Oakland office tower lands buyer for huge loss in property value

OAKLAND — An office tower in downtown Oakland and a nearby parking garage have landed a new owner in a deal that provides a forbidding new sign of a weak Bay Area office market.

The 15-story highrise and its parking garage have been bought for no more than $99.6 million, according to documents filed on Oct. 10 with the Alameda County Recorder’s Office.

Lakeside Group and Rubicon Point Partners, via an affiliate, teamed up to buy the office tower at 180 Grand Avenue, and the nearby parking garage at 260 23rd Street in downtown Oakland, through a process similar to a foreclosure, the county property files show.

The maximum price that an affiliate controlled by Lakeside and Rubicon paid represents a jaw-dropped plunge from what the prior owner paid for the 180 Grand office building, which totals 278,600 square feet, and its 370-stall parking structure just five years ago.

In 2019, Harvest Properties and AXA Investment paid $175 million for the office tower and the parking garage, Alameda County real estate documents show.

At the time of that purchase, the Bay Area office market was riding a crest of tenant demand and investor optimism that helped to propel rents and values skyward.

That frothy exuberance began to dissolve in 2020 when government-ordered business shutdowns to combat the spread of the coronavirus chased away companies from countless workspaces, leaving office buildings empty.

Even after government officials lifted the restrictive lockdowns, workers have returned to their offices at an uneven pace at best — and sometimes not at all.

As a result, sky-high vacancies, faltering rents and a collapse in property values now haunt the Bay Area office market and its empty work sites.

Office vacancy levels have reached record highs in the Bay Area’s three primary office markets, a new survey shows.

In the July-through-September third quarter, San Francisco’s vacancy rate was the region’s worst, at 34.5%. Downtown Oakland had a 29.1% vacancy rate. Silicon Valley’s vacancy rate was 22%, reported JLL, a commercial real estate firm.

The result? Loan defaults and foreclosures have besieged more office buildings throughout the Bay Area.

The 180 Grand Avenue office building is just one of the latest towers to topple into financial difficulty.

Oakland-based Lakeside Group and San Francisco-based Rubicon Point Partners, acting through an affiliate, bought the office tower and garage through a deed in lieu of foreclosure, according to public documents on file with Alameda County and the state of California. This procedure is effectively a fast-track foreclosure of a property.

To buy the office tower and garage, Lakeside Group and Rubicon paid no more than the amount of the unpaid debt for the properties, which was the $99.6 million figure listed in the county real estate records. Lakeside gained ownership of the loan during the summer, which enabled the company and its ally to then buy the tower and the garage.

That maximum amount the new owners paid was 43% below what Harvest and AXA paid for the building in 2019. At the time of that prior $175 million purchase, Harvest and AXA also obtained a $100 million loan to finance the deal.

The collapse in values for a growing number of office buildings in the Bay Area could squeeze the property tax revenue that the affected parcels produce.

This dynamic, in turn, could impede the flow of property tax revenue for cities, counties, special districts, regional government agencies and public schools.