SteelWave, Barings give El Segundo office building to lender

SteelWave and Barings have surrendered a 164,400-square-foot office building in El Segundo to a lender after facing $53.1 million in troubled debt tied to the property.

An affiliate of the San Mateo-based developer and the North Carolina-based investment management firm handed the keys to lender New York Life after signing a deed in lieu of foreclosure for Grand + Nash at 2160 East Grand Avenue, CoStar News reported.

The SteelWave and Barings affiliate bought the three-story, Class A building in 2019 for $63.5 million, or $386 per square foot. A statement at the time said it paid $420 per square foot.

The affiliate, San Mateo-based 2160 GRAND PO, then borrowed $69.6 million from New York-based New York Life to revamp the property, built in 1999. 

The renovation, completed in 2022, featured a “tenant amenity experience center” that includes a modern lounge with a cafe, state-of-the-art gym and indoor-outdoor meeting areas, according to its website.

The landlords had $53.1 million in unpaid debt tied to the building, according to CoStar, citing public records. The maturity date for the loan, or the reason for the property surrender, were not disclosed. But a former owner suggested a plunging valuation.

Barry DiRaimondo, CEO of SteelWave, told CoStar News that the affiliate transferred ownership of the building to New York Life in a “completely amicable and forthright manner.”

DiRaimondo said rising interest rates have challenged developers, especially those involved in value-add deals whose debt is now maturing.

That debt is out of balance with current values, DiRaimondo said.

“Values have dropped, depending on location and where you are, by somewhere between 30-75%, and that is not specific to El Segundo,” DiRaimondo told CoStar in an email. “That’s what happens when you take interest rates and move them as high and as quickly as the Fed has done.

“The broader issue here is that there is a lot of commercial real estate debt that is not just stressed but distressed, and you will see a lot of loans being acquired at well below par and assets being sold well below the debt levels,” he said.

The entire Grand + Nash building is available for lease, according to CoStar. The building includes the aforementioned cafe and lounge, gym, plus rooftop decks and meeting areas to allow employees “to work where they choose,” according to a listing. 

The building’s asking rent was not disclosed.

Offices across El Segundo have a vacancy rate of 18.4 percent, above the 15.7 percent average for Greater Los Angeles, according to CoStar. Rents in El Segundo average $45.78 per square foot, compared to $41.54 per square foot in the metropolitan L.A. market. 

— Dana Bartholomew

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