Hotels across the West Coast are facing a series of setbacks brought on by broader market trends and macroeconomic challenges. The recent transfer of a $40 million loan behind the Sixty Beverly Hills hotel to special servicing, as reported by DBRS Morningstar, exemplifies the complexities that both borrowers and lenders face in today’s market. The loan, part of a larger commercial mortgage-backed securities (CMBS) package, is now facing challenging times.
Originally secured in August 2017 at a rate of 4.8 percent from Natixis, the loan carried a five-year term with interest-only payments, according to industry reports and public records. The Sixty Beverly Hills hotel, located at 9360 Wilshire Blvd. in Beverly Hills, is owned by Sixty Collective and led by the Pomeranc brothers. The building is an eight-story, 118-room property featuring a range of amenities, including a restaurant by Umbrella Hospitality Group, a wine shop, a coffee bar, and a rooftop pool and bar.
The troubling financial conditions experienced by the hotel took a turn for the worse during the COVID-19 pandemic. As the hospitality sector grappled with unprecedented challenges, the hotel’s loan was transferred to special servicing, reflecting the broader struggles faced by the industry. However, the hotel’s owners were granted forbearance, which in turn pushed the maturity date to the present month, August 2023. Notably, the loan’s maturity date was further extended to February 2024, signaling a possibility of a workout that would avoid foreclosure on the property.
The hotel’s net cash flow remains significantly short of the issuance underwriting, as highlighted by the DBRS Morningstar report, which may make any possible resolution to the present condition more difficult to achieve.
In the context of the Los Angeles County hospitality market, the challenges faced by Sixty Beverly Hills are not unique. Hotel sales in the county saw a significant decline of nearly 53 percent in the first half of 2023 compared to the previous year, primarily due to rising interest rates and mismatches in price expectations between buyers and sellers, according to a recent report by Atlas Hospitality Group. The market dynamics were further influenced by the implementation of a new tax on transactions exceeding $5 million in the city of Los Angeles.
