Another big San Francisco Bay Area hotel has been seized by its lender as the region’s hospitality market continues to struggle in the wake of the pandemic.
Cook Children’s Health Care Services, a Texas-based nonprofit, is now the owner of the 276-room establishment at 1431 Jefferson St. in downtown Oakland through a deed in lieu of foreclosure, according to property records and CoStar. The 18-story building contains two hotel brands, a 133-room AC Hotel and a 153-room Marriott’s Residence Inn catering to guests wanting longer stays. Both opened in 2023.
The loan default is only the latest hotel in the region to shut down or run afoul of lenders, as the Bay Area’s tourism economy has failed to bounce back fully from the aftereffects of the pandemic. The 500-room Oakland Marriott City Center hotel, the largest hotel in the East Bay, is in default on a $100 million loan from Invesco CMI Investments, which could foreclose on the landmark property. The 145-room Waterfront Hotel in Oakland’s Jack London Square closed its doors in late January after its owner stopped paying rent.
In recent days, Berkeley’s largest hotel and biggest waterfront tenant, the 378-room DoubleTree Berkeley Marina, was teetering on the edge of default, according to commercial mortgage-backed securities data. A $48.3 million loan on the property was transferred to special servicing in March for “imminent monetary” default.
Bay Area hotels are still lagging behind those in other major U.S. markets, according to a recent CoStar analysis. Years of negative national press have affected tourism, leading to the relocation of some convention events.
Despite recent stricter return-to-office policies by some San Francisco-based companies, office vacancy rates still exceed 20%, suppressing corporate travel. The slow return of international visitors has also hindered recovery.
Finance headwinds
Los Angeles-based Hawkins Way Capital set out to develop the dual-brand hotel concept at 1431 Jefferson St. in Oakland’s Uptown neighborhood in 2019, when the area was experiencing a boom as an influx of tech start-ups and their employees flooded in and new restaurants and bars opened.
The 18-story hotel was financed by a $112-million loan from a unit of Goldman Sachs. It was later transferred to Fort Worth-based Cook Children’s Health Care Services, whose operations include a children’s hospital.
Michael Stathokostopoulos, CoStar’s senior director of hospitality analytics, noted this year that office vacancy rates in San Francisco remained the highest in the country at around 23%. Bay Area technology companies retained remote work policies long after the end of the COVID-19 pandemic, which has suppressed corporate travel.
In San Francisco, several large downtown properties have been unable or unwilling to pay off maturing loans taken out before the COVID-19 pandemic hit in 2020, including Hilton hotels in the Financial District and Union Square and the Parc 55 San Francisco.
Those hotels suffered a double whammy courtesy of a citywide hotel worker strike last year. The Four Seasons Hotel San Francisco at Embarcadero faced the auction block in October 2024 after its owner, Westbrook Partners, fell behind on payments on a $72.5 million loan.
Many are predicting a turnaround for San Francisco's hospitality sector in 2025, as three major sporting events set to take place in the Bay Area in the next two years are expected to net the region more than $1 billion in economic output, boosting commercial sectors that have struggled to recover from the pandemic.