More trouble hit the Norman Kravetz-helmed Realty Bancorp’s Los Angeles County office portfolio.
After the commercial mortgage-backed securities debt connected to the five-property portfolio landed in special servicing earlier this summer, the borrower is delinquent, and the value is less than half as much as it was at underwriting six years ago.
The 346,800-square-foot portfolio, located in Aguora Hills, Woodland Hills and Calabasas, was recently appraised at $47.8 million compared to $101.6 million in 2019, according to Morningstar Credit.
Not only has the portfolio’s value dropped to $138 per square foot, but it is worth less than the $67.3 million current debt balance tied to it. Realty Bancorp and Norman Kravetz did not immediately respond to a request for comment.
The addresses are: 29903 Agoura Road, 29899 Agoura Road, 29901 Agoura Road, 5230 Las Virgenes Road and 5855 Topanga Canyon Boulevard.
The property at 29899 Agoura Road was home to the Los Angeles Rams for nine years, but the team’s billionaire owner Stan Kroenke is moving the team’s headquarters as part of a $10 billion development plan at Warner Center in Woodland Hills. The Rams’ lease, which totaled 30 percent of the space, expired in February. Plus, Western General Insurance vacated its 28,000-square-foot lease at the Calabasas property three years before its expiration.
Total occupancy for the five office buildings declined to 72 percent at the end of June from 98 percent at underwriting — the properties are not bringing in enough money to pay off debt, Morningstar data shows. The portfolio has a debt service coverage ratio below one, and its net operating income has plummeted to about $3.1 million, down from about $6.3 million.
But the latest servicer commentary indicates that the borrower is requesting a short term forbearance, meaning a temporary suspension of loan payments for a set period; the special servicer is reviewing that and working toward a resolution.
The Greater Los Angeles area has a 24.1 percent office vacancy rate. Many office landlords are grappling with post-pandemic distress despite the recent return to office momentum, as tenants are choosing newer properties full of lavish amenities in desirable locations to lure workers back to their desks.
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