Loan default for big Oakland office complex may trigger foreclosure
A big office building in Oakland has flopped into a loan default, fresh evidence that point to the struggles of the Bay Area office sector.
OAKLAND — A big office complex in Oakland has flopped into a loan default, a financing setback that provides fresh evidence of the economic maladies that still afflict the Bay Area office market in the wake of the coronavirus.
The Landing, a two-building office center on Hegenberger Road in Oakland, one of the gateways to the city’s airport, is in default on its mortgage, according to documents filed on Dec. 13 with the Alameda County Recorder’s Office.
The office complex totals about 198,200 square feet, according to a marketing brochure that was circulated by Cushman & Wakefield, a commercial real estate firm.
The property consists of two buildings: an eight-story office building at 333 Hegenberger Road that totals 142,800 square feet and a four-story building at 303 Hegenberger that totals 56,000 square feet.
The financial struggles for the building represent a fresh example of the ailments that plague the Bay Area office market, even after the end of the coronavirus.
Wide-ranging business lockdowns to combat the spread of the coronavirus chased workers away from their offices. Even after the end of the virus outbreak, an uneven return to the workplace has kept employees away from their offices.
These worrisome dynamics, in turn, have shoved office vacancies higher and undermined property values and office rents. Now, a growing number of Bay Area office buildings have become delinquent on their loans or have even suffered foreclosures of the mortgage and seizure by the lenders.
A real estate loan for the two buildings that totals $37.2 million is in default, the county real estate documents show.
At the time of the default, an estimated $33.7 million was owned on the delinquent mortgage, including principal, interest, late payments and penalties.
Walnut Creek-based Vertical Ventures, one of the Bay Area’s savvy real estate investment and development firms, defaulted on the loan, which it obtained in 2019.
Arc Lender provided the financing to Vertical Ventures, Alameda County records show.
Vertical Ventures paid about $40.6 million for the property in 2019. Vertical Ventures bought the building at a “major discount” compared to the prior purchase price. The building was 82% leased at the time of the acquisition in 2019.
The two-building complex was described by Vertical Ventures as an office center in a choice location.
“This is a desirable Oakland location easily accessible from Oakland International Airport and Interstate 880,” Vertical Ventures states on its website.