A court-appointed receiver for an investor group stuck with Brookfield’s former Gas Company Tower in Downtown Los Angeles is negotiating a 300,000-square-foot lease.
Receiver Gregg Williams, representing the commercial mortgage-backed securities investors, is in talks with the Los Angeles County Housing Department for 13 floors at 555 West 5th Street, according to unidentified sources cited by the Commercial Observer and The Real Deal.
Williams has hired Colliers to market the building for lease. Terms of the potential deal were not disclosed.
In February, Brookfield defaulted on $784 million in loans tied to the 52-story Gas Company Tower and another 52-story skyscraper at 777 South Figueroa Street.
The Toronto-based alternative real estate asset management firm then defaulted on a $275 million loan connected to EY Plaza, a 41-story tower at 725 South Figueroa Street.
Both EY Plaza and the Gas Company Tower have been placed into separate receiverships, where the court-appointed third parties are trying to restore maximum value for debt holders.
Brookfield defaulted on $465 million worth of loans from Citi Real Estate Funding and Morgan Stanley at the Gas Company Tower at 555 West 5th Street, after declining to extend the loans.
The loans were packaged into commercial mortgage-backed securities, whose unidentified investors are now represented by Williams, of Newport Beach-based Trident Pacific Real Estate Group. The receiver was picked by a court in April.
Williams is negotiating 300,000 square feet of the 1.3-million-square-foot Gas Company Tower with the county’s Housing Department, which would add a homeless services counter on the ground floor, according to the Observer.
The agency would vacate its offices at 1200 West Seventh Street, which would be occupied by LA Care Health Plan.
Colliers, which represents the landlord, disputes aspects of the deal as recalled by sources with knowledge of the negotiations. A Colliers spokesperson called into question the homeless services counter, and said the deal is not yet final – with three to four weeks to go.
Remote work has led to office vacancies, which with rising mortgage rates have inflicted a double-whammy on Brookfield and the Downtown office market.
Office vacancies in Downtown L.A. rose to 22.6 percent in the first quarter, up from 21 percent in the previous quarter, according to the Downtown Center Business Improvement District. Overall availability, which includes space up for sublease, was 30 percent, according to Savills.
— Dana Bartholomew
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