“The lenders are willing to sell us their loans or the mortgages back at a discount,” Brookfield Property Chief Executive Officer Brian Kingston said during an Aug. 6 earnings call. “And so in that case we’ve been able to essentially reacquire the asset at an attractive basis.”
Brookfield Asset Management Inc., the parent of the property firm, raised $23 billion from investors in the most recent quarter, including $12 billion in new commitments for a distressed fund. Brookfield spokeswoman Kerrie McHugh declined to comment.
Digital Strategy
Colony has stopped making payments on many of its hotel bonds since the pandemic hit, while focusing on its long-planned “digital” real estate strategy -- buying properties like cell towers, data centers and network infrastructure.
It began raising at least $6 billion for a second digital fund shortly before announcing plans in May to evaluate “strategic and financial alternatives” for 245 lodging properties with $3.5 billion in debt. Wells Fargo & Co., trustee of Colony’s Tharaldson hotel portfolio, sued in June in federal court to appoint a receiver to manage those hotels after Colony defaulted on the debt. The portfolio, with $842.7 million in loans, was reappraised in June at $836.7 million, down 36% from $1.3 billion in January 2018.
“We’ve been very careful not to put good money into bad situations,” Colony CEO Marc Ganzi said on a conference call earlier this month.
Blackstone, which ended its second quarter with $46 billion to invest in real estate deals, is delinquent on a $274 million mortgage for four Club Quarters Hotels. Blackstone is considering walking away from those properties, because it would cost too much to make them competitive, Bloomberg reported in June.
Hotels, Retail
Hotel and retail properties represent just 13% of Blackstone’s real estate exposure and the Club Quarters mortgage is its sole delinquent CMBS.
Starwood is said to be raising $11 billion for a new opportunistic investment fund while also falling behind on payments for 17 of its 30 retail properties with almost $2 billion in CMBS debt. Management of three Starwood malls was assigned to a court-appointed receiver in April after it missed payments.
Debt on a four-mall portfolio was downgraded to junk following an appraisal that cut the property value 66% and wiped out Starwood’s equity.
“We remain committed to ensuring the best outcome possible for our investors in what has proven to be a very challenging asset class,” Starwood said in an emailed statement. “The level of uncertainty regarding tenant performance, anchor stability, capital markets and now the impact of the pandemic remains unprecedented and our strategy for these assets is evolving.”