Oaktree Secures Extension of $259M Loan for DTLA Tower

Oaktree Capital Management has secured a three-year extension of a loan on a 48-story Downtown Los Angeles office tower that was featured in the 1990s hit TV show LA Law.

AIG Insurance Co. has extended until 2026 a $259M loan backed by the 914,000-square-foot office tower at 444 South Flower, which Oaktree acquired in a foreclosure sale in January.

Oaktree said in a statement that the extended financing for the DTLA tower will enable it to invest in enhancing sustainability features, creating spec suites and adding amenities in building. JLL is handling the leasing for the building, while CBRE was retained by the company to oversee property management.

Los Angeles-based Oaktree took control of the building from Coretrust Capital Partners in a foreclosure auction on Jan. 30. Coretrust bought the building for $336 million in 2016, then refinanced it in 2018 with a $210-million senior loan from AIG and a $65-million mezzanine loan from Oaktree.

Coretrust’s $65-million mezzanine loan from Oaktree—with an interest rate of nearly 9%—initially came due in December 2021, but Oaktree and Coretrust reached a forbearance agreement that extended the loan until the middle of last year.

Earlier this year, Canadian real estate giant Brookfield defaulted on two other DTLA trophy towers, one of which has gone into receivership.

Last month, the 52-story Gas Company Tower was placed in receivership by the Los Angeles Superior Court after CMBS lenders Citi Real Estate Funding an Morgan Stanley filed a lawsuit asking the court to appoint a receiver to pave the way for the sale of the property, in lieu of a bankruptcy proceeding.

In February, Brookfield defaulted on two senior loans backed by the tower at 555 West 5^th Street, totaling $350M in debt. According to court filings, the REIT failed to pay off the loan by the maturity date of Feb. 9 and it failed to pay an advance of $3.6M in property taxes by April 10.

Brookfield also defaulted in February on $319M in loans for 777 South Figueroa St., also known as the 777 Tower.

The company’s DTLA REIT, formed in 2013 after Brookfield’s $2B acquisition of office tower owner MPG Office Trust, has been considered a bellwether for the DTLA office market in the past 10 years. The fund owns nearly 8M SF of DTLA office space.

Brookfield’s DTLA office fund warned in a November SEC filing that it was running out of cash and might start missing loan payments. In a Nov. 10 filing, Brookfield’s fund said declining cash flows, net operating income—and the declining value of the office towers—were putting it on the precipice of foreclosures.

Greg Williams of Trident Real Estate Group was appointed receiver of the Gas Company Tower and given the authority by the court to “market, advertise, promote and negotiate the sale of the property,” with proceeds from any sale used to pay creditors. Williams has awarded the exclusive leasing and property management assignment to a Colliers team for the Gas Company Tower, which is the headquarters of Southern California Gas Co.