Neilly.
When properties change hands, no matter how large or small, a property-transfer tax is typically due to the city and county where the sale took place, according to Theresa Rabe, deputy assessor/county clerk/recorder for San Mateo County. However, neither San Mateo County nor Redwood City has seen the tax revenue from Pacific Shores’ sale to Starwood, and now the county is asking the campus’ owners to pay up.
“Only from the newspaper did we see the value of the sale was $880 million,” said Rabe. “If that calculation is correct, the tax would be $968,000.”
Rabe sent a letter to Pacific Shores Center’s new owners, operating as Pacific Shores Investors LLC, on June 11, reiterating the perceived debt. If collected, the sum would be split evenly between county and city coffers, Rabe added.
Starwood representatives did not return calls for comment. In letters to the San Mateo County Recorder’s office, the new owners believe they are exempt from the tax because “they’re saying the legal entity did not change, and we believe that it did,” Rabe said.
After several lean budgetary years, city and county leaders said that more than $400,000 in tax revenues could certainly come in handy.
“We’ve cut $10 million from our budget in the past five or six years, and there have been impacts to city services,” said Redwood City Mayor Barbara Pierce, citing everything from reduced library service to public-safety reductions.