Brookfield Defaults On US$784mil Loans Backed By 2 Office Towers

Office Finder Team

February 16, 2023

USA – Brookfield has failed to repay on time loans secured by two office buildings in Los Angeles, namely US$319 million in loans backed by the 777 Tower and another US$465 million collateralized by the Gas Company Tower, reported GlobeSt on Wednesday evening (15 February, SGT).

“An event of default has occurred (and) lenders may exercise their remedies,” which may include foreclosure, stated Brookfield’s Downtown Los Angeles (DTLA) Fund Office Trust Investor in a filing with the US Securities and Exchange Commission (SEC) on Friday.

In the filing, the Canadian property giant had not exercised its option to extend the loans’ maturity date (9 February 2023).

Notably, Brookfield’s DTLA REIT, which was established in 2013 after the US$2 billion purchase of office tower owner MPG Office Trust, has been deemed as a bellwether for Downtown Los Angeles’ office submarket as it owns 8 million sq ft of office space there.

Specifically, the 52-storey Gas Company Tower defaulted on a financial package that included a 2-year, floating rate US$350 million mortgage granted by Morgan Stanley and Citi Real Estate Funding. It also included a US$65 million mezzanine loan and a US$50 million junior mezzanine loan, both provided by Principal Financial Group.

On the other hand, the 52-storey 777 Tower defaulted on a financial package that included a US$269 million mortgage granted by Wells Fargo and a US$50 million mezzanine loan.

In a November SEC filing, DTLA REIT warned that its cash is getting depleted and it may begin missing loan payments amidst the falling value of its office asset and declining cash flow, which are putting it on the brink of foreclosures.

As of 30 September 2022, DTLA REIT amassed US$2.3 billion in total debt.

The default marks the 3rd one involving a trophy office tower in Downtown Los Angeles over the last three weeks. Oaktree started foreclosing on its equity stake in Coretrust Capital Partners’ 48-storey 444 South Flower Street office building.