Wardman Park Hotel Owner Files For Bankruptcy, Plans To Sell Shuttered Property
The owner of the historic Washington Marriott Wardman Park Hotel has closed the hotel permanently, filed for bankruptcy and is looking to sell the asset.
Wardman Hotel Owner LLC, an affiliate of Pacific Life Insurance Co., filed a Chapter 11 bankruptcy petition Monday in the U.S. Bankruptcy Court for the District of Delaware.
The owner, which has about $130M of debt obligations, said in the filing that it permanently closed the hotel just prior to filing the bankruptcy petition, a closing that was first signaled publicly in June. The owner is looking to sell the hotel as part of the bankruptcy process.
The 1,152-room hotel opened in 1918, in the middle of a pandemic, at 2600 Woodley Road NW. Over the years, it has served as a residence to two presidents and various other political figures. It contains 195K SF of event space and 95K SF of exhibit space.
The coronavirus pandemic exacerbated challenges that the hotel already faced, the owner said in the filing, and it blamed Marriott for its poor financial performance. It said that under Marriott's management, the hotel's net operating income fell from $24.8M in 2010 to $5M in 2018.
"The hotel has struggled to remain profitable due to a number of factors, including consistent and growing competition in the greater Washington area, including competition generated by other Marriott properties, and Marriott's failure to act as a reasonable and prudent operator of the hotel," Wardman Hotel Owner LLC Manager James Decker wrote in a court filing.
Marriott, which declined to comment, also manages other major convention hotels in the area such as the Marriott Marquis in D.C. and the Gaylord National Resort and Convention Center in National Harbor. Decker's filing claims that Marriott stopped booking premium group business for the Wardman Park hotel, instead directing the bookings to its other properties.
Additionally, the filing claims that Marriott failed to replace the group bookings with traditional overnight bookings, and relied too heavily on online travel agencies that charge high commissions. It also said Marriott let the hotel's costs "spiral out of control."
A spokesperson for Pacific Life declined to comment on the bankruptcy.
The hotel closed on March 25 after Mayor Muriel Bowser declared a public emergency due to the coronavirus pandemic. It then lost roughly $1.5M per month through the rest of the year, Decker wrote in the filing.
Marriott in March demanded that the hotel owner fund $10M of capital to cover cash flow needs at the hotel, the filing said. The owner informed Marriott it wouldn't provide the $10M, but that the manager could use $5M out of the hotel's furniture and equipment reserves, the filing said. In the following six months, Marriott issued several additional capital demands, each of which the owner rejected, the filing said.
Then in September, Marriott filed a lawsuit against the Pacific Life affiliate in Montgomery County Circuit Court, claiming the owner failed to honor the management contract by refusing to provide the requested capital. Circuit Court Judge Ronald Rubin Dec. 3 ordered the owner to pay Marriott a sum that is expected to be at least $5M, the Washington Business Journal reported.
The hotel owner lacks sufficient funds to pay Marriott and to continue to maintain the hotel, it said in the filing, a position that left it no choice but to seek bankruptcy relief. The owner said it believes a sale of the property will be the best way to fulfill its obligations to its creditors and stakeholders.
"Through this Chapter 11 case, the Debtor intends to conduct an orderly sale of substantially all of its assets, distribute the proceeds of such sale to creditors, and wind down its remaining business," Decker wrote.
