Brookfield walks away from a 95%-full $600 million LA tower

Brookfield built a $600 million apartment tower in downtown Los Angeles. Now it is handing it back to the lender.

The tower is the Beaudry: 785 apartments, 695 feet tall, opened in April 2023, less than four years ago. It has a golf simulator, a saltwater pool and a spa for pets. What it doesn't have is a loan Brookfield wants to pay for.

According to The Wall Street Journal, as reported by CRE Daily and citybiz, Brookfield has decided not to refinance the roughly $360 million loan on the building. Refinancing would have meant putting in tens of millions of dollars more. It chose to walk away instead.

A full building that still doesn't work

This is not a ghost tower. The Beaudry is about 95% occupied, according to CoStar data cited in the reports. Asking rents average about $4,200 a month, which is above the downtown market.

The problem is that $4,200 is still below what Brookfield was aiming for. And to fill the building, it has been offering weeks of free rent.

A rough sum shows the scale. 785 apartments, 95% full, at $4,200 a month comes to about $38 million a year in rent before a single bill is paid, and that is at asking rents, before the free weeks. That gross figure is our back-of-the-envelope sum, not Brookfield's. The point is that the building earns real money, and it still was not worth refinancing.

Brokers told the Journal that debt costs have erased Brookfield's equity in the tower. So the problem is not empty apartments. It's the cost of the debt.

The debt market "got away"

The tower was meant to be a hit, Dean Zander, a vice chairman at the brokerage Newmark, told the Journal. Then the debt market "got away."

The lender is Bridge Investment Group, which is owned by Apollo. Bridge is now selling the loan. Whoever buys it at a discount could end up owning one of the newest towers in downtown LA for a lot less than it cost to build.

Brookfield knows that game well, from the other side. In 2024 it bought a discounted portfolio of loans backed by 2,149 apartments in San Francisco.

Downtown LA's slow recovery

The neighbourhood has not helped. A Brookfield spokeswoman told the Journal the move reflects entrenched challenges downtown. Office vacancy there is still about double its 2019 level, and apartment rents have only just climbed back to pre-pandemic levels.

Brookfield has already defaulted on loans tied to nearby commercial buildings held in the same fund as the Beaudry. That fund is close to the end of its planned holding period, which makes putting in fresh equity even less appealing. Investors in a fund that is winding down do not usually want to write new cheques.

Why this isn't just one tower

The Beaudry is a big name on a much larger problem. Landlords across the US face about $1.8 trillion of debt maturities over the next decade, and nearly half of it comes due between 2026 and 2028, the reports say. Many owners are refinancing at more than double their original borrowing costs, according to CRE Daily.

The stress is showing in apartments, which were supposed to be the safe part of commercial real estate. Morgan Stanley puts the delinquency rate on multifamily loans in commercial mortgage-backed securities at 7.1%. In October 2023, it was 1%.

That is the uncomfortable lesson of the Beaudry. A building can be new, nearly full and charging above-market rents, and still be worth less than its debt.

When the owner of a $600 million tower decides the cheapest option is to give it away, the issue isn't the building. It's the maths.

What happens next

The next number to watch is what the loan sells for. Whoever buys it will have a view on what a new, nearly full downtown tower is really worth.

Brookfield, for its part, told the Journal it is still hunting for high-quality properties at attractive valuations, as higher rates force other owners to sell. It is walking away from one tower and shopping for others in the same breath.

That is not a contradiction. It is the market in 2026: the same firm can be the one walking away in one fund and a bargain hunter in another.

The Beaudry has a pet spa. It has a golf simulator. It just doesn't have an owner who wants it.

_Image: the Beaudry (centre) under construction in July 2022. Photo by Benoît Prieur, Wikimedia Commons_aka_Beaudry,_in_construction_in_July_2022.JPG), CC0._