Rising Realty Partners defaulted on a $200 million loan on the West7Center, or what was once called the Garland Center, according to a notice of default and election to sell dated early March. Co-founder and chief executive Chris Rising told The Real Deal he is working with lenders to resolve the matter and retain control of the property.
The $200 million note connected to the office and data center at 1200 West 7th Street, located in the City West area on downtown Los Angeles’ fringe, was originated by Brookfield. Brookfield later sold part of the debt — a $172 million loan to five other lending entities (four of which are foreign) — and held the remaining $28 million, according to a person familiar. The notice of default concerns the $172 million.
Rising Realty Partners, H.I.G. Realty Partners and Silverpeak Real Estate Partners purchased the 733,000-square-foot property for about $210 million, or around $286 per square foot in 2016, The Real Deal reported then. It has nine stories of office space and three subterranean stories of data center services (and a detached parking structure). The deal was complicated and included the purchase of two ground leases. The person familiar believes the real estate is now worth about $100 million, or around $136 per square foot, which is comparable to other downtown properties.
H.I.G. Realty Partners, Silverpeak Real Estate Partners and Brookfield did not immediately respond to a request for comment.
L.A. Care Health Plan made a deal to occupy 370,000 square feet of the property, in 2019, and is still located there.
Rising recently lost One California Plaza, an office tower on Bunker Hill, to a receiver after owners Rising Realty Partners and DigitalBridge defaulted on their $300 million debt. The 42-story, million-square-foot tower saw its value plummet to about $120 million, compared to about $460 million nine years ago.
But in February, the skyscraper inked a lease for about 26,000 square feet with law firm Gordon Rees. Plus, it renewed Citigroup as a tenant in the skyscraper, which had a last known occupancy of 55 percent.
The latest downtown Los Angeles office numbers put the vacancy rate at 34.4 percent, per a CBRE analysis. Bunker Hill and City West have slightly better vacancy rates, at 32.7 percent and 28.3 percent, respectively. Still, those are sky-high vacancies that reflect the post-pandemic Los Angeles office sector, where only a couple places such as Century City, are considered bright spots.
Rising isn’t the only one to see distress. Commercial giant Brookfield has defaulted on hundreds of millions of debt, lost properties to receivers and is in the midst of mostly lender-facilitated exits throughout the Financial District.
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