Oakland Office Towers Taken by Lender Deutsche Bank

The office distress in San Francisco has bled across the Bay Bridge to Oakland.

Deutsche Bank AG, acting through an affiliate, seized three office towers in downtown Oakland through a deed-in-lieu of foreclosure, the Mercury News reported. The structures are at 2101 Webster Street, 1901 Harrison Street and 2100 Franklin Street.

Starwood Capital owned the buildings prior to the lender takeover. The unpaid debt for the three office buildings totals $442.1 million, according to filings cited by the Mercury News. The original loan Deutsche Bank provided to Starwood totaled $364.5 million, per Alameda County real estate records.

Starwood bought the office buildings in 2019 for a total of $494 million. At the time, the purchase was seen as a vote of confidence in the Oakland office market. The Covid-19 pandemic that broke out the following year sent office values in San Francisco and across the Bay Area spiraling, leading to bargain-basement sales and foreclosures in the region.

When Starwood bought the buildings, the office vacancy rate in downtown Oakland was approximately 7.5 percent, according to a Colliers report cited by the Mercury News. Today, nearly six years after the outbreak of the pandemic, the vacancy rate has not gotten close to recovering. In the fourth quarter of last year, the office vacancy rate in downtown Oakland was 28.5 percent, according to Colliers.

The 2101 Webster building rises 20 stories and spans 473,000 square feet. The 1901 Harrison structure is 17 stories tall with 285,000 square feet, and 2100 Franklin is 10 stories with 217,000 square feet. The three office buildings total 975,000 square feet, according to the Mercury News. Because the properties are on separate parcels, the Deutsche Bank affiliate could offload the buildings in individual transactions should it choose to sell them.

— Chris Malone Méndez