Developer Gives Bank Equity Stake in Property

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When residential developer California Landmark Group needed to restructure the debt on a Marina del Rey property, the Westwood company worked out a unusual financing deal.

California Landmark was able to settle its $17 million debt obligation with original lender Corus Bank by taking out a smaller $11.5 million loan with CB Richard Ellis Capital Markets Group. California Landmark partially paid back Corus and covered the $5.5 million balance by giving the Chicago bank an equity stake in the 4151 Redwood Ave. property.

The practice of giving a lender equity in a project to cover a debt obligation is uncommon. But Brian Eisendrath of CBRE Capital Markets said the deal is a sign of things to come as the recession wears on.

“Basically it was a project that was overleveraged based on current market values,” said Eisendrath, who arranged the new loan and advised California Landmark. “We were able to make it so that there were no losses for the existing lender, they converted debt to preferred equity and get paid off further down the road. If they weren’t willing to do that, we have to say, ‘Hey guys, we need you to take a loss of $5.5 million because we can’t pay you back.'”

California Landmark had taken out the original loan in 2005. It had planned to sell the 49 units in the project as condos and was able to line up 19 buyers, for a 20-unit portion of the development that remained condos. Now, the remaining 29 units at the

four-building complex are being rented as apartments.

Ken Kahan, president of California Landmark, said the property, called R1, is fully leased. CBRE Capital Markets is the investment sales and mortgage banking arm of L.A.-based CB Richard Ellis Group Inc. It sold the loan to Freddie Mac, which now holds it.

Eisendrath said he knew of no other deals that had given an equity position to a lender to settle debts. “We were just trying to figure out how to bridge the gap.”

New Boyd Brokerage

Bill Boyd, the veteran real estate player who managed the L.A. region for Grubb & Ellis Co. until leaving in May 2008, has wound up at brokerage Charles Dunn Co. And he’s brought along one of his former Grubb & Ellis colleagues.

Boyd and Linda Lee, a former Grubb & Ellis vice president, have started a Tri-Cities office for Charles Dunn. The duo will open an office in downtown Glendale later this month and will focus on office leasing and sales in the area.

“Charles Dunn provides us with the platform and resources that we have historically delivered to our clients with a true entrepreneurial culture without public ownership,” said Boyd, who had worked at Grubb & Ellis for 10 years and got his start with CB Richard Ellis Group in 1981. “We have complete freedom and support to pursue the clientele we have worked with over the years and really provide a new alternative in the market that is headquartered in the market itself.”

Lee said the new team has a head start, as it was able to bring in accounts they had at Grubb & Ellis.

“We have been fortunate to have the support of our clients, who have made the move with us,” said Lee, who left Grubb & Ellis last month.

Boyd and Lee will be joined by Peter Pearce, a former real estate appraiser, who will work as a broker.

Hollywood Loan

Seward Digital Partners LLC, the ownership group of 729 Seward St., a 16,000-square-foot, fully leased digital recording studio, has secured a $7 million loan to retire a $6.7 million construction loan with RAIT Investment Trust that it took out to remodel the property.

Seward Digital Partners purchased the building in early 2007, and immediately remodeled it in a built-to-suit job for tenant Ripe Digital Entertainment Inc. Ripe Digital, a digital video production company, signed a 10-year lease for the two-story property in April 2008.

Seward Digital Partners is headed by Chris Bonbright, chief executive Ramsey-Shilling Commercial Real Estate Services Inc., a prominent commercial brokerage in the Hollywood area. It also includes John Tronson, a Ramsey-Shilling principal. The loan was with the California business banking division of Wells Fargo & Co.

“Despite the changing market conditions we were successful in getting the permanent loan to take out the construction loan,” said Andrew Levant of George Smith Partners Inc. who handled the deal.


Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.

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