Holders of Hilton USA Trust 2016-SFP commercial mortgage pass-through certificates should be alert to a forthcoming transaction involving the loan’s special servicer, Wells Fargo Bank, N.A. The underlying loan has been in special servicing since June 2023, following Park Hotels & Resorts’ decision to cease interest payments and forgo loan repayment at maturity. A court-appointed receiver currently manages the collateral—Hilton San Francisco Union Square and Parc55 hotels—and has enlisted Eastdil Secured to market the properties for sale.
In August 2024, Trimont LLC announced a definitive agreement to acquire Wells Fargo’s non-agency third-party Commercial Mortgage Servicing (CMS) business, a transaction supported by Värde Partners, a global alternative investment firm. Trimont is controlled by investment funds managed by Värde.
Värde’s Dual Role Raises Concerns
Värde Partners is a prominent player in the hospitality sector, having formed a $1 billion joint venture with Hawkins Way Capital in 2022 to acquire distressed hospitality assets. This partnership has already secured several high-profile properties, including a former DoubleTree, a Marriott in Manhattan, and the Sheraton Boston. Like these properties, the Hilton San Francisco Union Square and Parc55 are large, full-service city-center hotels, making them potential acquisition targets for Värde’s ventures.
Trimont’s acquisition of Wells Fargo’s CMS business is slated to close in early 2025. Meanwhile, the San Francisco Superior Court judge overseeing the Hilton properties has set a March 31, 2025, deadline for a third-party sale, after which non-judicial foreclosure proceedings will begin.
Conflict of Interest Risks
Värde’s ownership of Trimont introduces potential conflicts of interest. Värde’s Form ADV Brochure, dated July 23, 2024, highlights these risks, noting that Trimont’s servicing of asset-backed securities held by Värde’s clients could create conflicts. Additionally, conflicts may arise if Värde-managed funds hold investments across different levels of an entity’s capital structure. Decisions regarding troubled assets, such as restructuring or liquidation, may pose further challenges.
Despite these concerns, Trimont asserts its commitment to maintaining independence and avoiding conflicts of interest. Its website states, “We are fully committed to our role as a trusted, ethical, and independent partner, avoiding conflicts-of-interest entirely by making certain to never involve itself in any direct competition with clients or their business priorities.”
Key Questions for Certificate Holders
Given Värde’s dual role as a servicer owner and a distressed asset investor, Hilton USA Trust 2016-SFP certificate holders are urged to seek clarity from the special servicer. Specifically, they should request details on how conflicts of interest will be mitigated as Trimont transitions under Värde’s control. This transparency is essential to ensuring fair and independent decision-making as the Hilton properties face sale or foreclosure.
