Pimco Surrenders 20-Hotel Portfolio

The Hospitality Industry Is Facing Headwinds Of Rising Operating And Borrowing Costs.

Pimco has reportedly walked away from 20 hotels it owns, the latest example of an institutional player giving up on underperforming properties amid a challenging financing environment.

The Newport Beach, California-based asset manager owns 99% of a joint venture that controls the portfolio tied to a $240M mortgage, and it has decided to forfeit those properties, Bloomberg reported, citing loan servicer commentary. Fulcrum Hospitality is also a partner in the joint venture.

The hotels and brands in the portfolio, which includes hotels in San Antonio and Carmel, Indiana, weren't disclosed. The hotels were initially valued at $326M when the loan was originated in 2017, but by December, the values had dropped 16% to $272.8M, Bloomberg reported. The CMBS loan was transferred to a special servicer in August 2022, according to CRED iQ.

Fulcrum, which was founded by hotelier Steven Angel in 2011, manages more than $6B in assets, according to its website.

Even though U.S. hotel operators continue to see room rate performance improve and heading toward pre-pandemic levels, the hotel industry also is facing challenges from rising operating and borrowing costs, which is keeping new hotel supply muted. More than 5% of hotel CMBS loans were delinquent as of September, according to Trepp.

Pimco is facing distress elsewhere in its portfolio. It defaulted earlier this year on a $1.7B loan tied to a collection of office buildings, primarily in New York and San Francisco. The appraised value of that portfolio was slashed by 30% in June, but Pimco is still negotiating with the lender, Bloomberg reported.

Institutional owners like Blackstone and Brookfield have also handed back the keys to office buildings, electing to give up on the properties and focus on more profitable sections of their real estate portfolios.

Pimco might be facing some distress, but it is also hoping to benefit from it. It raised $3B in August for a second commercial real estate debt fund, Bloomberg reported.

Continue reading this story with a free account

Log in or register
Sign up for more articles like this
Subscribe to Bisnow's National Newsletters
Related Stories

How U.S. Giant Realty Income Bought The UK And Europe

Spirit Christmas Unveils Plans To Grow Store Count This Holiday Season

Stephen Ross, Jeffrey Soffer Scrap Plans For Miami Airport Hotel Project

Hurricane Isaias Puts More Than $40B In Multifamily Property In Its Path

Grafton Place Scheme Comes To Market Again, Guiding At €250M

Braemar Inches Closer To Ashford Breakup With $372M Hotel Sale

Workers At 6 Chicago Hotels Go On Strike Ahead Of Chicago Marathon

Transformers: Yet Another Data Center Power Infrastructure Supply Chain Bottleneck

Proposed EPA Rule Change Could Cut Months From Timelines Of Projects Near Wetlands

NYC Is Building Hotels Again. It May Not Be Enough

Distress Divide: How Private vs. Institutional Investors Are Thinking About D.C. Office

Rates, Rents And AI Risks: Peter Linneman's Warning For CRE