Brookfield defaults on $784M on loans connected to DTLA office towers
Financing tied to Gas Company Tower, 777 Tower
By: Isabella Farr
Brookfield's Brian Kingston and 777 South Figueroa Street (left) and 555 West 5th Street (right) and in Downtown Los Angeles (Getty, Brookfield, LoopNet, Carol M. Highsmith, Public domain - via Wikimedia Commons)
Brookfield has defaulted on $784 million worth of loans connected to two of its trophy office towers in Downtown L.A.
The firm defaulted on a $465 million loan package connected to the Gas Company Tower at 555 West 5th Street and $319 million in loans connected to 777 South Figueroa Street, according to an SEC filing on Friday.
“An event of default has occurred” on both loans, a Brookfield subsidiary disclosed, adding “lenders may exercise their remedies,” which include foreclosure.
The loan on the 52-story Gas Company Tower was made up of a $350 million mortgage loan, a $65 million mezzanine loan and a $50 million junior mezzanine loan, according to Brookfield.
Citi Real Estate Funding and Morgan Stanley provided the two-year, floating rate mortgage, according to property records. The two also partnered with an entity linked to Principal Financial Group to provide the mezzanine loans.
Brookfield said it did not exercise any option to extend the maturity date on the loans, which came due on Feb. 9, triggering the default.
For the 52-story tower at 777 South Figueroa Street, the firm held a $269 million mortgage and a $50 million mezzanine loan. Property records show Wells Fargo provided the mortgage on the property in 2018.
About $290 million was outstanding under the loan, Brookfield said. The firm did not obtain a rate cap on the loan, which was grounds for default. Rate caps have soared in price as interest rates have risen over the last six months.
The defaults are a striking blow for Downtown L.A.’s office market, which has seen hints of distress crop up already. Earlier this month, Oaktree foreclosed on Coretrust Capital Partners’ 444 South Flower Street, a 48-story office tower.
Brookfield is one of the largest office owners in Downtown L.A., after it bought Trizec Properties in 2006 for $4.8 billion and MPG Office Trust in 2013 for about $425 million in cash and the assumption of $1.9 billion in debt.
But Brookfield is now struggling with the portfolio, as vacancy rates across Downtown L.A. have remained persistently high.
Brookfield is trying to sell off another one of its DTLA towers — the 52-story property at 601 South Figueroa Street.
Correction: A previous version of this story misstated that MetLife provided the mortgage, but it was in fact Wells Fargo.