Los Angeles Office Distress
The Los Angeles office sector is experiencing significant distress, with several high-profile properties facing financial difficulties. Two notable examples are the Wedbush Center and the Santa Monica Clock Tower, both of which have seen their values plummet in recent years.
Downtown Los Angeles
The 21-story Wedbush Center was recently appraised at $60.5 million, compared to its original value of $197.5 million at loan issuance. This represents a 69 percent decrease in value over seven years, leaving the office tower worth less than half of the $128 million debt connected to it. The commercial mortgage-backed securities (CMBS) debt backing the Class A offices at 1000 Wilshire Boulevard has landed in special servicing after missing a March maturity date. Occupancy at the 475,000-square-foot office building has slumped to 67 percent, down from 87 percent at loan underwriting.
The special servicer is reviewing resolution alternatives, but the vacancy rate may worsen at the Wedbush Center. The building’s largest tenant, Wedbush Securities, plans to vacate the premises once its lease expires at the end of the year, leaving behind 100,000 square feet of empty space.
Eyes on the clock
In Santa Monica, the Santa Monica Clock Tower was recently appraised at $27.4 million, compared to its original value of $49 million at loan issuance. This represents a 44 percent drop in value over around a decade, putting the office tower’s value under the $58 million Rockwood Capital paid for it six years ago. The CMBS loan connected to the offices went to special servicing after missing a May maturity date, but the borrower is responsive, and the value is still above the debt balance, leaving room for modification.
The century-old, 12-story Art Deco office property has seen its occupancy plummet to 43 percent in March this year, down from 100 percent at loan underwriting ten years ago. The 53,500-square-foot office building at 225 Santa Monica Boulevard is not generating enough income to pay off debts.
On sale
In Pasadena, Swift Real Estate Partners sold a nine-story office tower to GD Realty at a 47 percent loss, for $31.5 million. The property at 790 East Colorado Boulevard was part of a three-building office complex in Pasadena that Swift Real Estate partners purchased for $193 million six years ago. The offices at 790 East Colorado Boulevard were purchased for $59 million, and the 146,000-square-foot office building is 70 percent leased.
Slam dunk
Basketball brothers-turned-developers Tobais Harris and Terry Harris scored $46.6 million in construction financing for an apartment development in Echo Park. The development totals about 86,500 square feet, with 189 apartments at 1540 West Court Street deed-restricted at 80 percent of the median income.
Stalled project finds suiters
The bankrupt, half-baked Oceanwide Plaza at the center of Downtown Los Angeles has two bidders, according to its broker, Colliers’ Mark Tarczynski. Both bidders are developers, one from abroad, and are required to show $450 million to purchase the entitled site and $1 billion to complete it.
Builder’s remedy win
A Los Angeles judge found in favor of developer Leo Pustilnikov after he sued Beverly Hills for attempting to block a 19-story mixed-use development on Linden Drive. The proposed project includes apartments, hotel rooms, and a restaurant, and was one of the first in Beverly Hills to utilize the builder’s remedy mechanism, which allows developers to bypass local planning boards and zoning when localities’ housing plans fail to comply with state-mandated goals.
Conclusion
The Los Angeles office sector is facing significant challenges, with several high-profile properties experiencing financial difficulties. The Wedbush Center and the Santa Monica Clock Tower are just two examples of the many office buildings struggling to stay afloat. As the market continues to evolve, it will be interesting to see how these properties are redeveloped and repurposed to meet the changing needs of the city.
FAQs
Q: What is the current state of the Los Angeles office sector?
A: The Los Angeles office sector is experiencing significant distress, with several high-profile properties facing financial difficulties.
Q: What is the Wedbush Center, and what is its current value?
A: The Wedbush Center is a 21-story office building in Downtown Los Angeles, recently appraised at $60.5 million, down from its original value of $197.5 million.
Q: What is the Santa Monica Clock Tower, and what is its current value?
A: The Santa Monica Clock Tower is a 12-story office building in Santa Monica, recently appraised at $27.4 million, down from its original value of $49 million.
Q: What is the builder’s remedy mechanism, and how is it being used in Los Angeles?
A: The builder’s remedy mechanism allows developers to bypass local planning boards and zoning when localities’ housing plans fail to comply with state-mandated goals. It is being used in Los Angeles to develop new housing projects, such as the 19-story mixed-use development on Linden Drive in Beverly Hills.
Q: What is the current status of the Oceanwide Plaza project in Downtown Los Angeles?
A: The Oceanwide Plaza project is currently stalled, but has two bidders interested in purchasing the entitled site and completing the project.
