Rialto Sues to Foreclose at Distressed Oakland Offices

Three Oakland office properties have been taken over by a receiver after falling into “significant disrepair” following a loan default.

Lender Rialto Capital Management filed a lawsuit in Alameda County Superior Court to foreclose on a portfolio that includes Oakland’s Tribune Tower, the Financial Center building at 405 14th Street and offices at 1500 Broadway, the San Francisco Business Times reported. The move comes after Highbridge Equity Partners defaulted on a $111 million Rialto loan last year. Touchstone Commercial Partners’ Christian Diggs has been appointed as receiver, operating and managing the property in Highbridge’s place.

The three buildings have seen better days, according to the lawsuit. The legal filings claim the structures have broken windows, asbestos, and faulty elevators among other debris. People have reportedly been entering the buildings illegally and stealing copper wiring and others have been illegally camping inside, a receiver report said.

Tribune Tower at 401 13th Street reportedly has significant flood damage and is riddled with drug paraphernalia, abandoned mattresses and health and safety hazards like dog feces. The 16-story Financial Center Building a block away at 405 14th Street has a large amount of asbestos and debris with broken elevators. The 1500 Broadway building has broken windows and is plagued with plumbing and electrical issues.

In addition to defaulting on the $111 million loan, Highbridge also owed approximately $650,000 in property taxes across all three properties when the receiver took over last fall, which the receiver worked with Rialto to pay off. Another $650,000 payment is due in April. Rialto provided the $111 million loan in 2022 to refinance $91.1 million in existing debt and to pay for future renovations and improvements on the properties.

Highbridge reportedly stopped making monthly payments on the debt last June and was served a notice of default two months later. The unpaid balance is reportedly north of $100 million.

Highbridge bought the three buildings between 2016 and 2019, for a total of $119.6 million. Whether Highbridge’s lenders choose to sell the buildings to recoup all or some of the $111 million loan remains to be seen.

Oakland and the rest of the Bay Area have seen a string of loan defaults and foreclosures at commercial properties in recent years. This week alone, Deutsche Bank seized three other office towers in downtown Oakland via deed-in-lieu of foreclosure, taking control of 2101 Webster Street, 1901 Harrison Street and 2100 Franklin Street.

— Chris Malone Méndez