Brookfield defaults on more office buildings

Default on $161M mortgage follows loan trouble in Los Angeles

A photo illustration of Brookfield CEO Brian Kingston (Getty, Brookfield)
A photo illustration of Brookfield CEO Brian Kingston (Getty, Brookfield)

Brookfield has defaulted on a loan tied to its office property, this time largely around the Washington, D.C. area.

The firm defaulted on a $161.4 million mortgage tied to a dozen office buildings, Bloomberg reported. The CMBS loan for the properties was transferred to a special servicer working with Brookfield to execute a pre-negotiation agreement and figure out the way forward.

The debt was underwritten in 2018. Brookfield faced a sharp uptick in monthly payments on the debt amid rising interest rates — where monthly payments were around $300,000 a year ago, the monthly payment on the floating-rate mortgage was $880,000 for this month.

In an emailed statement, a Brookfield spokesperson said, “While the pandemic has posed challenges to traditional office in some parts of the U.S. market, this represents a very small percentage of our portfolio.”

The loan transfer comes after Brookfield defaulted in February on $784 million in loans connected to two trophy office towers in Downtown Los Angeles. The defaults were a big hit to the local office market, where Brookfield is one of the largest owners.

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Like many of its peers, Brookfield is struggling to refinance properties in the rising rate environment, as well as the devaluation of office properties after the pandemic sent tenants scurrying back home. For the dozen of buildings attached to the default, average occupancy fell from 79 percent in 2018 to only 52 percent last year.

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Brookfield's Brian Kingston and 777 South Figueroa Street (left) and 555 West 5th Street (right) and in Downtown Los Angeles (Getty, Brookfield, LoopNet, Carol M. Highsmith, Public domain - via Wikimedia Commons)
Los Angeles
Brookfield defaults on $784M on loans connected to DTLA office towers
601W Companies' David Blumberg and the Aon Center at 200 East Randolph Street (Getty, 601W Companies, Google Maps)
These $100M+ CMBS loans went to special servicing in March
PIMCO 's Emmanuel Roman with 650 California Street
PIMCO’s Columbia Property Trust defaults on $1.7B of office loans

There were nine CMBS loans with a nine-figure balance sent to special servicing last month. Most of those loans were tied to office and retail properties.

Other significant commercial distress this year includes Columbia Property Trust — controlled by PIMCO — defaulting on $1.7 billion in loans tied to office buildings across the country, representing one of the most significant defaults since the start of the pandemic. 

Holden Walter-Warner

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