So it was just a few years ago that Prentiss Properties (which is now Brandywine) was on a tear, scooping up what felt like every other property in the Lake Merritt office district, building their own little Shorenstein-like empire over there.
It was exciting! They picked up 2101 Webster (then considered a steal at only $64.75 million). They were expanding into downtown proper, with the acquisition of 1333 Broadway. They built Oakland’s first spec office building in more than a decade! Back then, Brandywine’s representatives couldn’t stop crowing about Oakland, saying things like:
We’re very excited about the Oakland market,” she said. “We’ve invested quite a bit in Oakland, and we believe that Oakland is just in a really good position now for Class A, top-level space.
Of course, once Center 21 finished construction last fall and still, as far as I know, hasn’t been able to find a tenant, the attitude changed. Now, instead of the boosterish optimism, you’ve got CEO Gerald H. Sweeney telling newspapers:
As we assessed Oakland, it felt more toward the lower-growth, higher-capital-consuming curve. It’s a good market but we viewed it as one of the markets we’d like to exit.
Ouch!! Now Brandywine is selling the bulk of their Oakland properties: the Ordway Building, 1901 Harrison, 1333 Broadway, 2101 Webster, and Center 21. That’s about 1.7 million square feet of office space. The deal also includes a 15-year purchase option for land next to the Ordway.
This is just so sad. Brandywine definitely has some issues with its portfolio that have nothing to do with Oakland, so the most positive way to look at this would be that they just needed to get some cash from somewhere, and they just happened to pick us. The thing is, it really doesn’t feel like that. The sale comes with a $7 million impairment charge, due to the portfolio’s reduced value in relation to Brandywine’s investment. The $412.5 million sale also includes a two year interest free loan of $40 million. This whole package just screams “We can’t get out of town fast enough.”
Things in Oakland are feeling pretty grim lately, and losing major investors is never good news. But hey, there’s an upside to everything. Well, maybe not everything, but to this at least, and that’s that we get to welcome CIM Group, current owner of the downtown Marriott and Courtyard by Marriott, to the market in a big way. I don’t know much about CIM Group. In fact all I really know is that I found their press release (PDF!) about acquiring the Marriott a little delusional, but I suppose people less cynical than me would call it optimistic. In any case, it’s good to see someone still has some confidence in this town.