In mid-2016, the Ratkovich Company and American International Group’s Alhambra office complex found itself in a tough spot financially.
Occupancy at the 932,000-square-foot property had fallen to 66 percent, while a $130 million CMBS loan on the property was set to mature in June. The landlord informed its lender that it would not be able to pay the loan off on time, and it was transferred to special servicing in May.
The parties to the loan worked out a forbearance agreement, and early next year a group of foreign investors stepped in to help pay off the debt. Beijing-based ELITE International Investment Fund and Shanghai-based Future Land Holdings paid $157 million for a majority stake in the complex, while Ratkovich remained the general partner, and AIG exited the deal.
With the Alhambra’s finances turned around, the owners secured a $150 million CMBS refinancing for the property in 2019. Documents associated with securitization provide an inside look at the complex’s finances.
At the time of the refinancing, the 20-building complex was 90 percent leased to 40 office tenants and 10 retail tenants, paying an average underwritten annual rent of $30 per square foot.
The largest tenant at the 1000 South Fremont Avenue property is USC’s Keck School of Medicine, which has been at the Alhambra since 2000. The university’s tenancy includes a 74,000-square-foot lease set to expire this year (with a three-year extension option), and two leases totalling 41,000 square foot with expiries in 2024.
The second largest tenant is the Eastern Los Angeles Regional Center, a private nonprofit that works with the California Department of Developmental Services to provide community-based services to people with developmental disabilities. ELARC has been at the property since 2002 and its two current leases extend to 2025 and 2026.
Three departments of the County of Los Angeles are also major tenants at the Alhambra. With 110,000 square feet, the Public Health division has been at the building since 2000, while the Health Finance division occupies 68,000 square feet and Public Works occupies 42,000 square feet.
The largest retail tenant, LA Fitness, occupies its own 51,000-square-foot building at the Alhambra which was built in 2009, and has a lease that extends to 2028. The gym chain, which has struggled amid the pandemic, recently received a $300 million loan from the government’s Main Street Lending Program and has hired financial advisers to help manage its $1.7 billion debt load.
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With 16 office buildings totalling 863,000 square feet, and three retail buildings totaling 18,000 square feet (plus the 51,000-square-foot LA Fitness building), the Alhambra sits on two non-contiguous sites with a total area of 27.7 acres — not counting parking lots — according to loan documents.
In 2017, Ratkovich filed plans for a three-phase development on 20 acres of land at the Alhambra occupied by parking lots and small commercial buildings. The project, dubbed “The Villages at the Alhambra,” would create up to 1,061 residential units (516 for sale, 545 for rent), split up with internal roads and pedestrian walkways.
Layout of the Alhambra complex (Source: Loan prospectus via Trepp)