By Alex Barreira – Staff Reporter, San Francisco Business Times | Feb 12, 2025

Updated Feb 12, 2025 4:27pm PST

Oakland’s largest hotel, the 500-room Oakland Marriott City Center, has defaulted on a $100 million loan according to public records.

The hotel’s debt troubles arrive as the latest sign of serious distress and plunging values of Oakland hospitality assets. The timing this week is especially awkward: Oakland is preparing for its highest-profile hosting gig in years with events associated with NBA All-Star Weekend. And the Marriott City Center itself just opened its newly renovated facility for the WNBA Golden State Valkyries.

The borrower, an affiliate of Gaw Capital Partners, took out an $80 million loan from the the New York branch of French banking giant Natixis in 2017 and upped the loan to $100 million in 2019, per public records. Gaw Capital Partners bought the full-service hotel in 2017 for a total purchase price of $143 million.

Gaw Capital USA, an affiliate of Gaw Capital Partners, did not respond to a request for comment on Wednesday.

A default could act as a motivating factor in refinancing or disposition talks. Or it could act as the first visible sign of an impending foreclosure should the owner be unable or unwilling to pay off the loan balance, which is not immediately available in public records.

It’s possible that a significant amount of debt has been paid off on the loan. Cushman & Wakefield previously marketed a first mortgage loan secured by the Oakland Marriott City Center with an outstanding balance of $35 million to potential investors, pairing the offering with a $31.5 million loan secured by a high rise in New York.

The default follows a string of discouraging developments for Oakland hotel values, which been challenged to meet maturity dates for pre-pandemic debt, similar to the situation in San Francisco.

The historic 145-room Waterfront Hotel in Oakland’s Jack London Square shuttered last month while lenders behind the Radisson Hotel Oakland Airport are suing ownership to foreclose on the 289-room property. Last summer two downtown Oakland hotels accounting for 276 rooms at 1431 Jefferson St. — the dual-branded AC Hotel and Residence Inn by Marriott Downtown Oakland — defaulted on a $101 million loan just over a year after opening.

The Marriott’s owners are no stranger to the shakiness either: Core Capital, itself a minor investor in Oakland Marriott City Center, recently acquired the 162-room Courtyard Oakland Downtown for just $10.6 million, a 76% discount from Gaw Capital Partners’s purchase price in 2016.

Significant declines in local market pricing and relative debt mean the full-service Oakland Marriott City Center is likely a tougher sell than the Courtyard. And Oakland’s largest hotel appears to be a likely candidate for foreclosure, notes Alan Reay, president of Irvine-based hotel market consultancy Atlas Hospitality.

“If the lender doesn’t pursue a personal guarantee on (Gaw Capital founder) Goodwin Gaw, then it’s probably another situation of ‘here’s the keys, guys,'” Reay said. “It’s nowhere near worth what the debt is on it, even if the debt was paid down somewhat.”

The situation is far too common in today’s market, Reay said. Per his research, there are currently more than 350 U.S. hotels with commercial mortgage-backed securities loans on watchlists, representing upwards of $6 billion in cumulative debt. About 43 of those hotels, he said, are delinquent on their loans — representing about $1.5 billion. For comparison: hotel asset sales volume last year was about $3.4 billion.

“The sales comps from two years ago aren’t really reflective,” Reay added. “Now we’re starting to see these hotels trading at these kind of prices. The new appraisals are writing down the loan values, which are writing down asset values. We’re going to start see this happening a lot more now.”

Lodging analysts say public safety remains the dominant concern in Oakland as prominent business closures blamed on crime and viral thefts have plagued the city’s image for investors. Lackluster downtown Oakland office activity and the exodus of major sports teams have contributed to a significantly further timeline for a full hospitality rebound than San Francisco.

This weekend the Oakland Marriott City Center will be flooded with guests attending the Castrol Rising Stars Practice and Ruffles All-Star Celebrity Game in the Oakland Arena on Friday; and the NBA All-Star Practice and NBA HBCU Classic on Saturday.

The Oakland Marriott City Center’s 31,800-square-foot facility was used by the Golden State Warriors until their move to San Francisco in 2019 and just wrapped up its multimillion-dollar renovation.

Oakland’s appeals to sports fans have been undercut by the departure of three major sports franchises — the Athletics, Warriors and Raiders — in recent years. For some of their fans, local goodwill and a following is building behind the upstart baseball team, the Oakland Ballers, and the men’s and women’s soccer teams Oakland Roots and Oakland Soul.

One of the city’s chief marketing tools is its class of pioneering and diverse restaurants, which a few major magazines have honored as the country’s best food scene.

Peter Gamez, CEO of Oakland’s destination marketing organization Visit Oakland, said the challenges for Oakland properties are “difficult to witness.”

“Like everyone in these situations, we had hoped to see full recovery in our city much sooner,” Gamez said. “But Oakland is strong and resilient. We are confident that there are many people who continue to invest in the value of our location, local assets, and inspiring community.”