Monarch Alternative Capital has taken over ownership of the limited liability company that controls the Pendry West Hollywood, a $500 million condo and hotel projects on the Sunset Strip, from developers AECOM Capital and Combined Properties, The Real Deal has learned.
Monarch Alternative Capital, which held a $165 million mezzanine loan on the 149-key and 40-condo Pendry, took over ownership earlier this year, according to business filings with the state of California and property records filed with Los Angeles County. The property sits at 8430 Sunset Boulevard.
AECOM and Combined still own a stake in the property, according to an AECOM spokesperson.
In the case of default, mezzanine lenders can take control of properties by filing a Uniform Commercial Code foreclosure, or can convert their debt into an equity stake. While no foreclosure notice was filed, the ownership of the limited liability company that controls the Pendry West Hollywood changed, according to state filings. No deed has been recorded with the county, signaling a complete transfer of ownership.
Monarch scored a $225 million, three-year loan with extension options from Ares Commercial Real Estate Management in connection with the deal, according to loan documents. Neither Combined nor Monarch responded to requests for comment.
AECOM and Combined had tried to refinance a $350 million senior loan provided by Credit Suisse, which was packaged into a commercial mortgage-backed securities deal in 2021.
The firms had struggled to pay off that CMBS loan, according to data from Morningstar and commentary from loan servicer KeyBank. At the end 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 meet its debt payments.
One of the major issues facing AECOM and Combined was that their hotel was not unique enough.
“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 earlier this year.
AECOM and Combined built the property in 2021, spending more than $500 million on the project. But by last year, they were quietly trying to sell the hotel, according to a source familiar with the matter, asking about $149 million. About 60 percent of the condos were sold as of February.
This story has been corrected to reflect that no deed reflecting change of ownership has been filed, but that Monarch took over ownership of the limited liability company that controls the Pendry West Hollywood.
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