New Filing Details Challenging Year Ahead For Brookfield DTLA

The Brookfield fund that has already defaulted on $754M in loans secured by two Downtown LA towers is facing — like so many other office owners — a 2023 full of more loan maturities, a new filing with the Securities and Exchange Commission shows.

The filing, published last week and showing data current through the end of 2022, shows that $1.1B worth of the Brookfield DTLA Fund Office Trust Investor’s debt is scheduled to mature by the end of 2023. That amount is for loans spread across four of the seven properties the vehicle owns. 

A report filed with the SEC in November showed the entity had about $822M in debt maturing before the end of this year. Representatives for Brookfield declined to answer questions from Bisnow including those about the updated, larger figure.

On the soon-to-mature debt in its portfolio, the filing noted that Brookfield would attempt to negotiate with lenders so it could retain its properties but also noted that without that help, it would not succeed. 

Brookfield DTLA has a total of $765.4M in loans on the Wells Fargo Center North and South towers coming due this fall. On the north tower, which has a $265.4M mortgage coming due in November, Brookfield DTLA says it plans to pay the debt service through the maturity date but is not clear on what comes next: It has no assurance from its lender that it can extend the maturity date and is uncertain it could afford a paydown to refinance.

The Wells Fargo Center South tower has $500M in mortgage, mezzanine and junior mezzanine loans. Brookfield DTLA has come to an agreement with its junior mezzanine lender for conditional forbearance for the month of March, but it also knows that the property is not generating enough cash to pay for debt service plus the maintenance expenses, such as leasing costs. It acknowledged it will not be able to afford its payments on this property without help from its lenders. 

At EY Plaza, Brookfield DTLA Fund Office Trust Investor has $305M in loans set to expire in early October — a $275M mortgage and a $30M mezzanine loan. Here, too, the building isn’t generating enough cash to pay for its operations and debt, but there are also other problems: Some tenants at the property have notified Brookfield DTLA that it isn’t in compliance with some of the terms of their lease agreements. There are also mechanics liens at the property for an undisclosed amount. 

Brookfield noted "it is unlikely that they will be able to obtain additional sources of liquidity or negotiate favorable amendments to the EY Plaza Loans or interest payment forbearances from the lenders in time." Without these interventions, it won’t have the cash flow to fix its compliance issues with tenants, pay its mechanics liens or make April loan payments, the entity said as it acknowledged that each of those issues, if not addressed properly, could lead it down the path to foreclosure. 

The FIGat7th retail center, which sits next to a Brookfield-built apartment tower, has a $58.5M loan that was slated to mature on March 1; the entity got an extension to April 3. Brookfield DTLA is in ongoing talks with its lender for a three-year extension but hasn’t yet gotten a commitment. Here, too, Brookfield DTLA noted that without an extension, there is ultimately the potential for foreclosure.

On both the 777 Tower and the Gas Company Tower, which secure debt that is already in default, Brookfield DTLA said it has not made March interest payments and does not intend to pay future interest expenses. The 777 Tower property also has existing mechanics liens on the property for an undisclosed amount. 

Lenders have not foreclosed on either property yet; the Gas Company Tower has been placed in special servicing, the filing said.

Brookfield DTLA said it has limited unrestricted cash available and is therefore “limited” in its ability to make any loan paydowns without selling one of its assets, which it’s not under contract to do with any of its properties, the filing said. The entity seemed optimistic about the effects that a foreclosure on some or any of its properties might have on the rest of the portfolio.

“Nevertheless, if one or more of the properties securing our Maturing Loans were to be foreclosed upon by the lenders, as these secured debt obligations are not cross-collateralized with other properties in the portfolio, we believe we will have sufficient cash from our remaining properties and our Series B financings to meet our obligations to continue our operations within one year after the date of the issuance of the Annual Report,” the filing said.

Trepp has reported that a record $270B in commercial real estate debt is scheduled to mature in 2023, with office buildings making up about 30%, or $80B, of that maturing debt.

Office owners “have been trying to work out something with their lenders, but if the debt is coming due and they don’t have the liquidity themselves, the attitude becomes, ‘Fine, then take it,’” Seyfarth partner Christine Kim told Bisnow last week.