Downtown Oakland tower is returned to lender in feeble office market

OAKLAND — A historic downtown Oakland office tower that’s described as the East Bay city’s “original highrise” has been returned to its lender, a fresh indicator of the worsening weakness in the Bay Area office market.

The Syndicate Building, an office tower at 1440 Broadway, is now in the hands of its lender, a disquieting hint that economic maladies linger for the region’s feeble office sector in the wake of the coronavirus outbreak.

Brightspire Capital, a real estate investment firm and lender, has taken ownership of the 10-story highrise through a special deed that shows the property’s unpaid debt was $25.5 million at the time of the transaction, according to documents filed on July 28 with the Alameda County Recorder’s Office.

The office building, which totals about 89,500 square feet, was sold by a Tidewater Capital-led affiliate that had owned the property for about five years and landed the loan from Brightspire Capital two years ago.

The transaction provides clear indications that the value of the building, constructed from 1903 to 1911, has shriveled in recent years.

Tidewater Capital bought the building in 2018, paying $43.5 million for the 1440 Broadway tower, county real estate records show. In 2021, Tidewater obtained a $28.4 million loan from a Brightspire Capital affiliate, with the tower as the collateral.

At the time of the purchase, the coronavirus was still ongoing. Even so, real estate players gambled that companies would return to their workplaces after government-mandated business shutdowns had emptied out the vast majority of office spaces.

The unexpected occurred. Countless companies — primarily tech firms — determined they didn’t need nearly as much office space as they had occupied prior to the coronavirus outbreak.

As a result, many office buildings continued to suffer brutally high vacancy levels and flat rental rates, which helped to erode the value of the properties in numerous instances.

The slump in property values appears to be the case with the 1440 Broadway building that’s been taken back by its lender.

Brightspire Capital purchased the building for the unpaid debt of $25.5 million on the office tower. That amount is 41.4% below what Tidewater paid in 2018.

The debt amount also is 45.3% below the building’s property value of $46.6 million, as estimated by the Alameda County Assessor’s Office. Brightspire took ownership through a deed in lieu of foreclosure, county documents show.

California businessman and real estate executive Francis Marion “Borax” Smith constructed the building from 1903 to 1911. A marketing brochure that commercial real estate firm CBRE had previously circulated described the building as “Oakland’s original highrise.”

Smith made his fortune in the late 19th Century by hauling borax from rich mines in Death Valley and Nevada, employing 20-mule teams as an ingenious mode of transportation across harsh deserts, arid valleys and forbidding mountain ranges.

Buoyed by that fortune, Smith turned his attention to creating a real estate empire in Oakland. Smith and his partner Frank Havens constructed numerous buildings, notably the Claremont Hotel, Hotel Oakland and the 1440 Broadway building.

The 1440 Broadway tower became the headquarters for The Realty Syndicate, a real estate and development firm that Smith and his partner founded. Smith and Havens also were the prime movers behind the famed Key System railway lines.

Yet even after The Realty Syndicate ceased operations during the 1929 stock market meltdown and the Key System’s last train crossed the Bay in 1958, the 10-story office tower on Broadway remained, a silent witness to some of Oakland’s rich history.