Shorestein taking Ls
Shorestein does not appear to be doing good in recent news... (1) taking a loss on a Houston property they bought back in 2013, (2) Twitter HQ building not paying rent, (3) now they're trying to market a Downtown LA building due to pressure for a lender.
GreenStreet Article - Shorestein Aims to Cut Loss on LA Offices
Shorenstein, facing pressure from its lender, is shopping a Downtown Los Angeles
skyscraper that's expected to command about $220 million. The 1.1 million-sf Aon Center, at 707 Wilshire Boulevard, is just 64% leased, which could appeal to value-added investors. The estimated value translates to about $200/sf, a steep discount to peak pricing for Class-A office properties in Downtown Los Angeles, which topped $500/sf before the pandemic.
The lender, Mesa West Capital, is offering to provide financing to sweeten the
deal for a buyer. Newmark has the listing. Aon Center is just a block away from the PacMutual Building, which also is up for grabs and expected to fetch bids around $100 million - half the amount it last traded for in 2015. Ivanhoe Cambridge is shopping that property via Cushman &
Wakefield (see article on Page 8).
For Shorenstein's offering, theis a buyer could scoop up the 62-story tower, the third-tallest building in Los Angeles, at a bargain price and benefit from a strong existing rent roll while focusing on stabilization. The property has 53 tenants with a weighted average remaining lease term of 4.9 years and limited near-term rollover. The San Francisco-based investment shop paid Beacon Capital Partners $271 million, or $244/sf, for the property in 2014, when it was 55% leased.
In June 2018, the firm refinanced the debt that funded the acquisition with a $246 millionfrom Mesa West. The floating-rate had a three-year term and two single-year extension options, which would put final maturity at this year.
Newmark is describing the offering as a "lender-facilitated sale," which could catch the attention of investors seeking to capitalize on dislocation in the office market. A sale would allow Shorenstein to cover its existing debt, market pros said.
In 2020, Shorenstein completed a multimillion-dollar renovation of the 1974-vintage skyscraper. It has an upgraded lobby, a 90-person auditorium, a 45-person training lounge and a fitness center operated by Kinema Fitness. Amenities also include valet parking, a car-washing service, car-charging stations and a coffee shop that serves breakfast and lunch.
Marketing materials peg replacement costs for the property at $900/sf, providing a "massive basis advantage" to new construction for a buyer. Rents in Downtown Los Angeles would have to rise 70% to justify new office construction, according to the seller.
The sales campaign also touts the investment-grade credit ratings of the building's two largest tenants: Insurer Aon has 77,000 sf under a lease that matures in June 2027, while,000 sf under an agreement that expires in October 2026. No tenant occupies more than 7% of the building.Leases on just 15% of the space mature by 2026, with an additional 13% expiring in 2027. That should provide a new owner with stable income over the next five years, according to marketing materials.
Downtown Los Angeles has 39.1 million sf of office space that was 77% leased at the end of the year, according to a Newmark report. Asking rents for Class-A space averaged $44/sf
Can anyone provide insight on why Shorestein decided to refinance the acquisition loan with a bridge loan from Mesa? I'm assuming it was to use loan proceeds to renovate the building??