Sales  ·  office

Distressed West L.A. Office Building Sells for Half Its Pre-COVID Price

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Another office in Los Angeles has traded hands for significantly less than its pre-pandemic value as the beleaguered workplace real estate market faces historically low levels of demand.

Harbor Associates earlier this month acquired Westwood Terrace, a 164,683-square-foot building in Westwood, in a joint venture with F&F Capital Group, for $44.7 million. A partnership controlled by Goldman Sachs (GS) last acquired the property for $92.5 million in August 2018, according to property records and previous reporting by Commercial Observer

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A roughly $60 million loan from JPMorgan was tied to property, for which the previous owners could not make payments or secure refinancing, resulting in the lender taking control of the asset, according to a person familiar with the transaction. The Harbor-F&F joint venture acquired the deed from JPMorgan in lieu of foreclosure, the person said. 

The asset was 80 percent leased at the time of the most recent sale.

“After several years of kicking the can down the road, we are now beginning to see distress hit the market,” Harbor principal Joon Choi said in a statement. “While current market conditions and the work-from-home phenomenon has dealt a severe blow to the commercial office sector, there are still compelling opportunities to find hidden gems at a deep discount to replacement.  At our cost basis, we expect the property to perform very well for us in the post-COVID era.” 

The Goldman Sachs partnership acquired the building at 1640 South Sepulveda Boulevard in late 2018 from Downtown Los Angeles-based Ocean West Capital Partners and New York-based Westbrook Partners. Ocean West and Westbrook remained invested in the property and continued to manage it even after the sale, Commercial Observer reported at the time. Ocean West and Westbrook in turn bought the building from property management firm Jamison Services in 2013 for $54 million.

Representatives at Goldman Sachs declined to comment.

Built in 1987 and located one block north of Santa Monica Boulevard, the property had undergone $11 million worth of renovations over the past decade.

The purchase is the second completed by the Harbor-F&F joint venture in recent months. It acquired a 102,000-square-foot industrial portfolio in Carlsbad, Calif., north of San Diego, in November for $21 million. 

Westwood Terrace adds to several other office buildings throughout Southern California that have sold for a significant loss in recent days. The 62-story Aon Center — the third tallest building in the city — switched hands for a 45 percent drop. Beverly Hills-based Carolwood, along with investors Daniel Abrams and Adam Tischer, acquired the 1.1 million-square-foot tower for $147.8 million from Shorenstein, which paid $268.5 million for it in 2014.

Nick Trombola can be reached at NTrombola@commercialobserver.com.