Sawtelle office building loan sent to special servicing after maturity default

Debt tied to the 100,000-square-foot Sawtelle property backed by Jade Enterprises.

Loan trouble has surfaced at a West Los Angeles office building in the Sawtelle Japantown neighborhood after the borrower failed to repay its debt when it matured in January, according to Morningstar Credit.

The property at 1950 Sawtelle Blvd., a three-story red-brick office building totaling about 100,000 square feet, has been transferred to special servicing tied to a commercial mortgage-backed securities loan sponsored by Albert Taban of family-owned Jade Enterprises.

The debt was originally issued at $36.5 million roughly a decade ago and now carries a balance of about $33 million across three loan pieces, according to Morningstar. Servicer commentary indicates the borrower contacted lenders in an attempt to refinance but warned that any replacement loan could fall significantly short of the outstanding balance.

Vacancy has become a major challenge for the property. Occupancy was about 43 percent last summer, Morningstar reported.

Butterfield Productions, the building’s largest tenant, reduced its space by about 10 percent and now occupies roughly 32 percent of the building’s gross leasable area. Another tenant, Kung Fu Factory, vacated its space, leaving roughly 14 percent of the building empty.

Servicer notes indicate the borrower said discussions were underway with a potential tenant for a large portion of the vacant space.

Marketing materials from brokerage JLL show the building can accommodate office, medical or certain retail uses. When the loan was originally underwritten, the property was about 94 percent occupied.

Jade Enterprises acquired the Sawtelle property as part of a five-building office portfolio purchased from Blackstone in 2016 for a reported $159 million. The portfolio totaled about 350,000 square feet and included buildings in Beverly Hills, Santa Monica and Culver City.

The Sawtelle office building has not received a new appraisal since that acquisition, when it was valued at about $54 million, according to Morningstar.