The Marriott City Center once served as the nexus of business activity in Oakland. Smack-dab in the middle of downtown and a block away from BART, the 500-room hotel not only housed travelers but was connected to the East Bay’s largest corporate event venue and the headquarters of the Golden State Warriors.
But five years since the pandemic devastated the economy and the travel patterns that powered the property, its outlook is much dimmer. Gaw Capital, the Hong Kong private equity firm that has owned the hotel since 2017, is officially out after halting payments on its mortgage.
The hotel remains open, and the Golden State Valkyries continue to use the property for training and offices as its future gets worked out.
A subsidiary of investment firm Invesco, which guaranteed the $100 million loan Gaw Capital defaulted on this year, has taken over for now. The firm seized control of the property by making a winning bid of $70.2 million during a foreclosure auction last month.
Foreclosure experts call this sort of maneuver a “credit bid,” which means the holder of the note used the existing debt as leverage to gain control from the delinquent borrower. Invesco, which purchased the loan note from French banking giant Natixis last May, did not respond to requests for comment.
The price marks a 51% drop in value from the $143 million paid by Gaw Capital for the property eight years ago. The hotel has changed hands twice since opening in 1983, with its value increasing each time.
Joel Zeldin of law firm Shartsis Friese said what happens next depends on the objectives of the credit bidder. If the creditor is in the hospitality business, it might plan to keep the hotel.
If not, it’s more likely the credit bidder will market the property for sale in order to recoup as much as possible. If the guarantor purchased the debt at a deep discount, then it potentially stands to make a profit from a sale.
Zeldin is not involved in the hotel or its sale but provided insight from his 50-year career working on complex real estate deals and foreclosures. He said his comments do not reflect the facts or merits of disputes concerning the City Center hotel.
Between 1997 and 2019, the Golden State Warriors occupied 31,800 square feet in the hotel for their practice facility and office headquarters. After team owner Joe Lacob launched the WNBA’s Golden State Valkyries, his group spent $1.45 million to renovate the facilities for the team, which made its debut this year.
A Valkyries spokesperson previously told SFGate that the team did not anticipate any impact to its business or basketball operations as a result of Gaw Capital’s default.
In a sign of the city’s decline in group travel, the Oakland Convention Center, which has more than 100,000 square feet of meeting space, does not have any conferences booked on its calendar this summer. Marriott, which handles bookings for the space, did not respond to requests for comment.
Ten years ago, the office vacancy rate in downtown Oakland dipped as low as 2.8%, according to data from real estate firm Cushman & Wakefield. Today, it’s at roughly 37%, underscoring the dramatic reversal of fortune for the city that previously saw its office sector boom as tenants got priced out of San Francisco.
The Marriott City Center isn’t the only major hotel in Oakland buckling under the weight of expensive debt. Just a few blocks away, a building at 1440 Broadway sold in January for $5.5 million, a rock-bottom price of $61 per square foot.
Last summer, the AC Hotel and Residence Inn by Marriott in downtown Oakland slipped into default only a year after opening. The lenders who sued the operators said revenues fell short of debt obligations.
Elsewhere, the historic Waterfront Hotel in Jack London Square closed abruptly at the start of this year, and the Oakland Radisson near the airport is in the foreclosure process.