US Bank Tower

LOS ANGELES-MPG Office Trust's US Bank Tower and Wells Fargo Tower have gone into special servicing, bringing to 5.4 million square feet the total of Downtown L.A. MPG buildings either in or headed to special servicing. MPG disclosed the news about the US Bank and Wells Fargo towers on Friday, also disclosing that it has asked that its Gas Company Tower be placed in special servicing.

The US Bank Tower and Wells Fargo Tower are close to 1.4 million square feet each, and the Gas Company Tower is more than 1.3 million square feet. The other downtown asset that is part of the 5.4 million square feet is the 1.3-million-square-foot Two California Plaza. In its recent annual report, MPG said that the special purpose entity that owns Two California Plaza defaulted on the mortgage in March. The mortgages on the US Bank, Wells Fargo and Gas Company towers are not in default, the REIT said Friday.

Wells Fargo Center

In addition to the news about the Downtown L.A. assets, MPG on Friday disclosed that it has disposed of its 131,129-square-foot 701 N. Brand Blvd. building in Glendale to the project’s lender and largest tenant, California Credit Union. California Credit Union provided MPG with a cash payment and retained the REIT as property manager for up to 18 months in a deal that eliminated the $33.8 million of debt on the property.

These latest moves are part of a strategy that MPG has pursued for several years in an effort to reduce debt. In its latest annual report, the REIT said that it disposed of a total of 5.3 million square feet of office properties in 2009 and 2010.

In December, when MPG announced that it planned to default on the $470 million mortgage for Two California Plaza, the REIT said the default was a first step toward restructuring the loan. At the time, MPG president and CEO David Weinstein described Two California as “a key asset that is materially overleveraged.” He said that MGP would like to keep Two California as a core asset “and expects to have the opportunity to explore various potential options for doing so once the asset is transferred into special servicing.”

In MPG's most recent earnings conference call, Weinstein said that the REIT's strategy "includes maintaining our dominant market position in Downtown Los Angeles, preserving unrestricted cash, restructuring or exiting non-core assets, and extending debt maturities." Both in its conference call and in its annual report, MPG noted that the company is marketing its 350-room Westin Pasadena Hotel for sale. Weinstein said that the REIT had received "strong interest from a creditable group" of potential buyers of the hotel.