Beverly Hills developer Leo Pustilnikov said he’s working with the lender on a loan maturity default tied to retail storefronts he owns on Santa Monica’s 3rd Street Promenade.
UBS Real Estate filed a notice of default with Los Angeles County this month on a loan tied to the property located at 1241-1247 3rd Street Promenade. The lender indicated in documents $18.9 million was past due as of Sept. 6.
The developer told The Real Deal it has been difficult to refinance in the current interest rate environment.
He reportedly paid $24.5 million for the 15,000-square-foot property four years ago, according to a report from Traded.
The developer is often referred to as a pioneer of builder’s remedy. The legal provision allows developers to bypass zoning requirements for affordable housing projects in cities that do not have updated housing plans in compliance with state requirements. He has multiple builder’s remedy projects in Beverly Hills, plus another in Redondo Beach.
Pustilnikov in August bought 17 buildings of housing for the formerly homeless on L.A.’s Skid Row. He paid $10 million for the portfolio, or $8,333 per unit.
The Santa Monica notice of default is the latest manifestation of retail’s on-going challenges stemming from the pandemic. Tenants such as Banana Republic and Old Navy are among the companies that have left the Promenade.
Federal Realty Investment Trust sold its eight buildings on the Promenade for $103 million this summer. The deal for the 185,000-square-foot portfolio penciled out to $556 per square foot.
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Macerich, owner of the neighboring Santa Monica Place, defaulted on the mall’s $300 million loan in April and is now looking to work out a sale as it retools its portfolio. Morningstar Credit said this week the 534,000-square-foot center’s value has fallen roughly 35 percent to $255 million since the loan went to special servicing. It marks the second time in two years the loan has headed to special servicing. About 150,000 square feet of the mall went vacant after Bloomingdale’s and Arclight Theatre left in 2021.
For the greater Los Angeles market, average asking retail rent was $3.09 per square foot in the third quarter. That reflects a six-cent increase from the previous quarter, according to a CBRE report. Meanwhile, sales of retail property in the quarter slid 68 percent to $192.4 million, the report said.