Santa Monica Clock Tower Goes to Special Servicing

A loan backing the Santa Monica Clock Tower, once the city’s tallest building, headed to special servicing after the office tower struggled with occupancy.

A $26.7 million commercial mortgage-backed securities loan tied to the Rockwood Capital-owned Santa Monica Clock Tower at 225 Santa Monica Boulevard went to special servicing after missing its May maturity date, according to Morningstar. The borrower has not provided a plan for the loan, according to Trepp.

Rockwood purchased the 53,500-square-foot, century-old, 12-story Art Deco tower for $58 million in 2019 from Sorgente Group of America. The Italian investors purchased it about six years earlier for around $34 million.

Rockwood, which did not respond to a request for comment, failed to restructure or extend the loan before it matured. And the historic property was encountering a sharp fall in income.

Santa Monica Clock Tower’s occupancy dropped from 100 percent at issuance in 2015 to 43 percent by September 2024, according to Morningstar. The building’s average rents were $90.33 per square foot as of September 2024, according to Trepp. Net operating income dropped to $570,000 in 2024 from $1.7 million the year before; net cash flow fell to $432,000 from $1.6 million during the same period, per Trepp data.

Its debt service coverage ratio is at 0.38x, so the property is not bringing in enough income to pay off debts. A debt service coverage ratio of one means the borrower’s income can cover debt. But in 2022, the property failed to meet its required level of debt service coverage ratio, per Trepp. Since then, things have only gotten worse.

Last year, Shegerian & Associates, the second-largest tenant that occupied 16 percent of the building, left after its lease expired, according to Morningstar. The property’s net cash flow hasn’t reached underwritten levels since 2020, per Morningstar, which has had the tower on its watchlist for almost two years, so the property has not met the cash flows that the loan was underwritten for in five years. Rockwood is making payments on the loan as of June. No leases are set to expire throughout the year.

The Santa Monica Clock Tower was built in 1929 and designed by Walker & Eisen just blocks from the Pacific Ocean. It was the tallest skyscraper in Santa Monica for decades.

Santa Monica offices had a 25.2 percent vacancy rate in the first quarter of the year, according to Colliers, and an average asking rent of $5.22 per square foot, compared to 22.8 percent and $5.17 a year earlier. West Los Angeles’ total vacancy rate was 24.3 percent, and its average asking rent for all classes was $5.08 per square foot, versus 24.4 percent and $5.01 the year prior.