The value of a 289-room hotel owned by Oakland Alameda Hotels near a teamless Oakland Stadium has plunged 80 percent, putting it at risk of foreclosure.
The valuation of the locally based investor’s Radisson Oakland Airport at 8400 Edes Avenue fell to $15 million last month, from $75 million in January 2018, Bisnow reported, citing figures from Morningstar.
As such, the hotel’s plight marks the latest Bay Area hotel in financial distress after the economic landscape changed during the pandemic. This week, a historic hotel in Downtown San Jose traded for nearly half of what it traded for a decade ago.
The new $15 million appraisal for the Radisson represents an 80 percent decline in value, covering about half the hotel’s $28.2 million commercial mortgage-backed securities loan exposure.
In January, Banta Architects filed permits on behalf of the hotel owner led by Nupen Patel to convert the hotel near Oakland Airport into homes.
The Radisson made headlines last October after a three-year city investigation revealed 128 hotel workers were underpaid a total of $404,491 for nearly a year’s worth of paychecks between June 2019 and April 2020 — the largest wage theft finding in Oakland’s history, the East Bay Times reported.
The hotel’s huge plunge in value moves the loan collateralized by it one step closer to foreclosure, Morningstar Credit Analytics’ Senior Vice President David Putro told Bisnow in an email.
Since the property’s value is so low, Putro said the borrower probably has little incentive to remain involved with the property “as any workout would require a capital injection.”
“The servicer had been noting it was ‘dual-tracking’ the loan, which means it tries to negotiate a workout with the borrower while simultaneously starting the legal process towards foreclosure,” Putro said.
The 128,400-square-foot airport hotel, built in 1964, includes a 7,000-square-foot conference center. The hotel was used as a temporary shelter for homeless residents during the pandemic, but resumed normal operations in August last year.
“The hotel sits just blocks from the complex that once housed the Golden State Warriors, Oakland Raiders and Oakland A’s,” according to Morningstar’s report. “The stadium complex has lost all three tenants since the origination of this loan.”
Morningstar reported that the loan went into special servicing in September 2023, and the hotel reported negative cash flow last year.
“In the short-term, I assume the hotel will function normally,” Putro said. “The servicer has likely (or is likely in the process of) putting a receiver in place, so they’d operate the hotel and make sure bills are being paid, etc.”
A number of businesses have closed over the last year in the Hegenberger corridor, near the airport. In July, Virginia-based Park Hotels & Resorts said it would shutter its 56-year-old Hilton Oakland Airport Hotel at 1 Hegenberger Road after crime forced the closure of local businesses.
Hotel investors, wary of continued declines, are staying on the sidelines, with hotels forecast to lose value through next year, according to a summer report by Matthews Real Estate Investment Services.
“Hospitality pricing will decline through May 2025,” the report said. “Then, by Q3, increased transaction velocity and buyer demand outweigh the increase in market inventory supply, resulting in increased hotel values.”
— Dana Bartholomew
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