The 289-key Radisson Oakland Airport hotel’s valuation plummeted in October, with its value falling from $75M in January 2018 to $15M. It is the latest Bay Area hotel to exhibit signs of financial distress in an economic landscape dramatically changed by the pandemic.
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The new appraisal represents a 70% decline in value and covers only about half of the $28.2M CMBS loan’s current exposure, Morningstar wrote in a report on Monday.
The property’s diminished value moves the loan collateralized by it one step closer to foreclosure, Morningstar Credit Analytics’ Senior Vice President David Putro said in an email.
“The hotel sits just blocks from the complex that once housed the Golden State Warriors, Oakland Raiders and Oakland A’s,” according to Morningstar's report. “The stadium complex has lost all three tenants since the origination of this loan.”
Since the property’s value is so low, Putro said the borrower probably has little incentive to remain involved with the property “as any workout would require a capital injection.”
“The servicer had been noting it was ‘dual-tracking’ the loan, which means it tries to negotiate a workout with the borrower while simultaneously starting the legal process towards foreclosure,” Putro said.
The hotel is owned by Oakland Alameda Hotels LLC.
The airport hotel is at 8400 Edes Ave. and includes about 7K SF of conference and event space. It was used as a temporary shelter for homeless residents during the worst of the pandemic but resumed normal operations by August 2023.
“In the short-term, I assume the hotel will function normally,” Putro said. “The servicer has likely (or is likely in the process of) putting a receiver in place, so they’d operate the hotel and make sure bills are being paid, etc.
Morningstar reported that the loan went into special servicing in September 2023, and the asset reported negative cash flow that same year.
Wary of continued declines, hotel investors currently remain on the sidelines, Matthews Real Estate Investment Services reported in a summer 2024 research report.
Hospitality assets are forecast to lose value through next year, according to Matthews' report.
“Hospitality pricing will decline through May 2025,” the report said. “Then, by Q3, increased transaction velocity and buyer demand outweigh the increase in market inventory supply, resulting in increased hotel values.”
A number of businesses have closed over the last year in the Hegenberger corridor, including the 360-room Hilton Hotel that shuttered its doors in late August after 56 years, with its owner citing high crime rates.
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