PACE Loan Group Supplies $24M C-PACE Loan for L.A. Office Tower
By Andrew Coen January 17, 2025 12:22 pm
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Funds managed by Oaktree (OAK-A) Capital Management have sealed $24 million of retroactive Commercial Property Assessed Clean Energy (C-PACE) financing to fund sustainability enhancements at a Los Angeles office tower that faced foreclosure two years ago, Commercial Observer has learned.
PACE Loan Group (PLG) provided the loan for the sponsorship’s 48-story office building at 444 South Flower Street in Downtown L.A.’s Bunker Hill district. Loan proceeds will finance improvements to the property’s heating, ventilation and air-conditioning systems, as well as its plumbing, lighting and exteriors.
Oaktree acquired 444 South Flower Street in a foreclosure sale from Coretrust Capital Partners in December 2022 before securing a loan extension five months later.
Prior to Coretrust losing 444 South Flower to foreclosure, the firm took out a $64.7 million mezzanine loan from Oaktree in 2018 to refinance the tower at an 8.6 percent rate that matured in December 2021, CO previously reported. The lender took over the property after it went into forbearance.
Anchor tenants in the 910,672-square-foot building include the U.S. Securities and Exchange Commission, Morgan Stanley, Industrious and law firm Fisher Phillips.
“In a marketplace where ESG continues to be a priority for tenants, it’s essential that we continue to lead by example,” Bryan Sather, managing director at Oaktree, said in a statement. “By investing in sustainability, we not only enhance the tenant experience, but secure long-term value and differentiate 444 South Flower from competitive office assets.”
California’s C-PACE program enables landlords to finance sustainability improvements retroactively for up to three years after projects are completed.
Robbie Pinkas, senior vice president at PLG’s New York City office who originated the C-PACE loan, said the debt will support “sustainable upgrades” and boost leasing activity.
“What’s interesting about C-PACE is that sponsors don’t necessarily have to go above and beyond to qualify for financing,” Pinkas said in a statement. “Tenants benefit from the landlord’s investment in refreshed spaces and tangible reductions in utility costs, creating a win-win scenario for all stakeholders.”
Southern California has seen a series of retroactive C-PACE deals over the past year including $90.4 million of C-PACE financing from Nuveen Green Capital to a joint venture between Machine Investment Group and Taconic Capital Advisors to recapitalize two adjacent Hyatt-branded hotels in Hollywood last June, as CO first reported at the time.
Peachtree Group also closed a retroactive C-PACE hospitality loan of $40 million in June 2024 for a newly opened Marriott hotel in San Diego owned by Briad Group, CO previously reported.
“Having an institutional owner find value in incorporating C-PACE as a creative financing tool shows broader overall acceptance of C-PACE, and that’s a great thing,” Rafi Golberstein, CEO and founder of PLG, said in a statement. “No matter the market cycle, there is an application for C-PACE that can be accretive to almost any capital stack.”
Andrew Coen can be reached at acoen@commercialobserver.com
