Westwood Place reorganization plan gains bankruptcy court OK.

Nearly three years after seeking Chapter 11 bankruptcy protection, the Held family-led partnership that owns one of the Westwood's newest office highrises finally has its reorganization plan confirmed.

Key elements of the 15-story tower's restructured finances include a higher principal balance on the building's mortgage and a greater "participation" stake in the property for its mortgage lenders - along with a lower mortgage interest rate.

The plan has been confirmed after a protracted battle between the third-generation Held real estate operation and its lenders. It might even open the door for a sale of the Westwood Place tower to a local investment group, which could be Douglas Emmett & Co.

Westwood Place, the limited partnership that developed the 1987-vintage tower at 10866 Wilshire Blvd., petitioned for bankruptcy protection in June of 1992. The downturn in local office rents and values - and the dispute with the tower's mortgage lender - spurred the partnership's move.

When Westwood Place filed its petition, it hadn't defaulted on its $44 million "participating" mortgage from two big public-sector lenders - Teacher Retirement System of Texas and Alaska Permanent Fund Corp. - noted Robert Held. He is a general partner in Westwood Place and president of the family-owned Held Properties Inc. development/management firm headquartered in the 206,000-square-foot tower.

However, the developers had repeatedly tried to negotiate a restructuring of the mortgage payment schedule after it became clear the initial late-1980s payment plan was unworkable under early-1990s rent levels, Held said. After communications between lender and borrower broke down, the latter sought bankruptcy protection, added Held, whose father, Harold, is Westwood Place's other general partner and Held Properties' president.

Piece of the action

The permanent mortgage funded in 1988 stipulates that the lenders share with the owners a "participating percentage" in the tower's rental income and in any proceeds from any later refinancing or sale of the property. Title records show that the lender group's initial participation rate was 42.5 percent, potentially adjusting to as much a 50 percent.

A loan document "amendment" recorded May 16 on L.A. County title records - just after U.S. Bankruptcy Judge Erithe A. Smith's order confirming Westwood Place's reorganization plan - specifies that the participation percentage is now 65 percent. It also indicates a revised outstanding principal mortgage balance of $46.76 million, and a maturity date of Dec. 31, 1998.

Robert Held also noted the mortgage's interest rate has been reduced from about 11 percent to no more than 8 percent.

Thomas Walper, the Munger Tolles & Olson attorney representing the lender group in the Westwood Place bankruptcy matter, stressed that the reorganization plan also includes key provisions protecting his clients' ongoing stake in the property.

These include provisions hindering Westwood Place from staving off a future foreclosure even through another bankruptcy filing. They also stipulate the bankruptcy court will retain jurisdiction over the bankruptcy case until the Teacher Retirement System and Alaska Permanent Fund loan is paid in full.

Emmett in the wings

Robert Held also confirmed rumors that the Douglas Emmett & Co. real estate investment management operation has made "overtures" about buying Westwood Place once a reorganization plan is confirmed. Institutional investors advised by Brentwood-based Douglas Emmett affiliates have recently purchased other Westside office towers. Earlier this month, a Douglas Emmett-advised group acquired the 500,000-square-foot Nestle USA Inc. headquarters in downtown Glendale, reportedly for about $115 million.

If a Douglas Emmett affiliate does indeed purchase Westwood Place as well, it will be buying a modern highrise with 87 percent of its 186,000 square feet of rentable office space leased. The biggest tenants with about one-and-a-half floors is Peck Jones Construction Corp. - an affiliate of which is one of Westwood Place's limited partners - and law firm Gascou Gemmill & Thornton.