PIMCO Faces Heavy Losses on Philadelphia Office CMBS
From the desk of Jim Eccleston at Eccleston Law
Pacific Investment Management Co. (PIMCO) faces substantial losses on a $368 million commercial mortgage-backed (CMBS) security tied to Centre Square, a two-tower office complex in downtown Philadelphia.
PIMCO is the largest holder of the CMBS, according to regulatory filings, with approximately $58 million in face value across the deal. Roughly half of that exposure sits in the top-rated tranche.
Centre Square, located at 1500 Market Street, carried a $471 million appraisal in 2019. Last month, a judge approved the sale of the property for $70 million, an approximately 85 percent decline in value. According to Financial Advisor News, the sale is expected to close in the coming weeks, after which proceeds will go to creditors.
Wall Street strategists estimate that investors in the safest portion of the bond could recover about 44 cents on the dollar after accounting for advances, fees and other claims. Holders of seven lower-ranking tranches are expected to lose their entire investments. Based on estimated purchase prices and current recovery expectations, PIMCO's losses could exceed $35 million.
The Centre Square deal adds to mounting losses in single-asset, single-borrower commercial mortgage-backed securities, known as SASBs. Unlike traditional CMBS transactions that spread risk across many property loans, SASBs typically depend on a single mortgage tied to one property or complex.
Financial Advisor News reports that all three transactions used the SASB structure. The financing model grew rapidly over the past decade, but its concentration in a single property can magnify losses when that asset deteriorates.
Concerns extend beyond Centre Square. According to Financial Advisor News, Bloomberg data shows that more than 30 top-rated SASB CMBS tranches now trade below 85 cents on the dollar, including deals tied to office properties in Atlanta, Chicago and Denver.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, cmbs, pimco, commercial real estate, securities law, investment losses





