Vanbarton Group to Sell Vacant 86,000 Sq Ft Hollywood Offices Amid Leasing Woes

Key Takeaway

• Vanbarton Group is selling its 86,000-square-foot Hollywood Boulevard office building to a religious organization amid leasing struggles and loan delinquency.
• The property, bought for $42 million in 2017, is now entirely vacant after major tenants like WeWork and Live Nation exited.
• The sale price will exceed the $21.7 million loan amount, allowing Vanbarton to pay off the debt tied to the property.

Vanbarton Group's Hollywood Office Sale

The Vanbarton Group, a New York-based real estate firm, is set to sell an 86,000-square-foot office building near Hollywood's iconic TCL Chinese Theatre. This sale comes as the property has faced financial difficulties, primarily due to sluggish leasing activity. According to Morningstar data, the building's $21.7 million loan is currently 30 days delinquent and has been sent to special servicing. The Vanbarton Group plans to use the proceeds from the sale to pay off this debt. The exact sale price has not been disclosed, but it is expected to exceed the loan amount, allowing the firm to settle its financial obligations.

Financial Struggles and Leasing Challenges

The property, purchased by Vanbarton from CIM Group for $42 million in 2017, has struggled to maintain occupancy and generate sufficient income. Initially anchored by WeWork, the building saw significant tenant exits, including Live Nation in 2020 and WeWork in 2021. Although Industrious, another coworking firm, leased 28,900 square feet in 2022, the property is now entirely vacant. This vacancy has led to insufficient income to meet debt service obligations in both 2022 and 2023, highlighting the challenges faced by office properties in the current market.

Broader Market Context

The sale of Vanbarton's Hollywood office building is indicative of broader trends in the commercial real estate market. Similar to the retail sector's speculative bubble and subsequent decline, the office market has faced its own set of challenges. For instance, Thor Equities recently sold a Madison Avenue retail property at a significant loss, reflecting the volatility and shifting dynamics in commercial real estate. Investors are now cautiously re-entering the market, seeking opportunities in a landscape marked by fluctuating rents and changing tenant demands.

Market Implications and Future Outlook

The Vanbarton Group's decision to sell the Hollywood office building underscores the ongoing difficulties in the office real estate sector, particularly in high-profile locations. The move to sell to a religious organization, as reported, may signal a shift in the type of tenants that can sustain such properties. This sale also highlights the importance of adaptive reuse and diversification in real estate portfolios. As the market continues to evolve, property owners and investors must navigate the complexities of tenant retention, income stability, and debt management.