Market history · Real estate ·
Brookfield defaults on two Los Angeles office towers
In February 2023 reports emerged that Brookfield had defaulted on about $784 million of loans secured on two office towers in downtown Los Angeles. Trade press described it among the largest loan defaults in Southern California that year, and Commercial Observer noted a wider flood of defaults on major office properties that spring.
Offices faced a combination of pressures: higher interest rates that made refinancing costly, falling demand as remote and hybrid working persisted, and cautious lenders. Owners sometimes chose to hand properties back to lenders rather than put in more money.
The episode was a reminder that commercial property values depend on borrowing costs and tenant demand together.
The takeaway
Leverage works both ways. A building can stay full and still fail its lenders if debt costs more than the rent covers.
Sources
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.