The Metropolitan building, a historic Beaux-Arts property in Downtown Los Angeles, faces potential foreclosure after a special servicer for the lender initiated a judicial receivership. LNR, acting for commercial mortgage-backed securities holders, alleges the Fallas family defaulted on a $32 million loan originated by Natixis. The 1913 building at 449 South Broadway is currently in special servicing, according to court documents.
What is the status of the foreclosure?
LNR has requested that the court appoint Robert Warren of Investors’ Property Services as receiver to manage the 160,000-square-foot property. The complaint, which alleges the ownership is “financially incapable of curing defaults,” seeks to have the Fallas family cede all rights to the real estate so that the receiver may sell the building. Michael Fallas, who signed the original loan documents, received a notice of default in February and a notice of acceleration in May, according to records.
Why is the property facing this action?
The debt on the seven-story building amounts to approximately $200 per square foot. Industry observers suggest this valuation is likely higher than what the property would fetch in a current market sale. While the building includes 88 apartments that remain 91 percent occupied, the ground-floor retail space—formerly occupied by a Fallas Paredes store—is vacant. The Fallas family has been actively shopping the property through an offering memorandum from Zacuto Group and Northmarq, though that document does not list an asking price.
What happens next for the Metropolitan building?
A resolution could take one of two paths. A person familiar with the matter stated that the Fallas family and LNR are still engaged in talks, which could result in a short sale. Simultaneously, LNR is pursuing a “dual-track” strategy, continuing the foreclosure process while negotiations remain ongoing. Although LNR declined to comment and the Fallas family did not respond to requests, the person familiar with the situation confirmed that there are currently offers on the table for the building designed by John Parkinson.