The largest office development site at Playa Vista is in flux.

The mortgage note on the 60-acre property, owned by a joint venture of Tishman Speyer Properties LP and Walton Street Capital LLC, has been put up for sale, the Business Journal has learned.

The sale calls into question the fate of the site where Hughes Aircraft Co. built the Spruce Goose. The development is entitled for nearly 2 million square feet of office and commercial space, and was expected to be built out over several years.

According to sources with knowledge of the situation, the mortgage has a balance of more than $150 million and is held by a consortium of lenders led by KeyBank of Cleveland. The note is expected to fetch roughly $50 million; a sale for that amount could represent a write-down of at least two-thirds.

A payment of about $150 million was due on the mortgage this summer, but New York-based Tishman Speyer and Chicago-based Walton opted to not pay it. They bought the property in February 2007, near the height of the market, and commercial real estate values have since crashed. Rather than foreclose and take over the property, the lenders decided to sell the note, according to a source.

Steve Soboroff, chairman and chief executive of Playa Capital Co. LLC, which developed the Playa Vista community and sold the entitled land to Tishman Speyer and Walton, said he believes the note sale is a positive development.

“If this process ends with a user or buyer – for all or a portion of the property – that is great news,” he said. “From our perspective the sooner those buildings are built and occupied, the better it is.”

Tishman Speyer, Walton and KeyBank all declined to comment.

Tishman Speyer and Walton have already begun construction of a multibuilding office development on the property. A source said they will retain ownership of the buildings, which have signed tenants Belkin International Inc. and USC.

Tishman Speyer and Walton’s original plans called for a total of about 1.6 million square feet of space delivered by 2012. Likely buyers of the note could be another development group or real estate investors. A CB Richard Ellis Group broker is said to have the note listing, but he would not comment.

Koreatown Trouble

Solair Wilshire, a $165 million mixed-use development at Wilshire Boulevard and Western Avenue, has had a rocky first few months since opening this summer.

First, the project’s construction lender, Corus Bank of Chicago, was shut down Sept. 11 by the Federal Deposit Insurance Corp. That has made it impossible for developer Koar Wilshire Western LLC of Los Angeles to complete the sales of units in escrow because the lender holds liens on individual units and needs to approve sales. (It is the same predicament faced by developer Sonny Astani’s downtown L.A. Concerto condo project.)

Then, separate buyers of seven condos jointly filed a lawsuit on Sept. 25 in U.S. District Court in Los Angeles alleging that the developer misled them.

The lawsuit alleges that the developer made untrue claims that between 30 percent and 50 percent of units at Solair were sold to other buyers, giving the impression that the defendants would “have to act quickly” to purchase their desired units. The lawsuit alleges that a bulk of the pre-sales were actually to a “corporate entity and an individual who were related to the defendants,” and that those parties don’t plan to occupy the units.

Koar Wilshire Western principal Bruce Rothman said he had not been served with the lawsuit, but scoffed at the claims.

“They can allege anything they want to try to throw up a smokescreen to get their deposit back but at the end of the day the truth will come out,” Rothman said.

Thomas Ryu, the attorney representing the buyers, did not return calls seeking comment.

According to Rothman, between 80 and 90 units have either been sold or are in escrow. He declined to discuss the number of closed deals and occupied units.

The sale of Corus’ assets to Starwood Capital Group LLC and TPG could resolve issues surrounding the liens on units at Solair. The asset sale was expected to be finalized as early as Oct. 15.

Beverly Hills Lease

Premier Office Centers LLC, an Irvine company that rents executive offices to businesspeople, has signed a lease at 9701 Wilshire Blvd., a 12-story Beverly Hills office building owned by New York real estate investor LeFrak Organization.

The six-year, $7 million deal for 25,772 square feet started Oct. 1. Premier took over space occupied by Synergy Workplaces, which ran a similar business there. Premier is retaining the existing renters, said Jeff Reinstein, chief executive of Premier.

Premier rents space monthly and offers features such as secretarial service, telephone and Internet access, and furniture. Premier has 52 locations nationwide and does business as Premier Business Centers. It has another Beverly Hills location on Wilshire Blvd.

Gary Weiss of Madison Partners represented both sides of the deal.

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

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