Starwood Capital and partner Artisan Realty are reportedly in active negotiations with their lender as they try to figure out how to deal with the massive debt on a large El Segundo property whose anticipated value has slumped.
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Starwood and Santa Monica-based Artisan bought the Pacific Coast Towers — a 1.6M SF trio of office buildings they renamed PCT — in 2017 for just over $611M, Green Street reported.
In 2019, the pair refinanced via a senior mortgage with Morgan Stanley for about $500M. The details of the total debt package are unclear, but at the time, Starwood was seeking five years of interest-only financing totaling $624.25M and sources told Green Street the final terms were likely close to that.
Now, with the property approximately half empty due to the shift to remote and hybrid work and its estimated sale price in the current market estimated at less than $400M, PCT ownership and Morgan Stanley are trying to suss out “whether the debt should be written down — and if so, by how much — or whether the owners should turn over the keys,” according to Green Street.
A Starwood spokesman told Green Street it has not defaulted and still owns the buildings, but had no further comment. Morgan Stanley didn’t respond to inquiries from Green Street.
The three towers at 100, 200 and 222 North Pacific Coast Highway house a WeWork location, a Premier Workspaces flexible office location, and financial and professional services firms.
El Segundo’s availability rate was about 27.7% at the end of 2022, below the LA market’s 26.1% average, according to Savills data.
Office buildings across the city, most recently and notably in Downtown, have hit rough waters over the last few months. Perhaps the most visible sign of this was the $784M default of loans linked to two Brookfield towers in DTLA.
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