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’ portfolios.

Two hotels owned by Iowa Public Employees Retirement System (IPERS) 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’s 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).

IPERS told IPE Real Assets: “We 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.”

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: “I think that some managers want to get ahead of the write-downs that will be coming in the future.”

Prashant Tewari, a partner at The Townsend Group, said: “The 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.”

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