Rialto Sues Over Santa Monica Clock Tower

Rockwood Capital may be out of time. Special servicer Rialto Capital Advisors sued a company connected to Rockwood over a loan secured by the Santa Monica Clock Tower, once the city’s largest skyscraper.

Rockwood assumed $26.7 million in commercial mortgage-backed securities debt when it purchased the 12-story office building in 2019. Rialto alleges that Rockwood defaulted when the debt matured in May and owes about $25 million.

Rockwood purchased the property, at 225 Santa Monica Boulevard overlooking the Pacific Ocean, from Sorgente Group of America six years ago for $58 million, or $1,084 per square foot. The alleged default amount works out to $447 per square foot.

The loan landed in special servicing right before the local landmark’s value was downgraded. Its value declined to $27.4 million in July compared to $49 million in 2015, according to Morningstar Credit. Occupancy is an issue: It stands at 43 percent, per Morningstar.

Rockwood Capital and managing partners David Becker and Tyson Skillings and attorneys for Rialto did not immediately respond to requests for comment.

Rialto wants to foreclose on the Santa Monica Clock Tower and sell it. The special servicer requested a court-appointed receiver to take possession of the 53,500-square-foot, century-old, Art Deco building. Special servicers act on behalf of lenders; in this case, the loan was originated by German American Capital Corporation but was then sold off to investors in commercial mortgage-backed securities.

Rockwood expressed interest in transferring the title back to the lender, according to servicer commentary via Morningstar.

Santa Monica offices have a 24 percent vacancy rate, according to a second quarter CBRE report. That isn’t much worse than all of West Los Angeles, which has a 22 percent vacancy rate, but goes to show that the beachside city’s office market hasn’t seen a post-pandemic revival.