Plunging values, and safety concerns are hitting lodgings in the airport corridor.

By Jack Rogers| November 22, 2024 at 05:38 AM

Hotel values are cratering in Oakland, with the latest benchmark set by a downtown property that sold for 76% less than its last trade.

Core Property Capital paid $10.6M for the Courtyard Oakland Downtown, a 162-room Marriott-branded hotel located at 988 Broadway.

The five-story hotel, which includes 1,300 SF square feet of ground floor retail and 2,700 square feet of meeting space, was sold by Gaw Capital Partners, which acquired the property in 2016 for $43.8M, SiliconValley.com reported.

The downtown Courtyard’s estimated value in January, according to an Alameda County assessment, was $44.6M.

Last month, the 289-key Radisson Oakland Airport hotel’s valuation dropped to $15M, which is about half of a $28M CMBS loan backed by the property, according to a Morningstar report. The new valuation represents a 70% drop from a 2018 assessment of $75M.

At the end of August, the 360-room Hilton Oakland Airport permanently closed after 56 years at One Hegenberger Road. In June, Park Hotels & Resorts, which operated the Hilton, notified the Port of Oakland that it would be closing. Hilton has leased the 20-acre site for the airport hotel from the port since 1968.

“We understand that the hospitality sector continues to be negatively impacted by larger economic trends post-pandemic,” port representatives said in a statement announcing the Hilton shutdown, adding that they will evaluate “the best use for this property moving forward.”

The Hegenberger Corridor, where the airport hotels are located in Oakland, has been one of the most crime-ridden areas in the city, according to a report in the San Francisco Chronicle.

In January, Denny’s closed its restaurant at 601 Hegenberger Road after 54 years at the location. “The safety and well-being of Denny’s team members and valued guests is our top priority. Weighing those factors, the decision has been made to close this location,” the company said, in a statement.

Hotel values also are plunging in San Francisco. In July, at the request of a court-appointed receiver and a trustee for a lender, a Superior Court judge extended until March 2025 the deadline for the sale of two of the city’s largest hotels, 1,919-room Hilton San Francisco Union Square and the adjacent 1,023-room Hilton Parc 55.

Park Hotel & Resorts returned the hotels to the lender last year as the maturity approached on a $725M CMBS loan from JPMorgan Chase backed by the property.

The value of the Hilton Union Square and Parc 55 hotel complex was appraised in June at $553.8M by KBRA, a drop of more than $1B from the $1.56B value when the mortgage originated in 2016, Trepp reported.

The investment sales volume for hotels in Northern California totaled $448M during the first six months of 2024, a drop of nearly 37% from the total for the first half of 2023, according to a report from Atlas Hospitality Group.