Dallas-based Ashford Hospitality Trust Inc. is planning to surrender 19 hotels across the country to its lenders. The company announced last week that it has decided against investing more funds into these properties, which are part of a $982 million mortgage pool that missed its repayment deadline in June.
According to a statement released by Ashford Trust on Friday, retaining ownership of the hotels would have necessitated a paydown of approximately $255 million to extend the financing, as well as $80 million in capital expenditures until 2025. The statement further noted that based on comparable sales and brokers’ assessments, the equity in these properties is already negative, and attempts to sell off portions of its portfolio have not returned bids above the existing loan balances.
Among the defaulting hotel portfolio are several properties located in the state of California. They include:
- Residence Inn San Jose Newark – Newark, CA
- SpringHill Suites Manhattan Beach – Hawthorne, CA
- Courtyard Newark Silicon Valley – Newark, CA
- Courtyard Oakland Airport – Oakland, CA
- TownePlace Suites Manhattan Beach – Hawthorne, CA
- Marriott Beverly Hills – Los Angeles, CA
- Marriott Fremont – Fremont, CA
- Embassy Suites Walnut Creek – Walnut Creek, CA
The company stated in the statement that a consensual transfer of these hotels to the respective lenders is the most probable outcome.
However, Ashford Trust has successfully negotiated debt extensions for 15 other hotels in its portfolio by providing a total of $129 million in paydowns. This includes three Texas properties: Hilton Fort Worth, Marriott Suites Dallas, and Lakeway Resort Austin.
Due to increasing interest rates and declining property values, many lenders now require borrowers to pay down a portion of the debt or contribute additional capital for property expenses in order to extend the loan’s maturity.
Braemar Hotels & Resorts Inc., whose ultimate parent company, Ashford Inc., shares the same ownership as Ashford Trust, made a payment of approximately $121 million in June to extend a mortgage on four hotels. This payment reduced the outstanding mortgage debt by 33 percent, bringing it to approximately $249 million, according to a report in The Dallas Morning News.
According to Green Street, hotel values had declined by 3 percent from their recent peak as of June, in contrast to a 16 percent drop for all commercial property types and a 31 percent decline for office spaces.
Ashford Trust mentioned in the statement that most of the hotels expected to be returned to lenders are located in markets that have faced significant challenges in their recovery following the pandemic. Additionally, some of these markets are not projected to reach pre-pandemic revenue levels until 2025 or 2026.
Ashford Trust also highlighted that once the situation with these hotels is resolved, the next imminent debt maturity is a Morgan Stanley loan pool secured by 17 hotels, which is set to mature in November. The company believes that this loan can be extended without requiring a paydown, as stated by Rob Hays, the president and CEO of Ashford Trust.