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Brookfield Sells L.A. Office for Half Its Debt

Brookfield Asset Management is selling one of its distressed trophy office towers in Downtown Los Angeles at a steep discount.

Consus Asset Management, an investment firm based in South Korea, has agreed to buy 777 South Figueroa Street—a 1M SF asset also known as the 777 Tower—for about $145M, which is close to half the value of a loan backed by the building.

In an SEC filing in February 2023, Brookfield notified investors that it defaulted on $289M in debt tied to the 777 Tower. Eastdil Secured brokered the deal to sell the building to Consus, at a price that equates to about $145 per SF, according to a report in Bloomberg.

Early last year, Toronto-based Brookfield defaulted on $784M in loans backed by two of its high-profile DTLA trophy office buildings, the 52-story Gas Company Tower and 777 South Figueroa, which also is 52 stories. Brookfield said in its SEC filing it had not exercised any options to extend the maturity date on the loans, which came due on Feb. 9, 2023.

The financial package in default on the 52-story Gas Company Tower, located at 555 West 5th Street, included a two-year, floating rate $350M mortgage provided by Citi Real Estate Funding and Morgan Stanley, a $65M mezzanine loan and a $50M junior mezzanine loan. The mezzanine loans were provided by Principal Financial Group.

The financing that came due on 777 South Figueroa included a $269M mortgage provided by Wells Fargo and a $50M mezzanine loan.

In April, the Gas Company Tower was placed in receivership by the Los Angeles Superior Court after lenders Citi and Morgan Stanley filed a lawsuit asking the court to appoint a receiver to pave the way for the sale of the property, in lieu of a bankruptcy proceeding.

At the beginning of May, Trepp reported that Brookfield defaulted on a $275M loan backed by EY Plaza, a 41-story tower at 725 South Figueroa. The loan was originated in 2020 by Morgan Stanley and Wells Fargo and then sold to CMBS investors.

At the end of May, the same receiver that was appointed by the Superior Court to oversee the receivership on the Gas Company Tower—Gregg Williams of Trident Real Estate—was again tapped by the court to handle the receivership for EY Plaza.

In a November 2022 filing with the SEC, Brookfield's DTLA fund warned that declining cash flows and the declining value of its L.A. office towers were putting the properties on the brink of foreclosure.

At its peak, Brookfield's DTLA fund owned a portfolio of offices in Los Angeles totaling nearly 8M SF.
Reprinted with permission from the Thu, 28 Mar 2024 06:16:12 EDT online edition of GlobeSt © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.