Brookfield Properties is facing a foreclosure push at one of its Downtown Brooklyn office buildings, where Rialto Capital Management alleged a $132.7 million loan default.
Rialto, acting as special servicer, filed a pre-foreclosure complaint on Aug. 21 in New York State Supreme Court in Brooklyn, according to PincusCo. The loan, originated in 2013 at $170 million and securitized into a Morgan Stanley Bank of America Merrill Lynch CMBS trust, matured in September 2023. The borrower, Forest City Myrtle Associates — controlled by Brookfield — allegedly failed to pay off the balance at maturity.
Rialto claims at least $132.7 million remains due, a total that doesn’t include reserves but factors in principal, interest and default interest. The loan is secured by 115 Myrtle Avenue, a 692,000-square-foot office building formerly known as 15 MetroTech Center. The property is part of the Brooklyn Commons campus, which Brookfield rebranded in 2022 after acquiring Forest City Realty Trust in 2018.
Brookfield invested in upgrades to the property after its acquisition, with reports of renovations underway in 2021. Records show the building generated $25.9 million in revenue in the most recent year, about $37 per square foot, roughly in line with its assessed market value of $132.7 million.
For Brookfield, the foreclosure threat comes as its New York portfolio remains heavily weighted toward office — 58 percent of its holdings — with $13.8 billion in debt across city properties.
The firm isn’t alone in facing maturing CMBS debt with limited refinancing options, but a foreclosure fight in Brooklyn highlights the growing risks for landlords outside Manhattan’s core.
Representatives for Brookfield and Rialto did not immediately respond to requests for comment from The Real Deal.
Rialto’s aggressive tactics have proven newsworthy in recent months. Citywide, property owners and court records show Rialto waging war against Signature Bank borrowers, creating defaults on deals in good standing by ignoring borrowers’ notices to exercise loan extensions and then suing to foreclose.
Rialto has said it is following the rules and has only enforced its rights and remedies in “rare instances” in which sponsors defaulted and failed to communicate. The firm previously told TRD it remains committed to borrowers and finding the “best resolutions possible.”
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