DTLA’s Wedbush Center to Special Servicer Over $128M Loan

Cerberus Capital Management has blown its deadline to pay off a $128 million loan backed by a 21-story office building in Downtown Los Angeles, shuttling it into special servicing.

The New York-based investor led by Frank Bruno failed to make a maturity deadline last month for a commercial mortgage-backed securities loan secured by the Wedbush Center at 1000 Wilshire Boulevard, Commercial Observer reported, citing Morningstar.

Cerberus bought the 476,000-square-foot building in 2018 for $196 million, or $412 per square foot. That year, Goldman Sachs provided the CMBS loan.

The problem for the landlord — and legions like it in offices from L.A. to New York — is sufficient occupancy to pay its bills.

Wedbush Center is 75 percent full, down from 87 percent seven years ago, while its net cash flow for 2023 was 45 percent below underwriting, according to Morningstar. The shoe is about to drop with another 21 percent hit in vacancy.

Last fall, Wedbush Securities announced it would pack up its desks at its namesake building for a smaller office in Pasadena.

When its lease expires in December, the locally based stock brokerage will pull up stakes from its 100,000-square-foot headquarters and relocate to a 20,000-square-foot office on Lake Avenue.

Wedbush has been based at the Wilshire Boulevard building since 2001, with two Wedbush signs on the tower visible from the 110 Freeway.

Wedbush is exiting the prominent office tower as a shift to remote work has caused many companies to downsize offices, which has decimated the downtown office market.

Late last year, vacancy in DTLA hit 33.33 percent, with 296,000 square feet of negative net absorption, according to CBRE.

Thousands of office workers have left, unlikely to return. Many shops and restaurants remain closed. Office tenants, meanwhile, say the streets feel less safe than they once did. Many tenants have bolted for offices in tonier Century City, El Segundo and Pasadena.

Cerberus, founded in 1992 as an alternative investment adviser, has $65 billion in assets under management, including $17 billion in real estate, according to its website. — Dana Bartholomew