No. of Recommendations: 4
As never having participated directly in CRE, this seems underappreciated as now a normal part of multiple cycles :
"In February Brookfield elected not to extend the maturity of its loans against two office towers it owns in
L.A. (the Gas Company Tower and 777 Tower). Brookfield also declined to purchase interest rate
hedges against its floating-rate debt. These actions put the mortgages into default and the towers could
face foreclosure. So far the lenders have not taken action. As they say, if you owe the bank $1 million,
you have a problem. If you owe the bank $784 million, the bank has a problem
While a default isn't good news, it's not catastrophic either. Brookfield finances its properties with non-
recourse debt to prevent problems at an individual property from affecting Brookfield as a whole.
According to Brookfield, a flight to quality has been a net benefit to the company's portfolio. The default
is likely a calculated bet to gain negotiating leverage with lenders who'd prefer not to take possession
of the towers."
ref : eagle point capital 2023 april substack
No. of Recommendations: 5
That's the art of the deal, go to the banks and borrow...never make a payment. Then go back and tell them to negotiate the deal, informing them you simply ain't payin' the original contract.
Now, on the other side of this endeavor, what are you tenants doing? According to Brookfied they are paying more, not less. It is always this way for Brookfield, all things are good, better, or simply great!
So it should be just fantastic for Bruce and Co. We will see, won't we? LOL, time will tell.
Owner since way back in the Brascan days. Always fascinated by the Brookfield game...always!
