One of Los Angeles' largest office landlords has scooped up a building along famed Wilshire Boulevard, a deal that not only saves the property from possible foreclosure but also marks the new owner's return to the capital markets.
Douglas Emmett acquired the Murdock Plaza building through a deed-in-lieu sale that valued the 17-story tower at $131.1 million, according to county property records. The deal, which closed earlier this month, saves former owner Tishman Speyer from defaulting on its loan after it was sent to special servicing last month.
The New York-based developer acquired the building at 10900 Wilshire Blvd. for nearly $125 million in 2014 and used it to back a $122.7 million loan it secured through Blackstone Mortgage Trust in 2021, according to data from CoStar and Morningstar. Blackstone also provided financing for Douglas Emmett, which took out a roughly $62 million loan to finalize the deal.
The combination of depressed demand, stagnant leasing and the ongoing effects of flexible work has helped push the national office vacancy rate to a record high of nearly 14%, according to CoStar data. Tenants collectively handed back upward of 65 million square feet last year, boosting the total to more than 210 million square feet of move-outs since the start of 2020.
Those pandemic-induced factors have been exacerbated for a number of property owners across the country, and some — especially if they're facing maturing loan deadlines or mounting expenses — have been eager to offload underperforming properties, even if it means closing a deal at a deep discount to their initial investments.
Both Tishman Speyer and Blackstone declined to comment, while Douglas Emmett did not immediately respond to CoStar News' requests for additional details.
'Vacancy doesn't scare us'
The more than 243,000-square-foot building has long been home to anchor tenant Wasserman, a sports talent management and marketing firm that leases about 55,800 square feet, according to CoStar. Other companies that occupy space in the property include online dating platform eHarmony and Citigroup, among others.
Murdock Plaza is more than 85% leased, and Douglas Emmett is already marketing the remaining space available for lease on the real estate investment trust's website.
For Douglas Emmett, the deal fits into the REIT's patchwork of properties across the Los Angeles area as well as its strategy to focus on boosting its portfolio occupancy with a mix of small to midsize tenants.
"Taking advantage of opportunities in the office market remains a key objective for us," Chief Investment Officer Kevin Crummy recently told analysts. "The few recent transactions in our markets have so far been dominated by large tenant buildings, which are not our bread and butter."
What's more, the Wilshire Boulevard deal will likely set the stage for future deals to come as the landlord continues to home in on potential acquisitions that could help boost Douglas Emmett's existing office portfolio.
"We’re targeting properties that have vacancy in them, because we want to take advantage of our operating platform," Crummy said. "Vacancy doesn’t scare us, and we’re not good at buying buildings that are stabilized because we can’t add that value."
Sales volume nationally has plummeted by more than 55% over the past year to $35 billion, according to CoStar, a nearly 15-year low. Yet, on a quarterly basis, sales held steady throughout 2023 and even ticked up in the early months of 2024 as significant discounts pushed an expanding group of investors to take advantage of more deals, data shows.