Things just keep getting worse for Norman Kravetz.
The Realty Bancorp Equities principal defaulted this summer on the commercial mortgage-backed securities debt connected to a five-office-property portfolio, and now faces calls to cede control to a court-appointed receiver.
The calls are coming via a Wells Fargo Bank unit on behalf of the commercial mortgage-backed securities holders.
Kravetz-linked entities are on the hook for around $70 million, which is more than five-building portfolio is worth.
The 346,800-square-foot portfolio is spread over the San Fernando Valley, including three properties in Agoura Hills — one of which was home to the Los Angeles Rams for years before the team’s billionaire owner Stan Kroenke moved headquarters as part of a $10 billion development plan at Warner Center — and one in Calabasas and another in Woodland Hills.
The five offices were valued at $101.6 million at underwriting in September 2019, a few months before the pandemic was declared and remote work took over. In July, the portfolio was appraised at $48.85 million. Occupancy was 71 percent and properties were not making enough money to pay off debt, running a debt service coverage ratio ranging downward to 0.59.
This isn’t the first bad bet Kravetz has made. Realty Bancorp Equities defaulted on more than $100 million in loans tied to an office complex in Santa Monica; the company later sold the property at a price that didn’t cover its debt.
The Real Deal previously reported on Kravetz’s delinquency on the five-building portfolio, after his debt landed in special servicing, and a multimillion dollar haircut to the portfolio before the matter headed to court.
Stay tuned for more.
Kravetz could not be reached for comment.
Leaning tower of Pasadena
Southern California’s landscape of office distress goes beyond one valley: A nine-story property called the Pasadena Office Tower in the heart of the San Gabriel Valley faces foreclosure after its owners defaulted on $40 million debt.
The default notice and foreclosure threat came after the owners, entities connected to Albert Taban and Michael Pashaie, managing partners at Jade Enterprises and Golden West Properties, saw the property’s value cut by more than half as tenants cleared out.
Now the 142,000-square-foot office, which is 69 percent occupied, is only worth $23 million.
That value is on paper, though, and we’ll have to see if the current trend of deep discounts on office properties eats up that slim margin, too.
School daze on multifamily
Speaking of vacancies, Azusa Pacific University sold an uninhabited apartment complex to Legacy Partners for $91.8 million.
The university received tax exempt financing for the property that would become student housing — but occupancy lagged in the post-pandemic era on college campuses, leading to the sale.
Hudson Pacific cuts, adds to board
Hudson Pacific Properties announced more changes to its board of directors. Mark D. Linehan left the publicly traded real estate investment trust after 14 years and was replaced by T. Ritson Ferguson.
In a Securities and Exchange Commission filing, the company said Linehan stepped down “due to his desire to devote more of his time to other professional commitments,” and that he “expressed no disagreement with the company.”
Ferguson was the chief executive of CBRE Global Investors and now an investment committee member.
Ferguson’s cash compensation, per the Hudson Pacific’s non-employee director compensation program, amounts to $40,000 for an annual retainer and $12,500 for being a member of the audit committee. He could elect to receive vested shares of the company’s common stock instead of that cash — but he is already set to earn an annual award of restricted stock units valued at $90,000.
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