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Brookfield pools 12 office properties in $223M CMBS

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Brookfield Property Partners (Nasdaq: BPY) is pursuing a securitization of a $223.4 million commercial mortgage loan secured by lien and fee interest in an Eastern U.S. concentration of mostly suburban office properties.

The deal is through Morgan Stanley (the loan originator and seller) and includes six classes of term notes and two interest-only tranches backed by the two-year loan, which has three optional one-year extensions. The transaction is sponsored by the global alternative asset manager's Brookfield Strategic Real Estate Partners II, a closed-end fund launched in 2016 with $9 billion of committed capital.

The 12 properties that are included in the Morgan Stanley Capital I Trust 2018-BOP trust pool have an appraised value of $361.6 million as well as a diverse lease base covering 240 tenants.

S&P’s report stated the "property and tenant diversity is offset, in our view, by the portfolio’s geographic concentration primarily in three suburban markets” including 81% – or nine properties – in the Washington, D.C., area. The three other properties are located in Florida and Georgia.

The largest tenant accounts for just 3% of the net rentable area of the pool and 3.9% of the in-place base rent: the Henry M. Jackson Foundation for the Advancement of Military Medicine, which leases space in the 271,394-square-foot One Central Plaza in Bethesda, Md.

Other major properties include a 51 Monroe St., a 21-story office building in Rockville, Md., that houses government tenants (and one of the few non-suburban properties in the portfolio), and a 206,323-square-foot office building at 6110 Executive Blvd. in North Bethesda, Md.

During a site visit, S&P noted that management at the building have plans for upgrades such as small executive suites for tenants and a bike-sharing station to take advantage of the nearby "eat-live-play" mixed-use development of apartments, retail shops and restaurants.

With a mortgage loan-to-value ratio of 89.3%, Brookfield has $77 million in equity remaining in the properties after closing. But there is additional mezzanine debt with two loans tied to the properties outside the trust totaling $55 million.

Brookfield Property has $69 billion in assets.

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CMBS Morgan Stanley Brookfield Property Partners