Cerberus Capital Management Faces Challenges with Wedbush Center Debt
Overview of the Situation
The financial difficulties surrounding a prominent 21-story office tower in Downtown Los Angeles have escalated, as the debt associated with the Wedbush Center has now moved to special servicing. This incident underscores the ongoing distress faced by the commercial real estate market in the area.
Details of the Debt Transfer
Cerberus Capital Management has reportedly defaulted on a $128.4 million loan linked to the Wedbush Center, a property covering 476,000 square feet located at 1000 Wilshire Boulevard. This loan, part of a commercial mortgage-backed securities deal, was initially set to mature in March. According to a report by Morningstar Credit, Cerberus acquired the building for $196 million from Lincoln Property Company in 2018, with funding provided by Goldman Sachs at that time.
Occupancy Challenges
A significant factor contributing to the building’s financial woes is its occupancy rate. Currently, the Wedbush Center is reported to be 75 percent occupied, a drop from 87 percent when the loan originated. Furthermore, the net cash flow for 2023 is 45 percent below the initial projections made at the time of underwriting, as noted in the Morningstar report.
Future Implications
The situation is poised to deteriorate further, with Wedbush Securities—one of the primary tenants—planning to vacate its current 100,000-square-foot lease at the tower. The company is expected to relocate to a more compact 20,000-square-foot office in Pasadena upon lease expiration in December.
Conclusion
The struggles of Cerberus Capital Management with the Wedbush Center are reflective of broader issues within Downtown Los Angeles’ office market, characterized by increased vacancies and reduced tenant commitments. As the situation unfolds, stakeholders will be keen to observe the eventual outcomes for both Cerberus and the broader market.
