Owners of Lakeshore Towers File for Bankruptcy Protection

IRVINE —  The owners of Lakeshore Towers, one of Orange County’s tallest office buildings, have filed for bankruptcy and may lose possession of the sleek 19-story structure.

The partnership that owns the 378,000-square-foot building and other structures near the San Diego Freeway and Von Karman Avenue recently filed for Chapter 11 bankruptcy protection after it was unable to meet loan payments.

Real estate analysts say the partnership’s largest creditor, the Fuji Bank Ltd., or a court-appointed receiver could take possession of the building and sell it to pay off debts.

The owners, which include affiliates of Irvine-based MBK Real Estate Ltd. and Stamford, Conn.-based General Electric Pension Trust, owe the bank $62 million, according to documents filed in U.S. Bankruptcy Court in Santa Ana.

The partnership’s total debt is $98.3 million, the court documents showed, but its assets have not yet been determined.

“The intent is to reorganize the project and move forward,’ said Tucson bankruptcy attorney Susan Boswell, who represents the partnership owners. “There will be very little disruption for the tenants.”

Boswell declined to comment on the group’s reorganization plan, or when it would be filed.

Real estate consultant Alfred Gobar said that since the owners’ debts are so high, lenders are likely to push to take possession of the complex and sell it to recoup as much of their investment as they can.

The building opened in 1991 and was envisioned as the first of twin towers skirted by a pond stocked with fish. Employees from within the complex would be able to picnic on its banks and fly-fish during their lunch hour.

But plans for the second tower were scrapped because of the real estate recession that began to grip the area that year, and new owners later took control from the original developer, Birtcher.

The complex now is controlled by Lakeshore Towers Ltd. Partnership, Phase I. It also includes the building housing Il Fornaio restaurant and an eight-story parking garage. The partnership, however, doesn’t own the land. It leases the site from the real estate arm of Cleveland-based conglomerate Parker-Hannifin Corp.

Real estate observers say Lakeshore Towers would be attractive to potential buyers because it is 98% occupied and there is room for a second tower on adjoining land. The complex generated rental income of $8.6 million last year, according to bankruptcy documents.

The building is probably worth about $52 million now, but its value could shoot up to as much as $70 million in the next couple of years if the office market continues to improve, said Jim Kruse, senior director of Charles Dunn Co., a commercial brokerage.