A financially troubled skyscraper in downtown Los Angeles has gone into receivership as office landlords there struggle to keep their buildings leased.
One California Plaza — the gleaming 42-story tower on Bunker Hill that was one of the most prestigious addresses in the city when it opened in the 1980s — has dropped 74% in value from its market peak.
Earlier this year, the owners defaulted on their $300-million debt, set to mature in November, and faced foreclosure.
At the request of lenders, a judge appointed Trigild, a receivership service, to take control of the 1 million-square-foot property, the Real Deal reported.
One California Plaza is appraised at $121.2 million, down from $459 million in 2013, according to a Morningstar Credit report, real estate data provider CoStar said.
Net cash flow at the property trailed expectations by 37% last year, and the building is now 62% leased after the departure of major tenants, including law firm Skadden, Arps, Slate, Meagher & Flom, which is set to relocate to Century City.
Ownership of the property at 300 S. Grand Ave. includes Los Angeles landlord Rising Realty Partners, which declined to comment on the receivership. Co-owner DigitalBridge, a Boca Raton, Fla., investment company, did not respond in time for publication.
In recent years, the downtown office market has shifted against landlords as many tenants have reduced their office footprints in response to the COVID-19 pandemic, when it became more common for employees to work remotely.
Elevated interest rates recently have weighed on prices by making it difficult for building owners to refinance debt, pushing them into quick sales or foreclosures.
Some downtown L.A. office tenants have expressed concern that the streets feel less safe than they did before the pandemic and have left for other local office centers, including in Century City.
Downtown L.A. has 54 office buildings that are at immediate risk of devaluation and could result in nearly $70 billion in lost value over the next 10 years, creating a potential loss of $353 million in property tax revenue, according to a recent report by BAE Urban Economics.
The report suggested converting some of them to housing because they potentially could have more value as apartments or condominiums, which could help mitigate expected tax losses.
Converting just 10 big office buildings to housing would boost their combined assessed property value over a decade by $12 billion, adding $46 million in tax revenue and creating more than 3,800 residential units, the report said.
The Gas Company Tower on Bunker Hill sold for around $200 million to Los Angeles County last year, down 68% from a $632-million valuation just four years ago, according to CoStar. The 777 Tower at 777 S. Figueroa St. was sold last year for $120 million, a 70% drop from its 2013 sale. EY Plaza at 725 S. Figueroa St., once valued at $446 million, is now worth about $150 million, a 66% decline.
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