The largest private landowner in downtown Los Angeles said it may have to file for bankruptcy protection, the latest sign of how the credit crunch has frozen a multibillion-dollar revitalization of the city’s downtown.
Real-estate firm Meruelo Maddux Properties Inc. said Thursday that it was working to reach agreements with four lenders after the developer stopped making interest payments on 26 loans valued at $266 million. Three of those loans are due, and the company hasn’t been able to extend them. “The debt capital markets have totally shut down,” Andrew Murray, the company’s chief financial officer, said in an interview.
It is the latest shoe to drop for Los Angeles’s downtown district, which has been the focus of a decade-long renewal project designed to convert old warehouses and office buildings into lofts, high-rise residential towers and an entertainment and retail district.
Meruelo Maddux, which owns land but has done little development, has reached 50% occupancy on its first luxury rental building, Union Lofts, which opened in mid-2008. Some of the prominent industrial real estate properties owned by Meruelo Maddux include: The Overland Terminal on Olympic/Alameda; Sci-ARC on 3rd; Seventh Street Produce Market on 7th; Salvation Army Building at 801 E 7th Street; Rykoff Building now occupied by American Apparel at 7th/Alameda; and the Chaffee Warehouse at Olympic and Alameda.
Meruelo is trying to sell its buildings to pay down debt and to persuade its lenders to restructure loans, but said that if those options fail, a bankruptcy filing could be a “strategic alternative.”