Value of Pimco office portfolio in default slashed by 30%

Appraisers have slashed the value of a seven-building office portfolio owned by Pimco’s Columbia Property Trust by 30 percent, after the firm defaulted on $1.7 billion in loans connected to the buildings. 

Last year, the portfolio, which includes buildings in New York City, San Francisco, Boston and Jersey City, was valued at $2.34 billion, Trepp data shows. 

The portfolio now holds an appraised value of $1.6 billion, according to comments from Wells Fargo, which is the special servicer on the commercial mortgage-backed securities loan connected to the properties. 

“Rent collections remain an issue at several of the properties,” Wells Fargo added in its comments.

Columbia Property Trust did not respond to a request for comment. 

The trust has now defaulted on more debt than the properties are worth, meaning some of the loans on the buildings are underwater.

At the time, Columbia Property Trust’s default marked one of the largest on office-backed loans since the start of the pandemic. But since, many office owners have become delinquent on debt payments, given the persistence of remote work and soaring interest rates in the latter half of last year that have caused debt service payments to balloon.

In Los Angeles, Brookfield has defaulted on $1.1 billion in loans tied to office buildings — two of which are now in receivership. 

And industry experts predict more pain on the horizon. Researchers from Boston Consulting Group expect office values to drop by about 40 percent from pre-pandemic levels over the next three years, according to a recent study.

Columbia Property Trust’s portfolio includes three office buildings in New York, two in San Francisco, one in Boston and one in Jersey City. The New York properties are at 245 West 17th Street, 315 Park Avenue South and the office portion of 229 West 43rd Street.

The properties in San Francisco are 555 and 650 California Street, located on the edge of Union Square. 

Two of the buildings — 650 California Street in San Francisco and 245 West 17th Street in Manhattan — were leased to Twitter and ran into financial issues after Elon Musk bought the company last year. In total, Twitter accounted for about 11 percent of the portfolio’s rental income, according to Trepp data. 

Pimco, based in Newport Beach, acquired New York-based Columbia Property Trust in a deal valued at $3.9 billion in late 2021.