In the latest indication of the Wilshire Center/Koreatown district’s real estate woes, the Hong Kong-based owner of five major office towers there has sought Chapter 11 bankruptcy protection.
Zufu Properties Co. Ltd.’s bankruptcy filing comes in the wake of a Los Angeles Superior Court foreclosure lawsuit filed Nov. 15 by the Wilshire towers’ primary mortgage lender, New York-based pension fund Teachers Insurance & Annuity Association of America.
Teachers had financed Zufu’s acquisitions of the four-building Central Plaza complex at 3440 through 3470 Wilshire Blvd. in 1989 and the nearby Metroplex highrise at 3530 Wilshire Blvd. in 1990. The properties collectively feature more than 1.1 million square feet of office space.
Teachers alleges in its lawsuit that Zufu stopped making its mortgage payments last summer, constituting a default. As of Nov. 14, the amount due was just under $114 million.
A Zufu bankruptcy financial statement specifies the Wilshire office properties’ combined values at less than $64 million.
Local commercial property rents and values peaked in the late ’80s before falling sharply with Wilshire Center seeing some of the most dramatic declines.
Several other investors who had purchased or financed major Wilshire Center office towers near the time of the market peak have recently relinquished ownership to lenders.
Zufu’s 718,000-square-foot Central Plaza complex includes three renovated 12-story office towers and an 11-story, 1980-vintage highrise. Teachers helped Zufu finance the 1989 Central Plaza purchase with a $60 million loan, according to title records and the Superior Court suit.
The 18-story Metroplex is a 390,800-square-foot tower completed in 1986. A $54.4 million Teachers loan financed Zufu’s 1990 purchase of that property Wilshire Center’s newest major office tower.
Zufu also owns the 147-unit Embassy Square apartment complex at 269 S. Lafayette Park Pl. in the mid-Wilshire district and a 280-unit Village Oaks apartment complex at 15773 High Knoll Dr. in Chino Hills. Zufu’s bankruptcy documents indicate that the corporation is 100 percent owned by a Hong Kong company called SEM Co. Ltd.
Teachers’ Superior Court complaint alleges that an Indonesian corporation called Korindo Group (also a defendant in the suit) guaranteed repayment of the Central Plaza loan and hence is indebted to Teachers in the amount of just over $62 million.
Zufu last week issued a statement noting that the Chapter 11 filing gives the company an opportunity to create a reorganization plan allowing it to maintain long-term ownership of its Wilshire properties. The filing also lets Zufu avoid receivership and keep Total Properties Management Co. as the managing and leasing agent.
Teachers executives hadn’t returned calls to the Business Journal as of late last week.