The Opportunity

In 1997, MCC together with its partners Blackstone Real Estate Advisors and Merrill Lynch acquired the first mortgage debt on Wilshire Courtyard, a 1 million square foot Class A office campus in Los Angeles.  In this off-market transaction, the $165 million first mortgage was acquired for approximately $140 million.  Prior to closing its acquisition, the borrower filed for bankruptcy protection.  The first mortgage together with a $200 million second mortgage held by other parties made Wilshire Courtyard at $365 million the largest single asset bankruptcy case in Los Angeles County history.  The bankruptcy notwithstanding, MCC and its investors elected to proceed with the acquisition.
The opportunity presented by Wilshire Courtyard was to prevail in bankruptcy and take control of a property with a replacement value of approximately $275 million.  At the time of the bankruptcy the project was 50% leased and only 40% occupied.  In early 1998, a bankruptcy settlement was reached with the borrower whereby ownership of the asset was transferred to the MCC led partnership. Subsequently, MCC led the acquisition of six other minority interests.  MCC then leased over 800,000 square feet to credit tenants in less than two years, bringing occupancy to nearly 100%.  In November 2000, Wilshire Courtyard was recapitalized together with South Coast Metro Center and China Basin Landing.  Wilshire Courtyard was sold to the new venture for $205 million.

Performance Highlights

  • Implemented a successful bankruptcy strategy that led to the transfer of fee ownership to MCC and its partners.
  • Negotiated the buyout of a long term, $170 million lease for 505,000 square feet which provided additional capital to the partners to re-tenant the project.
  • Leased over 800,000 square feet (including renewals) to bring the project from 50% leased to nearly 100% leased.
  • Completed over $30 million in interior improvements and capital expenditures.
  • Returned total cash gains of $68 million in 33 months.
  • Deal IRR of 51%.
  • MCC’s management team captured the 2000 BOMA Building of the Year Award for Wilshire Courtyard.

Current Status

  • The project was sold in September 2005.