Quiver Quantitative - A Pacific Investment Management Co. (PIMCO) affiliated joint venture has surrendered a 20-hotel portfolio under a $240 million mortgage. These properties, scattered in cities such as San Antonio and Carmel, Indiana, have witnessed a decline in value, dropping from an initial $326 million in 2017 to $272.8 million as of a December appraisal.
Amidst escalating borrowing costs that influence property valuations, major Wall Street entities like Blackstone (NYSE:BX) and Brookfield Asset Management (TSX:BAM) (BN). have been opting for defaults on unprofitable assets. Specifically, the hotels were predominantly owned by a PIMCO real estate fund, which collaborated with a company linked to hotelier Steven Angel.
In the broader hotel sector, increasing operational and capital improvement expenses are impacting revenues. This trend is underscored by moves from companies like Ashford Hospitality Trust Inc., which anticipated returning 19 hotels to lenders, and Park Hotels & Resorts Inc. that halted payments on two San Francisco establishments.
Separately, PIMCO faced a default on office buildings valued at $1.7 billion earlier this year. Despite this, the company is in negotiations with lenders and is actively raising capital for a new real estate debt fund targeting market disruptions, especially as $2 trillion in existing commercial real estate loans approach maturity.
This article was originally published on Quiver Quantitative