CIM Defaults on Kaiser’s Oakland Headquarters

CIM Group is staring down a potential foreclosure at one of Oakland’s most prominent office towers.

Lenders issued a default notice on a $97.1 million loan for 1 Kaiser Plaza just as the property’s value fell to roughly a quarter of its 2016 peak, the San Francisco Business Times reported.

Los Angeles-based CIM said in U.S. Securities and Exchange Commission filings that it is working with the lender and special servicer on a long-term resolution or extension. The notice is not an immediate foreclosure, but it gives the lender the right to pursue remedies including taking possession of the 28-story, 528,000-square-foot building.

The property is currently valued at $53.5 million, down from $212 million when the loan was issued in 2016, per Morningstar data cited by the Business Times. While the debt is well above the building’s current value, it’s “not unique to this building,” David Putro, Morningstar’s head of commercial real estate analytics, told the Business Times. “You’re seeing those kinds of haircuts everywhere.”

CIM said it remains current on monthly interest payments but chose not to put up the additional capital needed to refinance the mortgage. The lender has demanded immediate repayment of the balance and required the property’s rents, profits and other income be held in trust.

The loan entered special servicing in October 2024 after Kaiser Permanente, the building’s largest tenant, cut its headquarters footprint by roughly one-third.

Kaiser still occupies 236,692 square feet, but its downsizing pushed cash flow to breakeven levels and set the stage for the default. The building’s second largest tenant, KIPP Bay Area Schools, occupies 10,322 square feet in a lease slated to expire in 2031, while law firm Beles & Beles has 6,896 square feet expiring in September.

A workout remains possible, though CIM could be required to pay down part of the debt or fund reserves. The building’s vacancy could prove to be an obstacle, as refinancing office buildings below 70 percent occupancy has historically been difficult, Putro said.

Oakland’s office market is in the midst of a reset as roughly one-third of the city’s office space remains vacant. Distressed offices in the East Bay have been selling for fractions of their previous values or are returned to their lenders if their owners default on loans. Last month, Heitman Capital Management seized ownership of the Clorox Building at 1221 Broadway in a foreclosure proceeding. CIM Group defaulted on another headquarters building, the former home of Yelp in San Francisco, last year; that building is now being marketed for sale.

— Chris Malone Méndez