Pimco Sets Its Sights on Commercial Real Estate – The Wall Street Journal

Pimco also has become more active because last year its parent, German insurer Allianz SE, put the firm based in Newport Beach, Calif., in charge of managing its Allianz Real Estate investment business. Between its own investments and those made by Allianz, Pimco acquired $12 billion in private commercial property between January 2020 and June 2021, the firm said.

The combined Pimco and Allianz real-estate business also originated or invested in $7 billion in real-estate loans during that time, a Pimco spokeswoman said.

In its biggest real-estate investment during the pandemic, Pimco agreed this month to pay $3.9 billion for Columbia Property Trust, a real-estate investment trust that owns a portfolio of office buildings in New York City, Washington, D.C., Boston and San Francisco. The purchase, subject to Columbia shareholder approval, would be the first acquisition of a pure office real-estate investment trust since 2019, according to Thomas Catherwood, an analyst with BTIG LLC.

Columbia owns 6.2 million square feet of space mostly in decades-old downtown office buildings, such as the former New York Times headquarters and 315 Park Avenue South in Manhattan.

The big bond manager’s recent property-buying spree stands in contrast to many dedicated real-estate investment funds and private-equity firms, which have mostly held on to money raised for distressed sales in hopes that prices might fall further.

In the early months of the pandemic, Pimco was the rare active competitor in the distressed public-securities market. The firm invested $1 billion in shares of real-estate investment trusts and commercial mortgage-backed securities. Pimco also was active last year restructuring properties as a lender, taking advantage of the retreat from the market of traditional lenders.

More recently, Pimco has been one of the first investors to begin buying downtown hotels. That sector has been slower to rebound than resort hotels because business travel has yet to make a big comeback.

Pimco’s recent hotel deals have included the W Washington D.C. hotel, which the firm agreed to buy for more than $200 million. The firm plans to rebrand the property, which opened in 1917 and offers views of the White House from its rooftop, as an independent hotel.

Pimco has been more optimistic than many other investors in the office sector. Some investors are steering clear of these buildings because the success of remote work has raised questions about whether office demand will ever return to previous levels.

But Pimco is bullish on well-located offices in major markets, as well as those “in high-growth markets like the Southeast that benefit from population migration,” the spokeswoman said.

By being a contrarian, Pimco is able to buy office buildings for lower prices. Pimco’s purchase of Columbia Property Trust amounted to $19.30 a share, or 20 cents below what an investment group led by Arkhouse Partners and the Sapir Organization offered in March. The price dropped as Covid-19’s Delta variant spread around the U.S.

“As recently as June, when vaccinations were going up and case counts were going down, there was a little more optimism,” said John Kim, analyst at BMO Capital Markets Corp. “But since Delta spread out, office REITs started to fall with the delay of return to office.”

Write to Peter Grant at peter.grant@wsj.com