Blackstone has “completely” written off its stake in the 1.4 million-square-foot Playa District office campus in Los Angeles, a spokesperson for the firm confirmed to Bloomberg on Tuesday.
The private equity firm is now in talks with lenders about what to do with the property, Bloomberg reported.
“Given the challenges facing the property, we began writing this property down over three years ago and completely wrote it off earlier this year,” a Blackstone spokesperson said in a statement. “Playa District was purchased as part of a broader portfolio, the remainder of which was sold prior to the pandemic.”
In 2016, Blackstone bought Playa District, located on a triangular piece of land wedged between Sepulveda Boulevard and the 405 Freeway near Los Angeles International Airport, for $583 million. Three years later, the company called it a “high-quality asset” — one it wanted to invest in significantly.
The property was formerly called the Howard Hughes Center.
Blackstone is not the only landlord to slash values of their office investments in Los Angeles, as rising interest rates, a new transfer tax and the prevalence of remote work has deteriorated investor and tenant interest. In April, Brookfield slashed the value of its 45-story 355 South Grand Avenue in Downtown L.A. by $111 million, or roughly 26 percent.
Playa District, located at 6060 Center Drive, has about $482 million in debt.
Deutsche Bank, on behalf of a consortium of lenders, provided a $372 million senior loan and a mezzanine note of $110 million in 2016, according to property records and reports at the time.
Blackstone bought the campus from Hines, after the latter liquidated its real estate investment trust, through its eighth real estate fund.
The original loan from Deutsche Bank had an interest rate tied to the benchmark rate one-month Libor plus 2.7 percent, according to Green Street’s Commercial Mortgage Alert. Libor was phased out starting at the end of 2021 and has often been replaced with the one-month secured overnight financing rate.
Blackstone currently has no plans to sell the property, according to a source familiar with the matter.
When Blackstone bought Playa District, the property was 82 percent leased, according to reports at the time. The complex is now about 70 percent leased, according to Bloomberg, which cited Real Estate Alert.
Blackstone has said it has pivoted away from office in recent years.
“The majority of the real estate we own is in sectors like logistics, student housing and data centers and less than 2 percent of our owned portfolio is traditional U.S. office,” a Blackstone spokesperson said in a statement.
Blackstone’s real estate fund that owns Playa District reported $657 million in accrued revenues in the third quarter, according to an earnings release this month, down 20 percent from the year prior.