Last month, Columbia Property Trust defaulted on about $1.7 billion worth of mortgages on seven of its trophy buildings, including a San Francisco tower leased to Elon Musk’s Twitter and the former New York Times headquarters, now home to Snap. The finance behemoth wasn’t alone: Brookfield Corp., one of the biggest property owners in the world, also defaulted on two downtown Los Angeles skyscrapers, one of them crowned with the name of accounting firm Deloitte.
For institutional investors, defaults can be a strategy to open the door for debt restructuring. Debtors with commercial-mortgage-backed securities must at least technically default on their loans before they can renegotiate terms. CMBS is nonrecourse debt, which means borrowers can walk away and creditors can’t go after other assets they own.