The Distress Record: Charles Cohen, Brookfield close out year on low notes
Tower 57 returned to lender, Brookfield downgraded to junk
The year is ending much of the way it began, with office and multifamily players facing distress.
This week’s distress record:
Trouble at Tower 57
Billionaire Charles Cohen is looking to give Tower 57 back to a lender after falling behind on rent at the office building.
It’s far from Cohen’s first distressed property, with his total delinquencies on New York office properties amounting to over $600 million. But this one is different.
After Cohen found himself in trouble at his Midtown Manhattan office building thanks to high vacancy, he asked his landlord William Wallace for permission to convert it to residential. But Wallace refused.
So Cohen stopped paying rent to the owner of the land beneath the building. Cohen now owes $9 million to Wallace, and is looking to unload the tower.
Signature Saga
Meanwhile, the year’s close also coincides with the end of a chapter of one of 2023’s biggest stories: the collapse of Signature Bank.
New York City-based nonprofit Community Preservation Corporation announced it will partner with the FDIC to capitalize a $550 million fund to pay for repairs and loan workouts in rent-regulated buildings tied to the bank. Landlords of about 35,000 apartments could benefit from the strategy.
“[It] will give them additional resources to do capital improvements that are necessary to clear violations,” said Rafael Cestero, CEO of the nonprofit, which was created to deal with the city’s real estate crisis of the 1970s.
Pain in Pasadena
In Pasadena, California, Pasarroyo, a four-building office complex, found no bidders beyond an opening offer at a public auction Dec. 20, so it went back to the control of its lender Heitman, based in Chicago.
The opening bid for Pasarroyo, previously owned by Coretrust Capital Partners, was set at $114 million, just 42 percent of the $271 million owed to Heitman for the building.
Brookfield Brewing
S&P Global Ratings followed through on its consideration, downgrading Brookfield Property
Partners’ credit rating to junk status.
S&P took the Brookfield entity’s credit score down by two steps, from BBB- to BB. The cut to the lowest investment grade suggests Brookfield Property “faces major ongoing uncertainties to adverse business, financial and economic conditions,” according to a statement.
In the last year, Brookfield defaulted on more than $1 billion borrowed against Downtown Los Angeles office buildings, saddled with higher interest rates and a changing office landscape. Brookfield also stopped making payments on $886 million in loans tied to 10 retail properties.