Finance  ·  CMBS

Brookfield Defaults on Class B Office Portfolio Debt

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A $161.4 million commercial mortgage-backed securities (CMBS) loan backing nine Brookfield (BN)-owned Class B office buildings has defaulted, according to CRED iQ data.

The debt package was transferred to its special servicer, Keybank (KEY), on March 14 due to “monetary default.” KeyBank is now “working with the borrower to execute a pre-negotiation agreement and to determine the path forward,” loan documents show. The default was first reported by Bloomberg.

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The CMBS loan, which Morgan Stanley (MS) originated in 2018 in a MSC 2018-BOP deal, initially included 12 properties largely in the Washington, D.C., region with three since released, according to CRED iQ data. The senior mortgage balance was paid down from $223.4 million to $161.4 million as of April 2023.

“We have always focused on quality, so 95 percent of what we own are trophy and Class A buildings that continue to see strong demand globally and benefit from the flight to quality,” a Brookfield spokesperson said in a statement in response to the default. “While the pandemic has posed challenges to traditional office in some parts of the U.S. market, this represents a very small percentage of our portfolio.”

Five of the impacted properties are in Rockville, Md.: One Central Plaza at 11300 Rockville Pike, One Metro Square at 51 Monroe Street; Montrose Metro I at 11921 Rockville Pike; Jefferson Plaza at 600 Jefferson Plaza, and an unnamed office building at 6110 Executive Boulevard. Other properties include Wayne Plaza at 962 Wayne Avenue in Silver Spring, Md; Arlington Square at 4401 North Fairfax Drive in Arlington, Va.; University Corporate Center III at 11474 Corporate Boulevard in Orlando, Fla., and Windward Concourse at 1355 Windward Concourse in Alpharetta, Ga.

Brookfield also defaulted on loans tied to two Los Angeles office skyscrapers in February, the Gas Company Tower and the 777 Tower, encumbered by loans totaling $784 million.

Andrew Coen can be reached at acoen@commercialobserver.com