Coretrust loses DTLA tower to Oaktree in foreclosure

More than $110M in loans tied to 48-story office building at 444 South Flower.

Oaktree’s Howard Marks with 444 S. Flower Street
Oaktree’s Howard Marks with 444 S. Flower Street (Oaktree, Getty)

Coretrust Capital Partners lost control of its prized 48-story Downtown Los Angeles office tower in foreclosure to Oaktree, according to a source familiar with the matter.

Oaktree initiated the Uniform Commercial Code foreclosure for an equity stake at 444 South Flower Street, a 914,000-square-foot building in Bunker Hill. The auction was held on Monday after numerous delays.

The foreclosure is among the growing signs of distress facing the Downtown Los Angeles office market, which has struggled since the onset of the pandemic.

The skyscraper is one of the tallest in L.A., and has featured in television shows and movies, including in the opening credits of the 1980’s NBC drama “L.A. Law.” Coretrust purchased the building, then known as the Citigroup Center, from Hines in 2016 for $336 million. It took on a $230 million loan from the Bank of China that same year.

To refinance the property in 2018, Coretrust secured a $64.7 million mezzanine loan from Oaktree on the building, court records show, and a $209.6 million senior loan from insurance company AIG.

The mezzanine loan had an interest rate of about 8.6 percent and was due in December 2021, but Oaktree and Coretrust came to a forbearance agreement two months later, according to court documents filed with New York state court. Oaktree gave Coretrust until May 31 to pay back the loan.

But Coretrust couldn’t come up with the money. In September, Oaktree initiated a foreclosure on the tower.

“We are both surprised and disappointed that Oaktree moved forward with what we believe are unnecessary and aggressive actions,” said John Sischo, co-founder of Coretrust, in a statement to The Real Deal at the time.

Sign Up for the undefined Newsletter

As of Jan. 24, Coretust owed more than $110 million on the loan and had “failed to pay all outstanding obligations,” according to Oaktree’s lawyers.

Coretrust also owed more than $207 million to the senior lender, which Oaktree claims is also in default.

About 210,000 square feet, or 23 percent, of 444 South Flower is currently vacant, according to a LoopNet listing.

Brock Cannon of Newmark was marketing the sale, but declined to comment. Matthew Mannion of Mannion Auctions is the auctioneer.

A UCC foreclosure, which does not have to go through a traditional court process, requires the lender to set an auction to allow outside bidders to make an offer. But the lender usually wins the auction and has a path to control the property through a credit bid or a bid using its existing debt.

Oaktree, led by Howard Marks, is known for buying the debt of troubled companies. Marks told the Financial Times this summer that he is “starting to behave aggressively” because loan prices have fallen.

Oaktree was purchased by Brookfield Asset Management in 2019. Brookfield is one of the largest office owners in DTLA, with about 9 million square feet. The Brookfield entity that owns the portfolio reported a $116 million net loss in the fourth quarter of last year, as leasing and occupancy has not returned to 2019 numbers, according to a November SEC filing.

Coretrust and Oaktree did return a request to comment.

Recommended For You