Brookfield Properties has defaulted on loans at two of its Los Angeles office towers. The major development firm said in an SEC filing last week that the default occurred on a $465 million loan package that is connected to 555 West 5th Street in downtown Los Angeles, also known as the Gas Company Tower. The firm also reported a default on $319 million in loans at the office tower 777 South Figueroa Street, also in the city’s downtown area. In its filing, a subsidiary of the firm implied foreclosure is on the table, writing that “lenders may exercise their remedies.” Lenders on the loans are Citi Real Estate Funding and Morgan Stanley, as well as an entity linked to Principal Financial Group, which provided the mezzanine loans.
The development is more bad news for Los Angeles’ downtown office market, which has been experiencing persistently high vacancy rates. It’s also not the first default. Earlier this month, Oaktree Capital Management foreclosed on 444 South Flower Street, a 48-story office building owned by Coretrust Capital Partners. Brookfield became one of the largest owners of office space in downtown Los Angeles after it purchased Trize Properties and MPG Office Trust in 2006 and 2013, respectively. The company is now looking to sell off another one of its office towers in the neighborhood at 601 South Figueroa Street. As office markets around the country continue to struggle, other major industry players like Hines and Blackstone have been forced to hand the keys back to lenders.