A joint venture between Starwood Capital and Artisan Ventures has surrendered a 1.6 million-square-foot office complex in El Segundo to lenders after falling behind on nearly $500 million in debt, The Real Deal has learned.
Buyers Beacon Capital Partners and 3Edgewood acquired an unspecified majority stake on the $484.8 million of unpaid debt on the asset. After completing a deed-in-lieu agreement on Aug. 27, Beacon and 3Edgewood converted their debt position into equity, a source familiar with the matter told TRD.
The partnership did not specify how much it paid for the property. However, the source said the price was at a significant discount to the loan balance.
The transfer comes just months after the partnership lost a 257,000-square-foot office complex next door.
The complex, a collection of three office buildings located at 100, 200 and 222 Pacific Coast Highway, is also known as Pacific Corporate Towers. The property is partially leased to coworking firm WeWork, which signed a lease for three floors at the complex in 2018.
Boston-based Beacon Capital owns Pacific Concourse, a 162,000-square-foot office complex, also in El Segundo, which it acquired in a $43 million deal in 2018.
In March, Starwood and Artisan were reportedly in “active negotiations” with its original lender Morgan Stanley over approximately $600 million in debt on the Pacific Coast Highway property. At the time, the complex was reportedly half empty and valued at less than $400 million.
The property’s most recent valuation represents a sharp drop from the $605.5 million that Starwood paid in 2017.
The El Segundo transfer adds to a series of losses for Starwood. In July, Starwood and Artisan lost the property next door at 1960 East Grand Avenue. Aside from the office building on the Grand Avenue site, the partnership also planned to build a 94,000-square-foot office property in an adjacent parking lot. Lender MetLife Investment Management acquired the asset in July, paying $72.8 million in a foreclosure sale. At the time of the transfer, Starwood and Artisan owed $83.9 million under a roughly $85 million mortgage from 2020.
Starwood also recently surrendered three office towers in Oakland.
New York-based Starwood Capital Group is a private investment firm run by CEO Barry Sternlicht. Artisan Ventures is an investment firm based in Santa Monica and run by Collin Komae and Mark Laderman, both managing partners, according to its website.