Los Angeles office complex secures $ 550 million loan
The commercial mortgage-backed securities market is slowly coming back to life and the $ 550 million refinancing of City National Plaza, a 2.5 million square foot mixed-use LEED Platinum and office complex in downtown Los Angeles, is one of the agreements that pave the way. back.
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Morgan Stanley and Goldman Sachs originated the CMBS Loan for Owners of the Trophy Buildings, a joint venture of CommonWealth Partners and the California Public Employees’ Retirement System (CalPERS). The 10-year non-recourse loan has a fixed rate of 2.44% and requires monthly interest payments only. It is secured by the borrowers’ fee simple interest in the 52-story Class A twin office towers that occupy an entire block at 515-555 South Flower St.
The majority of the $ 550 million mortgage includes a $ 330 million Senior A Note that will be securitized as MSC 2020-CNP, a single-asset, single-borrower (SASB) CMBS transaction. A $ 50 million A note has been securitized as GSMS 2020-GC47, according to the Kroll Bond rating agency. The remaining ratings are expected to be part of future CMBS transactions, according to a preliminary rating report from KBRA.
Shlomi Ronen, Managing Director and Founder of Dekel Capital, said Commercial Real Estate Manager that the playbook is similar to the 2008-2009 financial crisis by starting with simpler single-asset, single-borrower CMBS transactions.
“This is the key. We’re going to need some of these types of sole proprietorship securitizations. These are relatively low level transactions that make it easy for investors to get hold of ”, Ronen said.
City National Plaza was developed in 1971 and acquired by the joint venture in 2013 for $ 858 million. Since acquiring the iconic downtown Los Angeles property, the owners have invested approximately $ 193 million in improvements, including $ 127 million for leasehold improvements and $ 66 million for capital expenditures, a reported KBRA. The building has 2.4 million square feet of office space and 123,375 square feet of retail space, as well as 3,240 parking spaces. Approximately 800 are located in a two-level underground garage and 2,436 spaces are located in a second garage one block north.
The asset is 81.4 percent leased with a mix of financial, legal and creative service tenants. Major tenants include the City National Bank; Federal insurance company; The architectural firm of M. Arthur Gensler Jr. & Associates and several law firms such as Paul Hastings LLP and Jones Day. All commercial tenants are closed due to the COVID-19 crisis and most office tenants work from home. Several tenants of offices and restaurants have requested rent relief due to the impact of the pandemic.
The loan has remained current since it was issued on March 25, and borrowers have not made any requests for relief, modification and forbearance, KBRA said. The loan is structured with a debt service reserve of $ 13.6 million, which will be enough to pay off one year of debt service, according to the KBRA report. The proceeds from the mortgage and $ 3.6 million in equity were used to pay off existing debt provided by MetLife and the New York State Teachers Retirement System.