Dallas-based real estate investment trust Ashford Hospitality Trust plans to hand back the keys for 19 hotels after failing to meet debt yield tests on maturing loans.
All of the hotels sat in three pools of commercial mortgage-backed securities loans that matured in June, and company officials believe the required $255 million in paydowns to extend loan terms would represent “negative equity value,” according to a statement the company released late Friday. Ashford Trust had marketed several of the hotels they now plan to hand back to lenders but did not accept any bids above the amount owed on the properties.
“The company has been in discussions with the lenders on these loan pools seeking modifications to the extension tests, but at this time, it appears that the most likely outcome will be a consensual transfer of these hotels to the respective lenders,” the news release states.
Ashford Trust officials claim the move will lower their net debt to gross assets ratio by three percentage points, along with improving companywide revenue per available room by roughly 3%. The REIT had expected to spend roughly $80 million on capital expenditures at those hotels prior to the move.
Ashford Trust President and CEO Rob Hays has publicly prioritized deleveraging the REIT, which once had a portfolio of 100 hotels and has been grappling with financial women since the onset of the pandemic.
During a recent quarterly earnings call with investors, Hays said the REIT had been unsuccessful in trading hotels under current market conditions with few buyers and no access to debt markets. Hays told investors he would try to keep as much existing debt as possible in place within the portfolio.
“The challenging debt financing market for hotels has been around for months now and they are not getting any better,” Hays told investors at the time. “The spreads are historically wide and I’m hopeful we are getting to the end of the Fed raising rates. It’s a weird dynamic. Hotels are performing well, but there’s a disconnect between the capital markets and the underlying fundamentals.”
Ashford Trust is making required paydowns adding up to $129 million for a one-year extension to loans for 15 other properties.
In a statement, Hays said the company’s next maturity comes in November and is a Morgan Stanley loan secured by 17 hotels.
“We currently believe that loans should be able to be extended with no paydown required,” he said.
The hotels Ashford Trust will be handing back to lenders including:
- Courtyard Columbus Tipton Lakes in Columbus, Indiana.
- Courtyard Old Town in Scottsdale, Arizona.
- Residence Inn Hughes Center in Las Vegas, Nevada.
- Residence Inn Phoenix Airport in Phoenix, Arizona.
- Residence Inn San Jose Newark in Newark, California.
- SpringHill Suites Manhattan Beach in Hawthorne, California.
- SpringHill Suites Plymouth Meeting in Plymouth Meeting, Pennsylvania.
- Courtyard Basking Ridge in Basking Ridge, New Jersey.
- Courtyard Newark Silicon Valley in Newark, California.
- Courtyard Oakland Airport in Oakland, California.
- Courtyard Plano Legacy Park in Plano, Texas.
- Residence Inn Plano in Plano, Texas.
- SpringHill Suites BWI Airport in Baltimore, Maryland.
- TownePlace Suites Manhattan Beach in Hawthorne, California.
- Embassy Suites Flagstaff in Flagstaff, Arizona.
- Embassy Suites Walnut Creek in Walnut Creek, California.
- Marriott Bridgewater in Bridgewater, New Jersey.
- Marriott Research Triangle Park in Durham, North Carolina.
- W Atlanta Downtown in Atlanta, Georgia.
CoStar News’ reporter Candace Carlisle contributed to this report.
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