Canadian actual property large Brookfield has defaulted on a $161.4M mortgage backed by greater than a dozen workplace buildings, primarily within the DC market.
The mortgage was transferred to a particular servicer who’s working “with the borrower to execute a pre-negotiation settlement to find out the trail ahead,” based on a submitting, Bloomberg reported.
Among the many dozen buildings within the Brookfield portfolio, occupancy charges averaged 52% in 2022, down from 79% in 2018 when the debt was underwritten, based on the report. Month-to-month funds on the mortgage’s floating-rate debt jumped to about $880,000 in April from simply over $300,000 a yr earlier because the Federal Reserve raised rates of interest.
That is the second main default for Brookfield this yr. In February, Brookfield defaulted on $784M in loans for 2 high-profile Downtown Los Angeles workplace towers, together with $465M owed on the Gasoline Firm Tower and $319M in loans for 777 South Figueroa St., also referred to as the 777 Tower.
“An occasion of default has occurred [and] lenders could train their treatments,” Brookfield’s DTLA Fund Workplace Belief Investor mentioned in an SEC submitting, including that treatments could embrace foreclosures.
Brookfield mentioned within the submitting it has not exercised any possibility to increase the maturity date on the loans, which got here due on Feb. 9.
The corporate’s DTLA REIT, shaped in 2013 after Brookfield’s $2B acquisition of workplace tower proprietor MPG Workplace Belief, has been thought of a bellwether for the DTLA workplace market prior to now 10 years. The fund owns almost 8M SF of DTLA workplace area.
Brookfield’s DTLA workplace fund warned in a November SEC submitting that it was working out of money and may begin lacking mortgage funds.
The monetary bundle in default on the 52-story Gasoline Firm Tower, positioned at 555 West 5th Avenue, features a two-year, floating charge $350M mortgage supplied by Citi Actual Property Funding and Morgan Stanley, a $65M mezzanine mortgage and a $50M junior mezzanine mortgage. The mezzanine loans had been supplied by Principal Monetary Group.
The financing that got here due on 777 South Figueroa—additionally a 52-story tower—features a $269M mortgage supplied by Wells Fargo and a $50M mezzanine mortgage.
In a Nov. 10 submitting with the SEC, Brookfield’s fund mentioned it was in compliance with all of its mortgage agreements as of Sept. 30, however declining money flows, web working revenue—and the declining worth of the workplace towers—had been placing it on the precipice of foreclosures.
Brookfield reported in November that the fund had about $2.3B of complete consolidated debt as of Sept. 30 and mentioned in its submitting that its “substantial indebtedness” required the fund to make use of “a fabric portion of our money move to service curiosity on the debt.
Together with the 2 52-story DTLA towers, the Brookfield fund’s workplace portfolio in DTLA totaled almost 8M SF, together with the 1.4M SF Financial institution of America Plaza.
The default was the third involving DTLA “trophy” workplace towers in February: Oaktree initiated a foreclosures on its fairness stake in Coretrust Capital Companions’ 48-story DTLA tower at 444 South Flower Avenue, a constructing made well-known because the fictional HQ within the hit Nineties tv present L.A. Legislation.
