Harvest and AXA surrender Oakland office tower with $95M loan for sale

Lender seizes control of the 280K sf building which has reported 72% occupancy

AXA Investment Managers' Marco Morelli; 180 Grand Avenue (Getty, Loopnet, AXA Investment Managers)
AXA Investment Managers' Marco Morelli; 180 Grand Avenue (Getty, Loopnet, AXA Investment Managers)

Harvest Properties and AXA Investment Managers have surrendered a 15-story office building near Downtown Oakland, with their troubled $95 million loan set to be sold to the highest bidder.

An unidentified lender has seized control of the 279,700-square-foot building at 180 Grand Avenue near Adams Point, and is marketing the “nonperforming” loan, the San Francisco Chronicle reported.

Harvest Properties, based in Oakland, and KKR, based in New York, bought the building across from the northern tip of Lake Merritt in 2017 for $119 million, or $425 per square foot. The building was 95 percent leased to such tenants as Charles Schwab, Bank of America, Deloitte and Marqeta.

Two years later, KKR sold its stake to Paris-based AXA Investment Managers for an undisclosed price.

This week, the $95 million loan backing the property hit the market and is set to be sold, with the unidentified lender seeking to recoup the unpaid debt.

JLL, hired to market the distressed loan, described the debt as “nonperforming,” meaning that AXA and Harvest either quit making loan payments or are in default on their loan agreement. 

The loan sale will allow a new owner to take over the property via a deed-in-lieu of foreclosure — where the property owners surrender the building to skirt the foreclosure process. 

It also means that the building’s value has likely dropped below the value of its debt, according to the Chronicle.

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The office building is now 72 percent occupied, according to an unidentified Oakland real estate source.

The property is the latest caught in the maturing debt vortex that has dragged down the commercial real estate sector, leaving many owners and investors upside down.

Oakland’s central core business district, including Downtown, Uptown and Lake Merritt, now has record office vacancies, reported at 35.7 percent in June. Office landlords in Oakland have started to slash rents, after holding steady through the pandemic shift to remote work.

In August, San Francisco-based Tidewater Capital surrendered a historic 10-story office building at 1440 Broadway, in Downtown, after defaulting on more than $25.5 million in debt.

Last week, San Diego-based HP Investors also defaulted on a $10 million loan tied to a 10-story office tower at 1700 Broadway, in Oakland’s Uptown.

— Dana Bartholomew

Correction: An earlier version of this story misidentified Oakland-based Harvest Properties as another firm, based on an error in the initial version of the San Francisco Chronicle story.

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