Majority of Los Angeles, OC CMBS Coming Due in Trouble

There will be a $2.6T wave of maturing CMBS washing over the U.S. commercial real estate industry between now and 2039, with the largest annual tranche of loans coming due cresting in 2024 at an estimated $500B, according to KBRA projections.

In Los Angeles and Orange County, an estimated $21B in debt back by commercial real estate is scheduled to mature in 2024, which is a bit less than the $30B that came due last year in those two markets, according to Morningstar Credit Analytics data. The debt coming due is tied to 400 properties, and nearly $3B has been paid off.

Nearly 60% of the balance coming due in 2024 already is in distress, according to Morningstar. These loans either are already in special servicing or are on watch lists, with at least $250M worth of property already delinquent.

A big chunk of the CMBS onslaught heading for Southern California, six out of the 10 largest CMBS deals in the region with loans coming due this year, involves property backed by a portfolio owned by Blackstone, according to a report in TheRealDeal.

This includes a $2.7B debt package backed by 138 warehouses in California and several other states, TRD‘s report said. The debt is scheduled to mature in August and was put on a watch list in November.

Morningstar’s data indicates that 30% of the loans coming due in the SoCal markets are backed by retail properties, including malls, 22% is backed by office buildings and 19% is debt for multifamily properties. The balance is spread over several sectors.

Several large loans coming due in 2024 are backed by office towers in Downtown Los Angeles, where several iconic towers went into receivership last year.

A $377M loan backed by Bank of America Plaza, owned by Brookfield, comes due in September; a $300M loan backed by Rising Realty’s 1M SF One California Plaza comes due in November.

During H1 2023, two DTLA trophy office towers owned by Canadian real estate giant Brookfield’s DTLA REIT in Los Angeles were placed in receivership.

The same receiver that was appointed by the Los Angeles Superior Court to oversee the receivership on the landmark Gas Company Tower was again tapped by the court to handle the receivership for EY Plaza, a 41-story tower that is the headquarters for accounting giant Ernst & Young.

Trepp reported that Brookfield defaulted on a $275M loan backed by EY Plaza. The loan was originated in 2020 by Morgan Stanley and Wells Fargo and then sold to CMBS investors. The delinquent CMBS package included a $220M and a $35M mezzanine loan.

In February 2023, Brookfield defaulted on two senior loans backed by the Gas Company Tower totaling $350M in debt. The landmark tower, headquarters for the Southern California Gas Co., is located at 555 West 5th Street.