Oaktree scores extension on $259M loan connected to DTLA office tower

Oaktree Capital Management has scored an extension on a loan connected to 444 South Flower Street, an office tower in Downtown L.A. it got through a foreclosure earlier this year. 

The asset manager and distressed debt specialist scored a three-year extension on the $258.8 million loan, which was provided by insurance firm AIG Asset Management, according to property records filed with L.A. County.

JLL, which has been hired to help lease up the property, announced the extension, but did not disclose terms or the lender. 

Oaktree, which is owned by Brookfield Asset Management, acquired the 914,000-square-foot property after initiating a Uniform Commercial Code foreclosure for an equity stake in the building last year. 

Coretrust was the previous owner of the property, but failed to pay back a $64.7 million mezzanine loan from Oaktree, prompting the latter to file for foreclosure. 

Coretrust purchased the building, one of the tallest in L.A., from Hines in 2016 for $336 million. It took on a $230 million loan from the Bank of China that same year, and refinanced the building in 2018 with a $210 million senior loan from AIG and the mezzanine loan from Oaktree. 

As of Jan. 24, Coretust owed more than $110 million on the loan and had “failed to pay all outstanding obligations,” Oaktree’s lawyers said in filings with New York state court. 

Oaktree is looking to hold its ownership of the property and “aggressively secure new tenants,” the firm’s managing director Justin Guichard said in a statement. 

Those moves come as Oaktree parent Brookfield is defaulting on loans connected to Downtown L.A. office towers and is giving up buildings. Oaktree’s decision to hold onto the property shows a bifurcation of the market — traditional office owners exiting the market, but distressed, opportunistic investors cashing in where they can.

In February, Brookfield walked away from $784 million in loans connected to two separate 52-story buildings in Downtown L.A. — the Gas Company Tower and 777 Tower.

Brookfield’s formerly publicly traded DTLA entity defaulted on a loan package from Wells Fargo connected to 777 Tower, after it declined to obtain an additional rate cap on the loan. Brookfield also defaulted on $465 million worth of loans from Citi Real Estate Funding and Morgan Stanley at the Gas Company Tower, after declining to extend the loans.

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