By Jorge Casuso

January 9, 2024 -- A Downtown office complex that became a cautionary tale of navigating Santa Monica's notoriously slow planning process has sold for $86.7 million -- far below the value of the debt on the building, according to reports.

Realty Bancorp Equity's recent sale to First Citizens Bank and Trust, which bought the Silicon Valley Bank after its collapse last year, amounted to $1,131 per square foot, according to The Real Deal.

That made it "one of the highest office deal prices on a per-square-foot basis across L.A. County in the last three years," the real estate news site said.

The price per square foot far exceeds the $745 JPMorgan agreed to pay for the 222,000-square-foot Pen Factory complex in Santa Monica, the Real Deal reported.

But by the time Realty Bancorp sold the building a block from the entrance to the Pier, the Woodland-based firm had defaulted on more than $109 million in loans, according to several reports.

After buying the building at 1540 2nd Street from McDonald's and constructing the new office complex, Realty Bancorp refinanced the property "with larger loans every few years," the Real Deal reported.

In March of last year, the company defaulted on a $79 million loan from Haymarket Insurance and on a separate $30 million loan from the same lender in April, according to the site.

"Realty Bancorp had failed to pay property tax installments, part of the debt service payments and put $3.6 million into an interest reserve account, according to the first notice of default," the Real Deal reported.

It had taken 12 years and millions of dollars before Realty Bancorp broke ground in 2006 for the 76,900-square-foot office building that counts McDonald's as a tenant.

The quiet groundbreaking had ended what is perhaps the longest episode of permit wrangling in Santa Monica history ("McDonald’s Developer Finally Gets His Break," January 4, 2006).

The long trek included designing and redesigning the project to pass the muster of the City’s Architectural Review Board (ARB), the Planning Commission and the City Council, appearing before each multiple times.

"In Santa Monica, there were many masters to serve," Norman Kravetz, who heads Realty Bancorp, told the Lookout in 2006.

"Although we ended up with a quality project, I found that the ARB, Planning Commission, and council all wanted something different," Kravetz said.

"They weren't unified in their thinking, and it’s difficult for developers to know what each wants."