Office REIT Columbia Property Trust is said to have defaulted on over $1.7B of debt backed by seven of its buildings, at a time when the office market is seeing increasing cases of defaults or debt restructuring.
Columbia - which was acquired by funds managed by Allianz SE's ( OTCPK:ALIZF ) Pimco for $3.9B - defaulted on a floating-rate mortgage taken in December 2021 on seven buildings, owing to elevated interest rates that pushed monthly payments higher. This marks one of the biggest defaults in the office space during the pandemic period.
The REIT also put a $125M mezzanine loan on the seven buildings, Wall Street Journal reported citing bond documents . The total $1.84B of debt was equal to ~81% of the buildings' appraised value.
The floating interest rate on the debt, which was ~3% at the time of the deal, has now risen to ~6%.
"We, like most office owners, are addressing the unprecedented challenges currently facing our asset class and customer base," a Columbia spokesperson said in an emailed response to Seeking Alpha. "We have engaged with our lenders on restructuring our loan on seven properties within our larger national portfolio."
Compounding its woes is the drop in occupancy at the seven buildings, at 84% as of December 31, 2022. Demand for office space has weakened since the pandemic started, owing to hybrid and remote workplace setups.
Brookfield Asset Management ( BAM ) also reportedly defaulted on over $750M in debt for two buildings in Los Angeles, while real estate developer RXR is in talks with lenders to restructure debt on a building.
Earlier, REITs ended lower for the third straight week, weighed by infrastructure and office REITs .
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Pimco's Columbia Property Trust defaults on $1.7B mortgage - report