UPDATE Nov 17 2022 9:05 AM: Ready Capital, which acquired assets from Mosaic Real Estate Investors earlier this year, has listed a downtown LA office complex at less than 10% of its last valuation in a desperate attempt to clean up its books.
A lender is looking to sell a 270,000 square foot office complex at 261 South Figueroa Street for $2.95 million (approximately $11 per square foot). genuine article.
The price per square foot is very low for downtown LA office space.
“This is a story of the impact of the pandemic, the loss of tenants, changes in use, and changes in ownership leading to liquidation prices,” said Tony, a broker at Sacramento-based KW Commercial Real Estate Services who handles sales. Wood says.
According to Avison Young, LA office investment sales fell in the third quarter despite falling prices over the past two years and being hurt by companies’ lackluster attempts to bring workers back to the office. High averaged $308 per square foot.
Rising Realty purchased a leasehold interest in a complex known as The Park DTLA for $16.5 million in 2015 and began redevelopment shortly thereafter. The complex is based on a land lease owned by Indivest.
Three years later, Rising entered into a lease on the complex. SaleAt the time, Rising advertised the opportunity as an added value considering the property was subdivided into over 1.2 million square feet of commercial space.
However, Rising could not find a buyer. That same year, Mosaic provided the company with a $26 million loan over his three years. The property was valued at approximately $35 million.
By November 2020, Rising owed Mosaic $22.6 million and was unable to repay the loan.
After defaulting, Rising transferred its leasehold interest in the property to Mosaic in lieu of a foreclosure, according to sources familiar with the transaction. Records also confirm that in December 2020 the leasehold and leasehold rights were transferred.
Rising continues to manage the property, but declined to comment further. Mosaic did not respond to a request for comment.
Earlier this year, Rising announced that biotech investor Ben Pouladian had entered into a deal to purchase Park DTLA, but Rising no longer held a stake in the asset.
Pouladian, who runs BEP Helix, planned to redevelop the facility into a life sciences project. He didn’t respond to a request for comment.
Mr. Pouradian signed a contract to purchase the property with a 60-day escrow period, but never executed it, according to a source familiar with the matter.
Around the same time, New York-based lender Ready Capital bought a portion of Mosaic’s portfolio to keep properties owned by lenders after borrowers defaulted on their mortgages, according to sources familiar with the deal. I wasn’t interested in that.
According to marketing materials, the property is currently about 50% occupied. The complex is operating at a loss of more than $2.3 million a year, despite involving about $2.7 million in annual rent, according to its July financial statements.
According to the financial statements, the ground lease costs approximately $2.8 million annually.
Wood now expects the property to be sold at a heavily discounted price to a company that may have sole occupancy of the complex, one of downtown LA’s only low-rise office complex.
That’s because “the lender wants to sell,” Wood said.
An earlier version of this article stated that Mosaic Real Estate Investors was the owner of Park DTLA. Ready Capital owns the property after acquiring a portion of Mosaic’s portfolio earlier this year. It also corrects that Rising Realty owns a leasehold interest in the property and does not obtain a ground lease.