Toronto-based multinational investment firm Brookfield, which already defaulted on $1.1 billion in debt tied to three office buildings in Downtown Los Angeles, now faces the potential risk of defaulting on an additional $400 million in loans linked to a separate office tower in the city’s central business district.
According to a report from Fitch Ratings, Brookfield is now confronted with a “heightened maturity default risk” concerning the commercial mortgage-backed securities debt associated with its 1.4 million-square-foot Bank of America tower located at 333 South Hope Street.
Fitch Ratings stated that the originators of the loans for Bank of America Plaza—Wells Fargo, Goldman Sachs, Morgan Stanley, and Citigroup—are already reporting a loss on the debt, according to a report in The Real Deal.
As interest rates rise and remote work impacts office occupancy, Brookfield’s owned office buildings have encountered difficulties. Since February, Brookfield has lost two Los Angeles towers—the Gas Company Tower and EY Plaza—to a court-appointed receiver. Additionally, Brookfield has been in technical default on 777 Tower, although it continues to make debt payments for the latter.
However, Brookfield’s challenges with Bank of America Plaza are primarily due to vacating tenants and declining income rather than rising interest rates. The CMBS debt on the building carries a fixed interest rate of 4.05 percent, shielding it from the current impact of increasing interest rates.
SEC filings reveal that the maturity date for the CMBS debt on the building is set for September 2024, giving Brookfield over a year to address any financial issues that may arise.
When asked for comment, Brookfield did not respond, but the company has previously stated that the defaults on 777 Tower and the Gas Company Tower represent only a small portion of its overall portfolio.
In addition to its troubles in Los Angeles, Brookfield is also grappling with distress on approximately $1 billion worth of shopping malls situated across a stretch of land from New Jersey to Virginia.