Starwood has foreclosed on the entirely vacant Broadway Trade Center. Brookfield has defaulted on $784 million worth of loans. KBS is still trying to sell off the 40-story Union Bank Plaza at a loss.
Why are we seeing all of this now?
“You have the twin issue of rising interest rates, which are taking a toll on the debt markets and the capital markets, and the problems with office market fundamentals in general,” said Michael Soto, a research director for Southern California at Savills. “It’s just a one-two punch for a lot of owners.”
The Real Deal’s podcast Deconstruct chatted with Soto about why and how we’re seeing distress crop up across Downtown L.A. and why he thinks there’s more to come.
“Some landlords will have to take a long, hard look at their portfolios and see which buildings are over-levered, which ones they need to save and which ones they might have to throw the keys back to the lenders on,” he said.
For more than two decades, domestic and foreign investors poured money into Downtown L.A., which was seen as a financial hub in one of the country’s 24-hour gateway cities.
“Prior to Covid-19, there were always blockbuster sales in Downtown,” Soto said. “Every month it was like, ‘That hotel sold, that apartment tower sold.’ And it was record pricing.”
That has changed.
Tune into the full episode on Apple, Spotify and wherever else you listen to podcasts.
Read more
