Brookfield avoids default on London skyscraper

financialpost.com:

Brookfield Asset Management Ltd. won more time to sell or refinance a City of London office tower that has seen its valuation slump, highlighting the difficulty landlords are facing after interest rates rose.

A loan for the property, which was sold off to bondholders through a commercial mortgage backed security, was set to mature on Jan. 20,  according to a stock exchange statement on Wednesday. The Canadian firm agreed to a 12-month extension on the debt.

In return, lenders will receive a “one-off maturity fee” equal to 0.25 per cent of the outstanding loan and an increase in interest payments of 0.35 per cent.

The 36-story office building became one of the symbols of the financial crisis when a fund managed by a previous owner missed a payment on loans secured by the skyscraper. Brookfield subsequently acquired the building in 2016 and has since invested in adding additional space, but the value has been dented by a combination of hikes in borrowing costs and the impact of work from home since the pandemic.

The restructuring of the loan highlights the pressure facing many landlords as they look to refinance debt taken out in the cheap money era. In a downside scenario where the vacancy rate rises, Citypoint might fall in value to as little as £450 million, Bank of America analysts wrote earlier this year, a drop of about a third from an independent valuation at the time.

The borrower will also purchase hedging for the senior loan for the year, according to the filing.