Starwood, Artisan Ventures Surrender 1.6M-SF SoCal Office Towers

Starwood Capital and Artisan Ventures are sustaining more office body blows in California, and particularly in El Segundo. 

Just a few months after handing back the keys to a 257,000-square-foot office complex in the coastal enclave just south of LAX,  the joint venture has lost yet another nearby property that’s more than six times the size. 

The latest property to fly the coop is the three-building, 1.6 million-square-foot Pacific Corporate Towers, at 100, 200 and 222 Pacific Coast Highway, according to The Real Deal, which first reported the news. The JV acquired the towers in 2017 for $605.5 million from BlackRock and General Motors Pension Fund, prior to the global pandemic and generational pivot to remote work, and took out a $600 million loan from Morgan Stanley (MS) to do so. 

But reports in March indicated that the joint venture was struggling to repay the debt, which at that time still hovered at around $500 million, and that the JV was attempting to sell the property or work with Morgan Stanley on refinancing. 

Beacon Capital Partners and alternative investment firm 3Edgewood recently acquired a majority stake on $484.8 million in outstanding debt tied to the property, converting the stake into equity at the end of August after signing a deed-in-lieu agreement, per TRD, citing a source familiar with the deal. The price paid by Beacon and 3Edgewood for the majority stake was not immediately available, but the unidentified source told TRD that it was at a “significant” discount to the remaining debt balance. 

A spokesperson for Starwood declined a request for comment from CO. Representatives for Artisan or Beacon did not immediately respond to requests for comment, while a representative for 3Edgewood could not immediately be reached. 

The specter of financial distress keeps shadowing Starwood Capital and Artisan Ventures lately. In July, the joint venture lost 1960 East Grand Avenue, next door to the Pacific Corporate Towers complex, to lender MetLife after defaulting on $83.9 million in debt tied to the property in February. MetLife paid just $72.8 million for the office, or 45 percent less than the $132 million that the JV paid for it in 2020. 

Further, Starwood and Artisan in March also surrendered a trio of office buildings in Oakland, Calif., to lender Deutsche Bank after defaulting on a $364.5 million loan tied to those properties. The partnership acquired the buildings from CIM Group for about $494 million in 2019. 

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