Another Brookfield L.A. Office Tower Wades in Financial Distress
The firm’s debt tied to the Bank of America Plaza in Downtown L.A. was transferred to special servicing.
By Nick Trombola July 12, 2024 2:55 pm
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Yet another Brookfield (BN)-owned Downtown Los Angeles office tower is in financial trouble on a nine-figure loan.
Brookfield Asset Management’s $400 million loan tied to the 1.4 million-square-foot Bank of America Plaza has been transferred to special servicing by its lenders, a consortium of Wells Fargo (WFC), Goldman Sachs, Citigroup (C) and Morgan Stanley, according to The Real Deal, citing a report by Morningstar.
A transfer to special servicing likely means the property’s lenders see a slim chance of Brookfield paying back the debt before it matures in September. The origin of that worry has been the bane of Brookfield’s L.A. assets in recent years: departing tenants.
Law firm Sheppard Mullin, the plaza’s third-largest tenant, is leaving the building once its lease there expires in December for new digs across the street at CIM Group’s City National 2CAL building. Fellow law firm Alston & Bird vacated the property at the end of last year as well after its lease expired.
“The transfer to special servicing enables us to begin discussions about a path forward for the loan and building,” a Brookfield spokesperson told Commercial Observer via email.
The Sheppard Mullin departure reduces the occupancy rate at Brookfield’s tower to less than 70 percent, per TRD. Capital Group Companies’ lease, which doesn’t expire until 2033, accounts for about 27 percent of the tower’s rentable space.
“Refinancing an office tower in Los Angeles right now would be a challenge for even stabilized properties, but for a property like this that’s going to face some near-term vacancy issues, getting it into special servicing before maturity and hopefully engaging in resolution discussions was the prudent course of action,” David Putro, senior vice president and head of CRE analytics for Morningstar, said.
Bank of America Plaza’s looming distress is just the latest in a long string of blows dealt to Brookfield, once the largest office landlord in Downtown L.A., in the era of weak office demand.
The investment manager has already lost control of its 52-story Gas Company Tower and 41-story EY Plaza to a special receiver in the wake of mounting debt obligations, both properties dropping in value by over 50 percent in the process.
Brookfield also defaulted on debt tied to its 52-story 777 Tower in early 2023. It’s had trouble shedding the property since then, with a $145 million sale to South Korean firm Consus Asset Management falling through in April despite a massive discount.
Then there’s the 53-story Figueroa at Wilshire tower, which has fared slightly better than its beleaguered brethren. The firm earlier this year managed to extend the maturity date on the $250 million loan tied to that property from lenders Massachusetts Mutual Life and Teachers Insurance and Annuity Association. Yet, Figueroa at Wilshire still hasn’t found a buyer after being listed for sale in 2022.
Nick Trombola can be reached at NTrombola@commercialobserver.com.
