These Investors Lost Big on Brookfield’s DTLA Portfolio

UPDATED, February 17, 2023, 12:45 p.m.

When a Brookfield entity declared it had defaulted on $784 million worth of loans connected to two office towers in Downtown L.A., the entity’s stock was already sinking.

The share price of Brookfield DTLA Fund Office Trust Investor — which owns 7.6 million square feet of office space across six towers in Downtown L.A. — has steadily declined over the last five years, as the entity has continued to rack up debt and struggle with high vacancy rates amid remote work.

The fund dipped to a new low of $2.20 a share on Feb. 16 — a 93 percent decrease from its high of $30 a share in November 2017. The stock debuted at $26.40 in October 2013.

The fund’s market cap is now about $23 million, though it held about $2.3 billion in debt at the end of September.

Even before the defaults occurred, investors in the fund had lost big.

The two largest shareholders in the fund are Kawa Capital Management, an alternative asset manager based in Miami, and Angelo Gordon, the L.A.-based real estate investment firm, according to filings with the Securities & Exchange Commission.

Kawa Capital, which is run by Daniel Ades, owned about 9.53 percent of the fund’s stock, totaling about 927,000 shares, as of Dec. 31. The firm first reported a significant ownership stake in the fund in 2019, when it owned 5.05 percent, or 492,000 shares.

At the end of 2019, Kawa’s shares in the Brookfield entity would have been worth about $9.8 million, based on a share price of about $20.

Now, even with double the number of shares, Kawa’s stake is worth $2 million.

Angelo Gordon is the Brookfield fund’s second-largest shareholder, records show. The firm reported a 8.98 percent ownership stake in 2019 — or 874,000 shares.

Back then, Angelo Gordon’s share would have been worth $17.5 million. But since 2019, the firm has whittled its stake to about 6.7 percent, or about 652,000 shares, making it the biggest loser on the stock.

Shares in the Brookfield entity are traded through a few exchange-traded funds, including one of BlackRock’s iShares ETFs, which has owned a stake in the entity since October 2013.

At the end of September, Brookfield’s DTLA holdings made up less than 1 percent of the iShares fund, which held about 765,000 shares, according to the fund’s website and SEC filings. On Sept. 30, the entity’s stock price was $9.42 a share, making BlackRock’s holdings worth about $7.2 million.

iShares has sold off some of its shares since then — buying and selling, depending on the fluctuations of an index, is a normal course of action for an ETF. It held about 713,000 shares as of this month, worth about $1.7 million.

Brookfield’s troubles may not be over yet.

“We believe DTLA’s decision to default on these two assets increases the risk for the remaining loans in their portfolio,” Barclays research analysts Lea Overby and Anuj Jain said in a note cited by Bloomberg.

Brookfield’s DTLA unit has a further $763 million in loans coming due before the end of the year, according to an SEC filing. Those loans are all connected to two towers in the Wells Fargo Center at 333 S Grand Avenue.

Correction: A previous version misstated the Wells Fargo Center address. It is located at 333 S Grand Avenue.