Cut and run: Ready Capital looks to offload Park DTLA office campus

UPDATED, Nov. 17, 2022, 9:05 a.m.: In a desperate attempt to tidy its books, Ready Capital, which acquired assets from Mosaic Real Estate Investors earlier this year, has listed a Downtown L.A. office complex for less than 10 percent of its last appraised value.

The lender is looking to sell a 270,000-square-foot office complex at 261 South Figueroa Street for $2.95 million, or about $11 per square foot, according to marketing materials obtained by The Real Deal.

The per-square-foot price is extraordinarily low for Downtown L.A. office space.

“It’s a story of pandemic impact, loss of tenants and a change of use then ownership leading to a liquidation price,” said Tony Wood, a KW Commercial Real Estate Services broker based in Sacramento, who is handling the sale.

Even as office sale prices have dropped over the last two years, blemished by companies’ lackluster attempts to bring employees back to the office, office investment sales in L.A. averaged $308 per square foot in the third quarter, according to Avison Young.

Rising Realty bought the leasehold interest on the complex, known as The Park DTLA, for $16.5 million in 2015 and started redeveloping the property soon after. The complex sits on a ground lease, which is owned by Indivest.

Three years later, Rising had put the leasehold interest in the complex up for sale. At the time, Rising advertised the opportunity as value-add, given the property was zoned for more than 1.2 million square feet of commercial space.

But Rising never found a buyer. The same year, Mosaic provided the firm with a three-year, $26 million loan, records filed with L.A. County show. The property was appraised at around $35 million.

By November of 2020, Rising had defaulted on the loan, owing Mosaic $22.6 million.

Following the default, Rising transferred the leasehold interest in the property to Mosaic in lieu of foreclosure, according to a source familiar with the deal. And records confirm the ground lease and leasehold interest were transferred in December of 2020.

Rising still manages the property, but declined to comment further. Mosaic did not respond to a request for comment.

Earlier this year, Rising announced biotech investor Ben Pouladian was in contract to purchase Park DTLA, even though Rising no longer held a stake in the property.

Pouladian, who runs BEP Helix, had planned to redevelop the property into a life science project. He did not respond to a request for comment.

Though Pouladian signed a contract to buy the property, with a 60-day escrow period, he never closed on 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 and wasn’t interested in keeping a property owned by a lender after the borrower defaulted on a mortgage, according to a source familiar with the deal.

The property is now about 50 percent occupied, according to marketing materials. The complex is also operating at an annual loss of more than $2.3 million, despite reeling in about $2.7 million in annual rents, July financial statements show.

The ground lease costs about $2.8 million a year, according to the financial statements.

Wood is now expecting the property to sell at the deeply discounted price to a company that could also solely occupy the complex, which is one of the only low-rise offices in Downtown L.A.

The reason, Wood said, is because “the lender wants it sold.”

A previous version of this story said Mosaic Real Estate Investors was the owner on Park DTLA. Ready Capital owns the property, after it acquired a portion of Mosaic’s portfolio earlier this year. It also corrects that Rising Realty owned the leasehold interest on the property and never acquired the ground lease.