(Bloomberg) -- Brookfield Corp. funds have defaulted on a $161.4 million mortgage for a dozen office buildings, mostly around Washington, DC, as rising vacancies hit property values.

The loan transferred to a special servicer who is working with “the borrower to execute a pre-negotiation agreement and to determine the path forward,” according to a filing on the commercial mortgage-backed security.

Some landlords are defaulting on debt as borrowing costs surge and the prospects of filling up office towers wanes given the rise in remote and hybrid work. Those trends have weighed on values, with prices on office properties falling about 25% in the past year, according to Green Street. About 4.8% of office properties with CMBS were managed by special servicers in March, up from 3.2% a year ago, according to Trepp.

Brookfield, a major office owner, previously defaulted on debt tied to two Los Angeles buildings, the Gas Company Tower and the 777 Tower. Landlords including Columbia Property Trust, owned by funds managed by Pacific Investment Management Co., and a venture started by WeWork Inc. and Rhone Group have also defaulted on office debt.

Another Brookfield office property in Los Angeles, 725 South Figueroa St., was transferred to a special servicer and placed on watch by Kroll Bond Rating Agency, according to a note Tuesday.

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

In the Washington metro area, office property values have plunged 36% through March from a year earlier, according to the Green Street index. 

About 43% of workers in the region were in the office during the week of April 5 compared with pre-pandemic levels, according to Kastle Systems. That’s lower than cities such as New York, Chicago and Austin, Texas, but higher than some areas in California that have been particularly hit by the pullback from technology firms.

Among the dozen buildings in the Brookfield portfolio with the $161.4 million debt, occupancy rates averaged 52% in 2022, down from 79% in 2018 when the debt was underwritten, according to the report. Monthly payments on the mortgage’s floating-rate debt jumped to about $880,000 in April from just over $300,000 a year earlier as the Federal Reserve raised interest rates.

Office-related stocks have slumped this year amid concerns about the outlook for the properties. An index of publicly traded office real estate investment trusts dropped 19% this year through Monday’s close. The S&P 500 Index climbed 8% during that time frame.

(Updates with special servicer data in third paragraph, Los Angeles property in fifth paragraph, stocks in 10th paragraph.)

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