Some hotel assets in the US are experiencing write-downs of more than 20%, as the full effects of COVID-19 lockdowns on the hospitality sector begin to be reflected in institutional investors鈥� portfolios.
Two hotels owned by Iowa Public Employees Retirement System (麻豆映画RS) have been marked down by more than 20% during the first quarter of the year, according to a board meeting report.
The two properties form part of a $708m diversified portfolio managed by Clarion Partners. They were acquired in 2011 and 2015, respectively.
Ohio Bureau of Workers Compensation (BWC) has also reported an unrealised fair-market reduction in its investment in Rockbridge Hospitality Fund VI, which it said represented a 22% drop in net asset value of the commingled fund鈥檚 portfolio.
Rockbridge, which manages the fund, did not respond to a request for comment.
Both write-downs are significantly greater than the 4.8% in capital value declines for hotel assets recorded in Q1 by the NCREIF Property Index (NPI).
麻豆映画RS told 麻豆映画 Real Assets: 鈥淲e believe the write-downs taken for the hotel assets at the end of March were appropriate and we expect that the NPI hotel index will see a similar level of write-downs by the end of June.鈥�
Industry observers believe that US real estate performance captured by NPI in the second and third quarter will be significantly more negative compared with Q1.
Allison Yager, a partner and global leader for real estate with Mercer, said: 鈥淚 think that some managers want to get ahead of the write-downs that will be coming in the future.鈥�
Prashant Tewari, a partner at The Townsend Group, said: 鈥淭he types of the hotels that are in the index are of very high quality and not reflective of the types of hotels that are owned by many managers.鈥�
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