Chase Manhattan forecloses on Wilshire Brentwood Plaza tower.

In another example of a mortgage lender taking back an "over-financed" local commercial property, Chase Manhattan Bank just filed a foreclosure lawsuit against the developers of the 15-story Wilshire Brentwood Plaza office tower.

A partnership headed by downtown L.A.-based Search Builders Inc. completed the 229,000-square-foot project at 12400 Wilshire Blvd. in 1985, then refinanced the Chase-funded mortgage - to the tune of $61.5 million - as local commercial property values peaked in 1989.

The current outstanding mortgage debt amounts to well over $250 per square foot. That's clearly beyond what real estate professionals consider "market value" for Brentwood area office buildings now that effective rental rates have fallen sharply from their late-1980s highs.

Chase's suit in San Diego Superior Court notes that the building's 1989 refinancing agreement also included a San Diego industrial development and a Los Altos office complex as "additional security" behind the Wilshire Brentwood Plaza loan. Those properties are owned by "affiliated borrowers" Search Sorrento and Los Altos Office Center Ltd., which also signed additional loans amounting to nearly $20 million.

The suit also specifies that the partnership that developed the Brentwood project - Search Wilshire Brentwood Plaza initially stopped making monthly interest payments due beginning Feb. 1, 1994.

Terms reshuffled

Then last August, lender and borrower executed a temporary "forbearance agreement" through which Search Wilshire Brentwood would pay down $6 million in principal and make monthly payments based on the "net cash flow" the three properties generate.

The agreement stipulated that Chase wouldn't exercise its foreclosure rights until March 31, 1995. Not only has that date passed, but the borrowers haven't made the required net-cash-flow payments since Jan. 1, Chase's suit claims.

And as of May 8, the Wilshire Brentwood loan had an outstanding principal balance of about $55.5 million, along with more than $3.8 million in unpaid interest, the suit specifies.

At the request of Chase's attorneys, Superior Court Judge J. Richard Hoden has already appointed a receiver to take over the property. The attorneys said Chase officials would have no comment; Search executives didn't return calls.

The receiver, Stephen M. Willmore, is affiliated with the big Koll real estate services firm headquartered in Newport Beach. Sources said Willmore, who took over responsibility for the property May 16, will appoint Koll as both property manager and leasing agent.

Varied tenants

The Brentwood property is currently about 83 percent leased. Major tenants include King World Productions, the Italian, Polish and New Zealand consulate generals and Taslimi Construction Co., along with several law firms and other professional services operations.

Search Builders Inc. is affiliated with Hong Kong-based Search International Ltd., a diverse international conglomerate of enterprises headed by Chairman Robert W. Miller. Miller is a co-founder of Duty Free Shoppers Group Ltd., the world's largest operator of duty-free shops in airports and downtown locations.

Miller became an equity investor partnering with several U.S. income-property developers. Search Builders was one of those ventures. Four years after the operation's 1984 founding, it had amassed a 1 million-square-foot, $250 million real estate portfolio.

In addition to the Wilshire Brentwood project, Search Builders co-developed the 95,000-square-foot Courtyard office project at 1250 4th St. in Santa Monica, and the 140,000-square-foot office building at 4221 Wilshire Blvd. in the Park Mile district. Much of Search Builders' joint venture development and acquisition activities have been in the San Francisco Bay area.