Brookfield Corp., parent of the largest office landlord in downtown Los Angeles, is defaulting on loans tied to two buildings rather than refinancing the debt as demand for space weakens in the center of the second-largest US city.
“We believe DTLA’s decision to default on these two assets increases the risk for the remaining loans in their portfolio,”
Barclays
Plc research analysts Lea Overby and Anuj Jain wrote in a note Tuesday.Brookfield declined to comment.
The values of comparable office buildings have broadly dropped, according to the Barclays analysts. Office vacancies have increased across the country since the pandemic made working remotely more routine. The vacancy rate in the Los Angeles central business district vacancy rate was 22.7% in the fourth quarter of 2022, according to a
Jones Lang LaSalle
Inc.
report
.The Brookfield DTLA portfolio has a total of $2.28 billion in secured debt, according to a November filing. Other buildings with maturing debt include the
Wells Fargo
Centers North Tower with $500 million in debt due in October and the Wells Fargo Centers South Tower with $263 million maturing in November. The buildings have about $1.8 billion of floating-rate obligations, generally hedged with interest-rate derivatives, which can translate to increased payments as the Federal Reserve raises interest rates.The lenders have not foreclosed on the two properties or exercised other remedies available to them, according to Brookfield’s filing. In January, Oaktree Capital Management wrested control of the building known for providing the exterior shots for the main office in the television series “L.A. Law” after the owner, Coretrust Capital Partners, went into default on a loan tied to the property.