New Distress Bodes Poorly for Future Sacramento Office Market
Sacramento Business Journal reports: As boom-era loans begin to come due, Sacramento’s previously stable office market is seeing its first properties fall into distress. In a recent Sacramento Business Journal piece, Staff Writer Michael Shaw discussed the significance of three office properties in downtown Sacramento that Real Capital Analytics has registered as having fallen into distress this year. They include the Senator Office Building, One Capitol Mall, and the Sacramento Corporate Center.
The stratum of severity covered by the blanket term “distressed” is illustrated through the three properties. In the most severe case, the Senator’s owners have recently defaulted on a $38 million loan in May, and sources indicate the building is marked for transfer to the receiver. It is likely the owners defaulted when the property's vacancy rate spiked over the past two years, to 40%.
At One Capitol Mall, the property owners simply missed a large balloon payment in May on a maturing $25 million loan balance. Though that is cause for concern, and moved this property into the distressed category, it is still a ways from foreclosure. RCA’s data indicates that after missing the payment, owner AKT Development Corp’s loan was transferred to special servicing, which could lead to a refinancing.
The third property has also avoided default, though RCA’s Ben Carlos Thypin informed Mr Shaw that the Sacramento Corporate Center’s debt was similarly transferred to a special servicer after it was determined its owners face “imminent default due to unspecified cash-flow issues.”
For more on this developing situation in Sacramento’s office market, including causes and that market’s near-term outlook, please see Mr Shaw’s full piece on Sacramento Business Journal’s site.
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Posted by: Nina Turner