Ashford Hospitality Trust, a real estate investment trust that’s struggled financially from the fallout from the pandemic, has won new financing to pay off nearly $440 million in debt set to mature this summer.
The loan won’t cover all the properties backing a 2018 commercial mortgage-backed securities deal that's in default. The partial repayment leaves 14 hotels totaling 2,384 properties at risk, subject to foreclosure or sale. Still, the financing shows progress in the Dallas REIT's debt-paying strategy that’s included selling off U.S. hotels.
Bank of America and alternative lender Sculptor Capital are expected to originate a $580 million floating-rate loan that will require interest-only payments, according to KBRA analysis of the proposed loan that is to be securitized in a new CMBS bond offering. Ashford will be required to enter into an interest rate cap agreement at a Secured Overnight Financing Rate plus 4%.
The loan is to be used to pay off debt secured by 16 hotel properties totaling 4,145 rooms in 11 states, according to KBRA, including three properties not included in the 2018 deal. The loan is also expected to return $74.7 million of equity to Ashford, according to KBRA.
Properties for which Ashford has lined up financing include the 260-room Marriott Beverly Hills in Los Angeles that accounts for $90 million of the new financing, and the 254-room Hyatt Regency Coral Gables accounting for $84 million of the loan amount, KBRA said in its analysis.
Ashford did not respond to requests to comment. The REIT is scheduled to report year-end earnings Feb. 26.
Deal in default
Thirteen of the 16 properties serve as collateral in the $980 million CMBS deal from 2018, AHT 2018-KEYS. The deal transferred to special servicing in April 2023 due to imminent default, an event that occurred in June 2023, and is still in default.
A month after the default, Ashford announced plans to extend loans on the 13 properties to June 2025 by contributing a combined $129 million toward principal paydown.
Ashford said then it had no plans to contribute additional principal to the remainder of the properties, according to KBRA. The REIT indicated the possibility of conveying the properties back to the lender but would still try to obtain loan modifications to resolve the defaults.
Ashford cited higher relative capital expenditures, weaker local market recoveries, and rising operating costs across the remainder of the properties in the 2018 deal, KBRA said.
The other properties in the deal have either been foreclosed on or put in receivership, and others are expected to be put up for sale this quarter, according to last month’s CMBS report to bondholders.
In November, Ashford provided an update of its strategic financial plan, sharing it had sold more than $310 million in hotels and completed the refinancing of the Renaissance Nashville in the Tennessee capital city.
“We are currently working on a couple of transactions that we hope will close in the near term, and we continue to believe we have a viable path of paying off this financing entirely before the end of the year,” Ashford CEO Stephen Zsigray said in a statement at the time.