1 Cal Plaza's $300M Loan Shifts to Special Servicing as November Maturity Approaches

A $300M commercial mortgage-backed securities (CMBS) loan tied to 1 Cal Plaza, located at 300 S. Grand Ave., has shifted into special servicing as the loan nears its November maturity. This transition, reported by Morningstar, highlights the challenges facing refinancing in the current market, especially for large office buildings. Special servicing is a step often taken to initiate workout discussions for loans under distress.

Financial Struggles and Occupancy Issues

The property, spanning over 1 million square feet, has experienced financial difficulties. In 2021, it had already entered special servicing due to a cash management problem, which was resolved. However, its struggles persisted, with Morningstar noting that the building’s net cash flow in 2023 was 37% below its original projections.

Occupancy is also under pressure, with major tenant Skadden, a law firm, preparing to vacate its 100,000 square feet of space by the end of this year. The firm plans to relocate to a smaller office in Century City, which will cause occupancy at 1 Cal Plaza to fall to just 63%.

Market Trends and Owner Response

The building’s owner, Rising Realty Partners, has yet to comment on the situation. A broader concern for Los Angeles office properties is looming, as a 2023 report indicated that 20% of all office loans in the city are set to mature between 2023 and 2025. Moreover, another Morningstar report estimated that $1.8B in CMBS debt is due this year in Los Angeles alone, with many properties facing significant leasing and vacancy challenges.