Brookfield’s EY Plaza office tower in Downtown L.A. has been placed in receivership, after the firm missed a loan payment on the building.
Lenders on a CMBS package — originated by Morgan Stanley and Wells Fargo — filed a lawsuit last week, directing the court to place the 938,000-square-foot, 41-story tower into the hands of a third-party receiver, according to a complaint filed with L.A. County Superior Court.
The move comes after Brookfield fell behind on payments connected to the $275 million CMBS package on the tower — made up of a $220 million senior loan and a $55 million more subordinated loan.
The receivership is the latest mark of distress for Brookfield, which has now defaulted on about $1.1 billion in loans connected to office towers in the central business district. It’s also the second Brookfield tower that has been sent to receivership this year — the first was Brookfield’s 52-story Gas Company Tower, on which Brookfield defaulted on $350 million in CMBS loans.
At EY Plaza, Brookfield has “defaulted under the terms of the loan documents,” the CMBS lenders wrote in their complaint, for a few reasons. It failed to pay a monthly payment for April, about $4.4 million in property insurance fees and “allowing multiple mechanic’s liens” to be filed against the building.
Receivership, as an alternative to bankruptcy, is a court avenue to make creditors whole and can also help restructure and refinance debt to resolve delinquent loans.
The court has already appointed Gregg Williams at Trident Real Estate as receiver, who will have the power to market the building, located at 725 South Figueroa Street, for sale.
A Colliers team, led by Sean Fulp and Ian Gilbert, has also been hired to help market the building for lease, the firm said in a release on Thursday.
“We will not sit back and wait for the market to determine its fate,” Fulp said in a statement.
Brookfield also faces allegations from tenants at EY Plaza that it has failed to pay certain improvement and construction allowances at the building.
One tenant, law firm Jackson Lewis, alleged Brookfield failed “to honor certain construction allowance obligations owed to the tenant under the Lease for purposes of paying for tenant improvements,” according to a legal letter sent to Brookfield filed with the court.
“We have always focused on quality so 95 percent of what we own are trophy and Class-A buildings that continue to see strong demand globally and benefit from the flight to quality,” a Brookfield spokesperson said in an emailed statement when asked about EY Plaza earlier this month. “This represents a very small percentage of our portfolio.”