Laguna Point Properties is delinquent on a $329 million loan it used to buy a portfolio of more than 1,000 L.A. apartments less than a year after securing the debt, The Real Deal has learned.
The Orange County-based investment firm is more than 30 days delinquent on the loan, according to data from DBRS Morningstar.
The loan is not in default, according to a spokesperson for Laguna Point.
MF1 Capital, a partnership between Berkshire Residential Investments and Limekiln Real Estate, provided the three-year, floating-rate loan to Laguna Point last April, brokerage JLL said at the time. JLL arranged the loan, which was used to purchase five buildings in Downtown L.A. totaling 1,037 units for $402 million. It also included two one-year extension options.
The buildings are located at 548, 600 and 650 South Spring Street, 111 West 7th Street and 215 West 6th Street.
The delinquency is yet another sign of commercial distress cropping up across Downtown L.A., but marks the first major delinquency linked to a multifamily loan in the area.
But Laguna Point has disclosed in court filings that it has faced a number of issues at the portfolio’s units, which allegedly have caused additional expenses. Data reported to DBRS Morningstar also shows occupancy across the portfolio dropped to 87 percent in February from 97 percent when it scored the loan. That’s lower than the average residential occupancy rate of 93.6 percent reported across Downtown L.A. in the third quarter, according to data from the Downtown Center Business Improvement District.
At 111 West 7th Street, Laguna Point alleged the previous owners never fixed a faulty fire pump motor after a fire broke out last year, forcing the firm to pay $200,000 to fix the pump and pay a person $18,000 a month to act as “fire watch,” court records show.
Also, Laguna Point has claimed the previous owners did not disclose certain threats of tenant litigation and the true financial performance of the assets.
Barry Shy, a prominent L.A. developer and multifamily landlord, signed the purchase and sale agreement to sell what the lawsuit calls the “Main Premises” to Laguna Point as a manager of one of the LLCs named as a defendant in the suit, Main SB.
While Laguna Point’s first complaint over the portfolio did not specifically name Shy, or any other individual, as a defendant, it has since added Barry, Rommy and Eric Shy as defendants in the suit.
“Barry Shy, Eric Shy, and Rommy Shy … intentionally misrepresented the financial performance of the real properties at issue in this lawsuit by concealing the historical level of rental delinquencies to fraudulently induce plaintiffs into entering the purchase and sale agreements,” Laguna Point Properties said in an amended complaint filed with L.A. Superior Court in January.