Finance  ·  Sales

Union Bank Plaza in Downtown LA Sells at a Big Loss

Office skyscraper sold for less than half it was expected to just a couple years ago. Deal closed with $75 million loan from BH Properties.

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Joel Schreiber won this round. 

Facing the larger troubles engulfing the office market, KBS sold the Union Bank Plaza tower in Downtown Los Angeles for a big discount to the Schreiber-run Waterbridge Capital after several rounds of descending bids, Commercial Observer has learned. 

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The 40-story, 701,888-square-foot office building sold for between $105 million and $110 million, according to sources familiar with the deal. KBS REIT acquired the same building from Hines for $208 million in 2010, records show, and also completed a $20 million renovation.

RC Acquisitions backed out of a $280 million deal for the property in 2019. Reports of the most recent sales effort started in 2021 and estimated a trade would garner $250 million. Harbor Associates placed the deal under contract in May 2022 for $165 million but dropped it a few months later. Further, Schreiber and Waterbridge were set to close for $155 million in October, but continued to drag out the process, The Real Deal reported.

Schreiber did not immediately return a request for comment. A previous deal with Schreiber was set to close in October for $155 million, according to reports.

BH Properties provided a $75 million acquisition loan, according to Colliers (CIGI), which sourced the financing. 

Union Bank Plaza was completed in 1967 at 445 South Figueroa Street in the Bunker Hill area, and was the first skyscraper in L.A. to be designated as a Historic-Cultural Monument. Union Bank renewed its lease for some 162,000 square feet in 2019, but that was significantly smaller than the 300,000 square feet it leased there prior to that deal.

Throughout the L.A. region, office activity has cooled significantly since the pandemic, especially in the central business district, and investor and lender appetite for office assets has dissipated with the rise of hybrid work and rising interest rates. Brookfield, the largest office landlord in L.A., defaulted on $754 million in loans tied to two Downtown L.A. office towers, and other skyscrapers, including the PacMutual Building and the 62-story Aon Center, are hitting the market at major discounts.

To make matters worse and put more pressure on a potential sale, L.A.’s Measure ULA goes into effect April 1, which will increase transfer taxes by 5.5 percent on transactions over $10 million.

“Executing on large-scale office assets in today’s environment requires an ability to address the entire capital stack and think outside the box. Even with a high-quality asset, these are not easy deals to close,” Mark Schuessler, an executive vice president with Colliers, said in a statement.

Joel Schreiber (not to be confused with KBS CEO Charles Schreiber) made a name as the first investor in WeWork and made several attempts to sell the former Broadway Trade Center downtown before filing for bankruptcy and succumbing to a foreclosure sale.

Colliers’ Schuessler, Sean Fulp, Ryan Plummer and Jason Roth sourced the financing for the Union Bank Plaza sale.

“Union Bank Plaza is just the most recent example of private capital filling the void where institutions have pulled back,” Fulp said.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.