Blackstone's $275M Hotel Portfolio Hit With Foreclosure

Blackstone may not own a $275M four-hotel portfolio known as Club Quarters much longer.

The CMBS loan for the hotels in Chicago, San Francisco, Philadelphia and Boston matured this month and Blackstone didn't pay the remaining balance, The Real Deal reported. 

Blackstone bought the 1,228-room portfolio in 2016 for $283M. 

The company took out $275M in senior debt and a $61M mezzanine loan for the hotels the following year. The loan had a two-year term with three options for a one-year extension. Blackstone used its first extension in 2019 and scheduled the loan for maturation in November 2020. 

The loan has been in special servicing with CW Capital since 2020 after Blackstone missed a payment and requested a forbearance agreement in April of that year. The two were unable to come to an agreement before the loan matured and ceased negotiations that year. The loan, originated by Bank of America, had been delinquent for 34 months by 2023. 

Blackstone wrote down the loan before the pandemic due to "operational challenges," the company said. Blackstone declined to comment.

Wilmington Trust, on behalf of the portfolio's bondholders, is moving to initiate the portfolio's foreclosure. It already bought the Boston asset in February out of foreclosure and is under contract to sell the credit to an undisclosed buyer for $75M. 

The trust filed a lawsuit last month to start foreclosure proceedings for the Chicago hotel, and the San Francisco and Philly properties are amid proceedings. 

The portfolio's previous owner, Masterworks Development, bought the mezzanine debt from Blackstone last year and could end up taking back ownership of the remaining properties.

An October 2022 appraisal concluded the value of the Club Quarters portfolio was $360M, down from its $423M value in November 2017.