By John Gittelsohn | Bloomberg
A joint venture tied to a Pacific Investment Management Co. fund surrendered a portfolio of 20 hotels with a $240 million mortgage.
The properties, located in cities including San Antonio and Carmel, Indiana, were forfeited in a deal that closed in September, according to commentary filed this week by the loan’s servicer. The Pimco portfolio, valued at $326 million when the debt was originated in 2017, was cut 16% to $272.8 million in a December appraisal.
Newport Beach-based Pimco declined to comment.
Commercial property owners are confronting much higher borrowing costs that are weighing on valuations. Wall Street investors including Blackstone and Brookfield Asset Management have defaulted on money-losing properties rather than continue to pay the debt on them.
The hotels were owned by a 10-year-old Pimco real estate fund that had a 99% stake in a joint venture with a limited liability company linked to hotel operator Steven Angel, according to loan documents. Angel’s Fulcrum Hospitality manages more than $6 billion in assets, according to the company’s website. Angel didn’t immediately respond to a message seeking comment.
For hotels, rising operating and capital improvement costs have cut into income. Ashford Hospitality Trust Inc. said in July that it would likely return 19 hotels to lenders, while Park Hotels & Resorts Inc. stopped making payments on two San Francisco properties.
Pimco defaulted on a portfolio of office buildings with $1.7 billion of debt earlier this year but continues to negotiate with lenders “as to the best path forward to maximize recovery,” according to a commentary on the commercial mortgage-backed security.
Pimco has also been raising money for a new commercial real estate debt fund that seeks to take advantage of market distress as $2 trillion of existing commercial real estate loans are set to mature within five years, according to a presentation to the Pennsylvania Public School Employees’ Retirement System.
The Pimco Commercial Real Estate Debt Fund II closed to new investors in August after raising $3 billion in commitments, according to a person with knowledge of the fund’s closing, who asked not to be identified citing private information.
