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Los Angeles

Bids for Shorenstein’s LA tower expected at 40% haircut

L&R Group Companies to offer $145 psf for AON Center, sources say

L&R’s Adam Rubin and Shorenstein Properties’ Brandon Shorenstein with 707 Wilshire Blvd in LA

L&R’s Adam Rubin and Shorenstein Properties’ Brandon Shorenstein
with 707 Wilshire Blvd in LA (Loopnet, Shorenstein, L&R)

Potential buyers think Shorenstein Properties’ AON Center in Downtown Los Angeles is worth a lot less than it was in 2014, The Real Deal has learned. 

L&R Group of Companies, an office and parking structure owner run by Adam Rubin, is expecting to bid about $160 million on the 1.1 million-square-foot tower at 707 Wilshire Boulevard — a roughly 40 percent discount compared to what the building last sold for, according to a source familiar with the matter. 

Shorenstein bought the tower for $268.5 million in 2014, or around $244 per square foot, according to records. 

L&R’s bid comes out to about $145 per square foot, less than the $158 a foot Joel Schreiber paid for the 40-story Union Bank Plaza building at 445 South Figueroa Street in March. 

Rubin, Shorenstein and Newmark’s Kevin Shannon, who is brokering the deal, declined to comment.

L&R is competing with at least one other buyer — a family office based in Singapore — that is expecting to place a bid in the same price range, the source added. Another firm is expecting to place a bid, but is not expected to be in the final running for the building. 

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Shorenstein, based in San Francisco, put the building up for sale in January, asking $220 million, or about $200 per square foot, according to reports. 

Mesa West Capital, a mezzanine lender on the property, pushed Shorenstein to put the building up for sale, after Shorenstein defaulted on the loan in December, according to a separate source familiar with the loan. Wells Fargo holds a senior loan on the building. 

Office values in Downtown L.A. have plummeted over the last few years, as the permanence of remote work has led companies to shrink their office footprints across the central business district. 

L.A.’s new transfer taxes have also hampered sales, given the city will charge 5.5 percent on all residential and commercial sales over $10 million. If the sale goes through at $160 million, Shorenstein will have to pay $8.8 million in additional taxes. 

Rising interest rates have led some building owners with adjustable-rate loans to struggle with debt payments. Also, higher rates can lower sales prices because the cost of money becomes a bigger part of making a deal pencil. 

Brookfield, one of the largest office owners in Downtown L.A., is delinquent on a $275 million loan on its EY Plaza tower — a 41-story office building at 725 South Figueroa Street. The firm already defaulted on $784 million in loans connected to two other buildings in the area.

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