Rockwood’s Santa Monica Clock Tower lands in special servicing

A $26.7 million commercial mortgage-backed securities loan tied to the Rockwood Capital-owned Santa Monica Clock Tower went to special servicing after missing its May maturity date, Morningstar Credit reported.

The 53,500-square-foot, century-old, 12-story Art Deco office tower struggled with occupancy for years and saw sharp declines in income. Santa Monica Clock Tower’s occupancy dropped from 100 percent at issuance in 2015 to 43 percent by last September. Shegerian & Associates, the second-largest tenant that occupied 16 percent of the space, left after its lease expired last year.

Net operating income plummeted to $570,000 last year from $1.7 million the year before, and net cash flow fell to $432,000 from $1.6 million during the same period, according to Trepp. The property has not met the cash flows that the loan was underwritten for in five years and is not bringing in enough income to pay off debts. Still, Rockwood is making payments on the loan as of June.

Rockwood purchased the tower for $58 million, or $1,084 per square foot, in 2019 from Sorgente Group of America. The Italian investors had purchased it about six years earlier for $34 million.

Norman Kravets’ LA portfolio problem

Norman Kravets of Realty Bancorp is running into trouble with his firm’s sprawling Los Angeles County office portfolio that includes the Los Angeles Rams headquarters.

A $67.5 million commercial mortgage-backed securities loan tied to a Realty Bancorp affiliates-owned-office portfolio landed in special servicing for imminent monetary default, according to Morningstar Credit.

The Norman Kravetz portfolio encompasses three office properties in Aguora Hills — one of which has been home to the Los Angeles Rams for years but probably won’t be for much longer — one in Woodland Hills, and one in Calabasas, totaling 346,800 square feet. The properties were almost completely occupied when the refinancing loan was obtained in 2020. But leases expired and occupancy dropped to 73 percent at the end of last year.

The office properties struggled to usher in income once the leases were up. Net operating income dropped to $3.8 million as of December last year from $4.7 million a year earlier, and net cash flow plummeted to $3 million from $4 million during the same period.

Orange County hot on office conversions

Los Angeles is three times the size of Orange County in population, but the latter notches millions more square feet of conversions in the pipeline.

The O.C. has 4.2 million square feet of office space earmarked for conversion to another use, versus L.A.’s 1.2 million square feet, according to CBRE.

On a percentage basis, the O.C. wins as well with 4 percent of the county’s office space earmarked for reuse compared to L.A.’s less than .5 percent.

The O.C.’s advantages include lower vacancy rates and higher effective rents that make it more appealing for conversion.

Goodbye, old Hollywood

Los Angeles’ longest continuously operating film studio is up for sale as film and TV productions continue to flee the state.

Occidental Studios’ 3-acre Main Lot, at 201 North Occidental Boulevard in Rampart Village, is asking $45 million, CoStar reported. The property boasts more than 69,000 square feet of buildings and has hosted productions from 1910s silent films to 2010s TV hits “New Girl” and “Sharp Objects” throughout its 112-year history.

It’s a notably small parcel compared to the sprawling studio spaces occupied by major corporations like CBS’ Television City in the Fairfax District and Warner Bros. Studios in Burbank.

“It’s private, it’s intimate and it’s functional,” Occidental Entertainment Group Holdings CEO Craig Darian told CoStar. “It feels like Old Hollywood.”

ICE-ing out construction

U.S. Immigration and Customs Enforcement raids are sowing uncertainty across workforces in Los Angeles and the rest of the country.

The raids began with companies in Downtown Los Angeles’ Fashion District earlier this month, and law enforcement most recently hit Dodger Stadium last Thursday, according to the team.

“I don’t think we should be throwing out of the country hard working, good people that we need in our community,” developer Rick Caruso said Wednesday during a Connect Los Angeles conference at the Intercontinental Los Angeles Downtown. “They’re creating a terrible problem that’s already affecting business in our region right now and in other regions.”