Ashford Hospitality Likely To Transfer 19 Hotels Back To Lenders

Ashford Hospitality Trust said 19 hotels that are part of a $982M mortgage pool on which it missed a repayment deadline last month will likely be transferred back to their lenders. 

The Dallas-based REIT is discussing options with lenders, but “the most likely outcome will be a consensual transfer of these hotels to the respective lenders,” the company said in a statement.

The hotels likely to be surrendered represent three of the six loan pools that make up the $982M mortgage and include Marriott's Courtyard, SpringHill Suites and Residence Inn brands. The 19 properties are in locations including Las Vegas, Atlanta, Plano, Texas, and Newark, California. 

“For the most part, the non-extended [hotels are] in markets that have experienced significant headwinds throughout their post-pandemic recoveries, and a number of these markets are not forecasted to reach pre-pandemic topline levels until 2025 or 2026,” the company said in the statement.

Ashford Hospitality Trust extended three of its loans, representing 15 hotels, by making paydowns totaling $129M, according to the statement. 

For the other three loans, the company said it is in the best interest of its stockholders to not make a $255M payment that would be required to extend them, in addition to $80M of capital expenditures through 2025. The company said it believes there is negative equity value in those hotels, based on estimated hotel values and recent comparable transactions.

Hotel values nationally were down 3% from a recent peak as of the end of June, much less than the 16% drop for all commercial property types, Bloomberg reported, using Green Street data.

But with rising interest rates and decreasing property values, many borrowers are struggling to make loan payments. Braemar Hotels & Resorts Inc., which shares parent company Ashford Inc. with Ashford Trust, agreed to pay $121M in June to extend a mortgage on four hotels, reducing the outstanding debt by about 33% to $249M, according to the Bloomberg article. 

Ashford Hospitality struggled especially during the first year of the pandemic. In May 2020, Ashford Inc. returned $59M in loans from the Paycheck Protection Program after weeks of criticism and threats of congressional investigation. In August 2020, it sold its first New York City hotel after less than two years of ownership to meet demands from lenders.

That landed the firm on the brink of bankruptcy in December 2020, Ashford Hospitality said in a filing with the Securities and Exchange Commission at the time.