search

The Real Deal Logo

Trending

“Multifamily is in the crosshairs”: Execs talk distress, opportunities at Milken conference“Multifamily is in the crosshairs”: Execs talk distress, opportunities at Milken conference“You don’t know what the f-ck you are getting”: The new leasing paradigm“You don’t know what the f-ck you are getting”: The new leasing paradigmDrew Barrymore is selling her Hamptons farmhouse Drew Barrymore is selling her Hamptons farmhouse Grant Cardone jumps back into reality televisionGrant Cardone jumps back into reality television
Commercial
Los Angeles

Brookfield faces contractor lawsuit at 777 Tower in DTLA

Investment firm continues to pay on debt although property is technically in default

Howard Building Corporation's Paul McGunnigle; 777 S Figueroa Street (Loopnet, Getty, Howard Building Corporation)
Howard Building Corporation's Paul McGunnigle; 777 S Figueroa Street (Loopnet, Getty, Howard Building Corporation)

Brookfield is in hot water for allegedly failing to pay more than $1.3 million in contractor fees for a tenant improvement project at one of its Downtown L.A. towers. 

Howard Building Corporation, a general contractor that specializes in interiors, has filed a lawsuit against Brookfield, claiming the alternative investment firm has failed to pay for a project at the offices of engineering firm HNTB, one of the tenants at the 52-story 777 Tower, according to a complaint filed last week with L.A. County Superior Court. 

In February of last year, Brookfield hired Howard Building to create the interior 22nd and 23rd floors for HNTB, according to a copy of a construction agreement filed with the court. 

Brookfield agreed to pay about $6 million for the work, which included labor and materials, Howard Building said in its complaint. Since then, Brookfield has only allegedly paid about $4.6 million, and owes the remainder plus interest. 

Brookfield declined to comment, while Howard Building did not respond to a request for comment.

The suit comes after Brookfield disclosed it had technically defaulted on a $319 million loan package on the tower, located at 777 South Figueroa Street, after declining to obtain a rate cap on the loan.

Sign Up for the undefined Newsletter

Though declining a rate cap was grounds for default, Brookfield is still making monthly debt payments on the loan and is not delinquent, according to a source familiar with the matter. 

The tower has not reverted to the lender — a group of commercial mortgage-backed securities investors — and is not in a receivership, like two other Brookfield-owned towers in Downtown L.A. A receivership is an alternative to bankruptcy and forces a third-party to help lease up a property and recover lost profits for lenders. 

At 777 Tower, the contractor suit adds to a slew of issues Brookfield has had with the building. From January to September last year, tenants vacated about 84,000 square feet, causing the vacancy rate at the property to rise from 19.5 percent at the end of June to 26.9 percent, according to Securities & Exchange Commission filings from Brookfield’s DTLA entity. 

And by the end of the year, Brookfield was paying about $1.45 million a month to service the senior and mezzanine loans on the property — up from about $557,400 a month in February 2022, before the U.S. Federal Reserve hiked interest rates seven times. 

Including the technical default on 777 Tower, Brookfield has defaulted on more than $1.1 billion in loans connected to office towers in Downtown L.A. 

“While the pandemic has posed challenges to traditional office in certain U.S. markets, this represents a very small percentage of our portfolio,” a spokesperson said in an email last month.

Read more

Companies and People
Brookfield Properties
Tags
DistressLA Office MarketLawsuits