CRE’s distress moment is here

PIMCO defaulted on $1.7B worth of loans, while Brookfield walked away from $784M in loans

From left: Tower56 in New York, Brookfield's Brian Kingston, 777 South Figueroa Street and 555 West 5th Street in Los Angeles
From left: Tower56 in New York, Brookfield's Brian Kingston, 777 South Figueroa Street and 555 West 5th Street in Los Angeles (Getty, Brookfield, Macklowe)

Distress is stressing out real estate investors. And last week didn’t help.

Columbia Property Trust, a large office landlord controlled by PIMCO, has defaulted on $1.7 billion in loans tied to seven buildings across the country, marking one of largest office defaults since the start of the pandemic.

In Los Angeles, Brookfield walked away from $784 million in loans connected to two of the firm’s trophy office towers in Downtown Los Angeles: 777 South Figueroa Street and the Gas Company Tower at 555 West 5th Street. The Real Deal analyzed Brookfield’s financials at both properties and how rising interest rates impacted their profitability. 

In New York, Cyrus and Darius Sakhai’s Sovereign Partners struck a deal with Pearlmark Real Estate to buy the Tower56 office building at 126 East 56th Street in the Plaza District for about $110 million.

Pearlmark couldn’t refinance its mortgage on the property, and the sale price is roughly what is owed on the debt.

It’s one of the first big forced sales to hit the New York office market — a trend many expect to grow this year as owners have trouble refinancing loans that come due.

Madison Realty Capital could lose its retail space at the Williamsburgh Savings Bank building in Downtown Brooklyn after a judge allowed lender Amherst Capital to proceed with its foreclosure on the retail condominium, owned by a joint venture of Madison and private equity firm Siguler Guff. The judge ruled the venture defaulted on a $22.2 million loan.

The joint venture blamed the pandemic for the property’s financial issues in court filings.

Trouble may be brewing in San Francisco, the loan for 555 California Street, owned by Vornado Realty Trust and The Trump Organization, was put on a loan server watchlist for potential trouble.

The owners are current on the $1.2. billion in mortgage debt secured by the 52-story building, the fourth-tallest building in the city. But there may be trouble, as watchlists indicate potential challenges threatening a borrower’s ability to stay current on a loan.

Sign Up for the undefined Newsletter

Frozen ground

Things weren’t all that rosy on the development side, either. Chetrit defaulted on the $85 million loan at 545 West 37th Street, a shovel-ready development site at Hudson Yards, Commercial Observer reported. Mack Real Estate is now the sole owner of the debt and the loan is being marketed by veteran dealmakers Adam Spies and Doug Harmon

In Miami, development site prices plunged in the third and fourth quarters of last year, largely due to rising interest rates, according to developer Harvey Hernandez, as well as some brokers TRD spoke with.

The market hasn’t frozen entirely. In Chicago, Thor Equities, led by Joe Sitt, is considering paying more than $100 million to Nealey Foods for the largest remaining development site in Fulton Market, CoStar News reported. If it goes through with a purchase for the 2.7-acre site, Thor could build multiple towers holding a total of 1.3 million square feet under current zoning.

Slinging mud

In Miami, Maria Lamas — the ex-wife of Shoma CEO Masoud Shojaee — and her daughters, Anelise and Lilibet Shojaee, sued Masoud Sojaee’s current wife Stephanie Shojaee, alleging defamation when Stephanie discussed her marriage and career on a podcast. 

Much like the office market, things don’t look to improve on that front, either.

Read more

Commercial
New York
Murder, bribery and contempt charges: Just another week in real estate
Residential
New York
Residential market New Year’s outlook: Once-hot market is old acquaintance