Union Bank Plaza, the 40-story downtown office and retail space at 445 S. Figueroa St., remains on the market and its owner is facing difficulties offloading it.
The appraised value of Union Bank Plaza took a significant hit, declining 17.4 percent, or $52.5 million, Newport Beach-based owner KBS Real Estate Investment Trust II Inc. said in a property revaluation presentation to shareholders filed with the Securities and Exchange Commission last month.
The real estate firm cites a limited number of buyers interested in a large office building and a multifamily development site among reasons for the decline, apparently referring to a roughly 2-acre developable parcel included with the Union Bank Plaza property. Recent reports have indicated that KBS is hoping to attract hospitality or apartment developers.
Developers have expressed concern about overdevelopment of multifamily units in the downtown area, KBS stated, and “have been unwilling to attribute any value to the development opportunity at the property.”
KBS also said it had marketed the property for sale throughout 2017, but “the majority of the offers were well below the 2016 appraised value.”
Union Bank Plaza’s total assessed value in 2016 was about $225 million and rose 2 percent to $229.6 million last year, according to CoStar Group Inc.
The 40-story high-rise office property includes 20,000 square feet of retail space on 3.7 acres and was built in 1967, renovated in 1994 and last sold in 2010 for $208 million, or about $331 per square foot.
KBS announced in an SEC filing in September that it had struck a deal to sell the office tower for $280 million to RC Acquisitions, an affiliate of Pacific Reach Properties.
Pacific Reach backed away from the deal a month later, reportedly after having trouble finding financing.
Downtown’s office vacancy rates are stubbornly holding out at just under 17 percent, perhaps highlighting the soft demand for office tower and plaza. Net absorption has been lower than expected in downtown Los Angeles despite strong rental rates because of multiple large blocks of space available.
The property represented about 13.2 percent of the KBS investment fund II’s assets and accounted for 17.8 percent of the company’s total revenue for the six months ending on June 30, 2017, according to the report.
Union Bank currently leases nearly 343,000 square feet of space, more than half of the property, which totals in excess of 627,000 square feet.
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