Months into the coronavirus outbreak, some office buildings are joining hotels and malls among the ranks of buildings transferred to special servicing.
Vanbarton Group’s 74,000-square-foot office complex at 6725 West Sunset Boulevard in Hollywood is now one of them.
The New York-based firm “has requested relief due to Covid-19,” according to servicer commentary from this month. Vanbarton, it notes, has “paid the loan payments out of pocket, but are no longer able to continue to pay the payments.”
While there is little reason to believe that Vanbarton, an investment advisory firm with large institutional clients and access to capital markets, is not financially “able” to make loan payments, the coronavirus crisis has nonetheless made it necessary to seek loan modifications that only the special servicer can provide.
The $21 million CMBS loan, which Cantor Commercial Real Estate provided to the five-story building’s prior owners in 2015, has been transferred to the special servicer with “imminent monetary default” cited as the reason. The loan is currently set to mature in January.
Vanbarton acquired the property from Costa Mesa’s Crown Realty & Development for $38 million in 2018. At the time, the building was 100-percent leased to 15 entertainment, tech and media tenants — although leases for nearly half of the space were set to expire by year end, presenting unique upside in an evolving office market.
Occupancy at the property had fallen to 73 percent by the end of March this year, and the coronavirus has since slammed the brakes on office leasing in Los Angeles.
According to the latest servicer commentary, the landlord is “close to finalizing” a 10,000-square-foot expansion lease with an existing tenant, and is “showcasing the newly renovated courtyard and lobby” to brokers and prospective tenants, as well as “newly finished spec suite buildouts.”
The largest tenant at the property is Berlin-based music technology supplier Native Instruments with nearly 15,000 square feet, followed by Catalina Bar & Grill Jazz Club with about 9,000 square feet.
The jazz club has been engaged in a legal dispute with Vanbarton since last August, accusing the landlord of trying to “squeeze out” the long-term tenant in order to lease the space to someone else for higher rent. Catalina claims the landlord has “blockaded” the entrance to the club, sought to remove signage, banned patrons from smoking on the patio and overcharged the club for tax expenses.
Vanbarton has dismissed these allegations as factually inaccurate or inconsistent with express terms of the lease. The company did not respond to a request for comment.
The Sunset Boulevard building was Vanbarton’s second office acquisition in Hollywood, following the $42 million acquisition of CIM Group’s 7083 Hollywood Boulevard in 2017.
That 82,000-square-foot property includes a 36,000-square-foot WeWork space and a 28,000-square-foot lease with ticket sales company Live Nation, which was set to expire at the end of June. The current status of the Live Nation lease, or the $21.7 million CMBS loan on the property, is unclear as servicer commentary for the Hollywood Boulevard loan has yet to be updated for the month of July.
Vanbarton’s Hollywood real estate plays also include a 280-unit apartment complex at 5550 Hollywood Boulevard, which the firm acquired for $148 million in 2018.
Contact Kevin Sun at [email protected]