Brookfield Unloads NoVA, Maryland Office Properties After Separate Defaults

The hits just keep on coming for Brookfield’s office real estate business. 

Due to the high visibility of the assets, the firm’s 2023 Los Angeles office tower defaults caught wide attention as the first big signs of the pandemic-driven unravelling of property values. Yet, Brookfield assets on the other side of the country have also faced distress, particularly in the DMV. 

A Brookfield investment fund, Brookfield Strategic Real Estate Partners II, has recently unloaded two office properties on the East Coast — one in Arlington, Va., and the other in Alpharetta, Ga. — to Wells Fargo, the trustee of a commercial mortgage-backed securities loan tied to the properties. The Brookfield fund in 2018 had secured a $223.4 million refinancing package for a 12-property office portfolio, which included the two aforementioned assets, via a senior loan originated by Morgan Stanley. Yet, Brookfield had defaulted on the CMBS debt by early 2023, with an outstanding balance of about $161 million. 

Wells Fargo acquired the Arlington property, a 140,000-square-foot office dubbed Arlington Square, earlier this summer for $14.9 million, according to property records. The sales code attached to the deal is marked as “1,” meaning foreclosure, auction or bankruptcy. Brookfield had acquired the office in 2017 for $35.5 million, records show. Wells Fargo took over the 103,000-square-foot Georgia property the previous month. 

“[Arlington Square] was written off in 2023, placed with a receiver, and is immaterial to our global real estate business, which remains strong — delivering nearly $15 billion of realizations this year alone,” a Brookfield spokeswoman told Commercial Observer.

The current status of the portfolio’s remaining 10 properties, most of which are in Maryland, is unclear. Receivership for those properties was pending as of February, according to a Morningstar Credit report at the time, with the ultimate preferred outcome listed as “receivership sale.” The portfolio’s occupancy at the time was about 54 percent. 

A representative for Wells Fargo did not immediately respond to requests for comment. 

Additionally, and also in Maryland, a joint venture between MRP Realty and Prime Finance has taken control of Brookfield’s former four-building office campus in Bethesda, after Brookfield defaulted on a $76 million loan tied to the assets, according to the Business Journals. The properties are unrelated to the Brookfield fund portfolio. 

Prime had purchased the loan note tied to the Bethesda properties, dubbed Bethesda Crescent, from MetLife in 2024, per the Business Journals. Prime then ultimately cast the $28 million winning bid for the properties at foreclosure auction earlier this year, and was later joined by MRP after judicial review in August.

Brookfield, which acquired Bethesda Crescent in 2006 after subsuming Trizec Properties with Blackstone in a deal valued at $7.2 billion, managed the properties until the August deal closure. 

“Divesting this asset aligns with Brookfield’s disciplined capital management strategy,” a Brookfield spokeswoman told CO. “We previously recapitalized to extract all our equity, distributed sizable proceeds over the course of the hold and have already earned strong returns from the broader portfolio acquisition.” 

MRP also did not immediately respond to a request for more information about Bethesda Crescent. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.