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April 28, 2017  

Moinian Rides Out Showroom's Cash Squeeze

Bank of China has originated a $119.8 million floating-rate mortgage on the International Jewelry Center in Los Angeles.

The 370,000-square-foot showroom and office building, at 550 South Hill Street in the Central Business District, is owned by Moinian Group of New York. The refinancing is a milestone for Moinian, which continued to make payments on the previous loan through years of a cash squeeze.

The interest-only loan, which closed two weeks ago, has a five-year term. The leverage is roughly 60%, pegging the property’s value at about $200 million.

The occupancy rate was 90% at yearend, according to a servicer report. There are roughly 450 tenants — mostly jewelry-makers and wholesalers or retailers in the sector.

Moinian, which is headed by investor Joseph Moinian, acquired the 16-story property in 2007 from Hertz Investment of Santa Monica, Calif., for $145 million. Moinian financed the purchase with a $145 million fixed-rate debt package, with a 10-year term, from Wachovia. The bank securitized the $124.4 million senior portion via a $5.8 billion conduit deal (WBCMT 2007-C31) and placed the $20.6 million B-note with Gramercy Capital.

The ensuing downturn took a toll on the property’s performance. In 2011, the net operating income fell to $7.3 million, from $10.2 million in 2008. The appraised value plummeted to $67 million in 2010. The income rebounded to $8.1 million last year. But from 2013 through last year, the income was less than the amount needed to service the senior debt, and Moinian funded the difference out-of-pocket.

In conjunction with the Bank of China loan, Moinian retired the $116.8 million outstanding balance of the senior loan on April 11. The status of the B-note was unclear.

The property, which was constructed in 1981, is across from the Pershing Square public park in the city’s jewelry district. It has a range of upscale features, including an advanced security system.