Charles Cohen, the billionaire developer behind New York-based Cohen Brothers Realty, is struggling with dipping profits at the Pacific Design Center in West Hollywood.
A $245 million commercial mortgage-backed securities loan tied to two buildings at the 1.6 million-square-foot office and showroom campus is on a watchlist for a low debt service coverage ratio, according to ratings agencies Morningstar and Trepp. Cohen Brothers Realty did not respond to a request for comment.
DSCR is used to determine how much a property is making compared to what it costs to service the debt — anything less than 1 means the borrower is shelling out more to cover the monthly t payments than it’s reeling in from the building.
On Cohen’s loan, the DSCR was 1.16 as of November, less than the “acceptable threshold” of 1.4, due to “low income and high expenses,” according to servicer commentary cited by Morningstar.
Cohen, who is also struggling with $600 million in delinquent debt tied to buildings in New York City, is also late on a debt payment for January, according to Trepp.
The drop in income came less than a year after Cohen scored the $265 million to refinance the two buildings, located at 8687 Melrose Avenue, which total 1 million square feet.
The loan, originally from Goldman Sachs and then packaged into CMBS deals, has a fixed interest rate of 5.94 percent, meaning any drop in the debt service coverage ratio is coming from a drop in net income.
The two buildings were 77 percent occupied at the end of September, according to the servicer’s commentary.
The Pacific Design Center consists of three buildings clad in blue, green and red glass, with the largest known as the “blue whale,” according to its website. In addition to office tenants, it has more than 70 showrooms for home decor, art, theater design and books.