Pendry West Hollywood faces debt crisis for owners AECOM, Combined

When AECOM Capital and Combined Properties opened the Pendry West Hollywood — a 149-key hotel with an attached condo project — the project was appraised at nearly $526 million.

That was in 2021, after the duo had spent more than $500 million constructing the hotel and attached condo project. They later refinanced the project with $515 million in loans. 

Since then, about 60 percent of the condos have sold, and the property still has a billboard that is generating a significant amount of revenue, according to one source familiar with the property. This month, the hotel portion was appraised at $139 million.

AECOM Capital and Combined are struggling to pay off senior and mezzanine debt tied to the property, according to sources familiar with the matter and data from Morningstar. In particular, the owners are working to refinance a $350 million senior loan provided by Credit Suisse. 

Monarch Alternative Capital also holds a $165 million mezzanine loan on the property, located at 8430 Sunset Boulevard.

The firms had tried to sell off the hotel last year, according to one source, with a price tag of about $149 million. But the hotel got no takers. 

AECOM Capital declined to comment, while Combined did not respond to a request.

The financial issues stem from two causes: rising interest rates and competition.

“Floating-rate debt has absolutely impacted the net operating income,” one source said. 

As of September, the debt service coverage ratio on the senior loan was 0 — anything below 1 indicates that the property is not making enough to pay off the debt. And it has been that way since 2022, according to Morningstar. 

“Multiple hotel competitors within a few hundred feet of the subject property is hurting the property’s overall financial performance,” servicer KeyBank wrote in commentary cited by Morningstar. “Property is also spending more on food and beverages than what it receives from food and beverages revenues.”

The firms are not delinquent on the $350 million loan, according to data from Trepp and Morningstar. Also, the duo is not delinquent on the mezzanine debt from Monarch, which did not respond to a request for comment.

If they are, Monarch could file to foreclose on the property or opt for a deed-in-lieu, forcing AECOM and Combined to forfeit ownership of the property in exchange for relieving the debt, according to a source familiar with the hotel. 

Correction: A previous version of this story did not distinguish property’s previous value with condos and later hotel-only valuation.