An office building with a distressed loan that has become something of a symbol for downtown Los Angeles' post-pandemic financial struggles has officially hit the market.
The more than 337,000-square-foot building at 811 Wilshire Blvd. is being listed for sale, according to marketing materials viewed by CoStar News. It's the latest chapter in a saga of challenges facing Jamison Properties, as the landlord has struggled to fill vacancies left by tenants opting for newer properties with top-tier amenities. A team of CBRE brokers has been enlisted to help market the property, which is being offered as part of a portfolio deal that also includes the adjacent parking garage at 616 S. Figueroa St.
The listing lands several months after Jamison, a Los Angeles-based real estate firm already facing possible foreclosure on a number of its properties in the city, defaulted on a $35 million commercial mortgage-backed securities loan tied to the 21-story Wilshire Boulevard building, according to CoStar CMBS loan notes. The loan was transferred to special servicing, joining more than $200 million in troubled Jamison debt, the notes said.
The loans collectively back seven other Jamison-owned buildings that span upward of 2.4 million square feet.
Similar to other landlords across the country, Jamison has had to contend with a bevy of pandemic-affiliated challenges that have complicated the financial outlook for a host of office properties, especially if they're older or facing maturing loans.
Built in 1960, 811 Wilshire's occupancy has plummeted in recent years, according to bond rating firm Morningstar DBRS, hitting about 35% by year-end 2024. What's more, with the leases among some of its remaining tenants slated to soon expire, the property's vacancy rate is expected to climb even higher to parallel Jamison's compounding challenges in meeting its financial obligations for it.
Even before COVID-19 decimated downtown Los Angeles' office market, the Wilshire Boulevard building struggled to compete with the city's high-end properties, and its vacancy rate has steadily climbed since Jamison's $26.5 million acquisition in the early 2000s. The landlord took out a 10-year, $39 million loan for the 21-story building in 2014, according to CMBS notes. That loan matured late last year.
Both Jamison and master servicer KeyBank Real Estate Capital declined to comment to CoStar News. LNR Partners, the CMBS servicing arm of Starwood Property Trust and special servicer for the Wilshire Boulevard property, as well as the CBRE brokers marketing the property, did not immediately respond to CoStar News' requests to comment.
Dwindling prospects
Despite the pressure Jamison faces in officially cutting ties with the 811 Wilshire building, it's unclear what the outcome for the troubled property will be and whether there are any buyers willing to take on the challenge — and at what price.
The optimistic combination of improved leasing activity and strengthened demand has meant pockets of the national office market are showing signs of stabilization. However, much of that has been concentrated at the upper end of the quality spectrum. Older properties that lack the flashy amenity packages found at newer or recently overhauled options have steadily lost occupancy to those premium competitors and have largely been unable to build it back.
To further complicate that outlook, high interest rates and declining property values have been added to the stew of hardships for landlords such as Jamison that have been unable to refinance properties or access the capital necessary to upgrade buildings in an effort to boost their appeal among prospective tenants.
The CMBS delinquency rate throughout the national office market recently hit a record high of nearly 11.1%, according to CoStar data. While lenders may have turned to tactics such as a loan modification or forbearance agreement in the past, the post-pandemic reality has meant many of those strategies have lost their effectiveness in helping office borrowers turn their financial outlooks around.
Many of the challenges are especially acute in Los Angeles, where the office market is at its weakest position in decades, according to CoStar analysis.
Vacancy rates have hit historic highs, climbing to roughly 16.5% from the 10% reported in early 2020. Downtown Los Angeles is faring even worse as tenants continue to downsize or vacate their downtown spaces, collectively handing back about 2 million more square feet than they leased in the past year, according to CoStar data.