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East Bay buildings flop into default as Bay Area office woes persist

Lenders could auction off or seize buildings through foreclosures





Two East Bay office buildings have flopped into separate loan defaults and face foreclosure and seizure due to the delinquencies, fresh evidence of weakness in the commercial property sector.


One of the office buildings is in downtown Berkeley and the other is in downtown Oakland. Both properties are near BART train stops in the urban centers of those respective cities.


Here are the details of the two real estate loan defaults:


— A downtown Berkeley mixed-use office and retail building known as Constitution Square at 2168 Shattuck Ave. is in default on an $11.8 million loan obtained in 2018. An affiliate headed up by Harvest Properties, a veteran Bay Area developer, and Independencia Asset Management owns the building whose loan is in default. JPMorgan Chase Bank is the lender.


— A downtown Oakland office tower at 1700 Broadway has defaulted on a $10 million loan issued to the building’s owner, an affiliate controlled by San Diego-based HP Investors. The tower’s owner obtained the loan in 2020. The lender is Bank of the Sierra.


The two loan defaults for the prominent buildings suggest the post-coronavirus economic maladies that have afflicted the commercial property markets in the Bay Area have yet to run their course.


Some experts believe more office and retail buildings could be seized by their lenders in the wake of loan delinquencies.


Sharply rising vacancy rates and softening rents now plague numerous office markets in the Bay Area as companies curb their appetites for office space.


That ominous dynamic, in turn, has raised the specter of financial woes and loan defaults for more properties.

In 2018, the alliance of Harvest Properties and Independencia Asset Management paid $19.7 million for the Berkeley building on Shattuck Avenue.


The Berkeley mixed-use office property totals 36,000 square feet, according to Harvest Properties. At the time of the purchase, Harvest Properties stated that it was “very optimistic” about the downtown Berkeley market and the office building’s prospects.


In 2017, HP Investors paid $13.3 million for the 1700 Broadway office building, which totals 31,500 square feet. The building also has 3,500 square feet of ground-floor retail.


The office tower has a “prime location” in downtown Oakland’s hip and trendy Uptown district.

The respective owners of the office buildings each have the opportunity to attempt to cure the loan delinquencies and retain control of the properties.


In a growing number of instances, however, owners of office buildings and even some retail centers have elected to return the properties to their lenders rather than sink more cash into them in a brutal commercial property market.



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