The largest hotel in Texas by number of rooms is closer to getting $300 million to refinance a loan the ownership group secured only a year ago.
Elliott Investment Management and the Chartres Lodging Group, the owners of the Sheraton Dallas Hotel in downtown Dallas at 400 N. Olive St., plan to close the deal on or about April 25, according to an S&P Global Ratings presale report published this week. The loan is secured by the fee simple and leasehold interest of the borrowers in the 1,841-room full-service convention center hotel.
"The Sheraton Dallas is the largest hotel in Texas featuring 1,841 guestrooms across three towers and a three-story convention center with over 230,000 square feet of meeting and convention space," S&P Global Ratings analysts said in the report.
The hotel suffered a substantial blow in January when Southwest Airlines didn't renew its contract for thousands of booked rooms because of the Dallas-based airline's decision to scale back its training volume to cut costs. The contract accounted for 60,206 room nights in 2024, representing 18% of total occupied room nights last year, according to the S&P report.
The hotel is also dealing with the major redevelopment of the Kay Bailey Hutchinson Convention Center Dallas, located one mile from the Sheraton Dallas. The yearslong construction process is expected to lower demand from convention attendees.
Elliott Investment Management and the Chartres Lodging Group did not immediately return a request for comment.
The two-year floating-rate loan is expected to mature on April 9, 2027, with three one-year extension options. Goldman Sachs Bank USA and JPMorgan Chase Bank are the originators of the loan. KeyBank is the servicer.
The hotel's loan-to-value ratio has escalated to what S&P Global Ratings analysts calculate at 90.3%. Including a $35 million mezzanine loan, the loan-to-value ratio rises to 100.8%, the report states.
Last year, S&P Global Ratings analysts said the loan-to-value ratio was 82.9%, including the mezzanine loan that totaled $30 million at the time. Lending professionals consider debt deals with higher loan-to-value ratios riskier.
S&P Global said it considers lodging properties such as the Sheraton Dallas to be among the riskiest property types because of the daily nature of the pricing structure, as well as their significant operating costs and high expense ratios compared to other real estate.
Convention business in Dallas is expected to be subdued from 2026 to 2030 as the city redevelops its aging convention center in a $3.7 billion project already expected to have delays, S&P Global analysts noted. The convention center expansion is scheduled to be completed in February 2029.
The Sheraton Dallas relies heavily on meeting and group demand, with about 60% of its occupied room nights coming from conventions, according to the report. The hotel has more than 230,000 square feet of meeting and convention space with five food and beverage outlets, a fitness center, a rooftop swimming pool, a business center and other amenities. The largest ballroom has capacity for 5,000 guests.
The Sheraton Dallas also has historically lower occupancy compared to its peers, with an $88.38 average daily rate in 2024, S&P analysts said. The rent on a ground lease for a small portion of the land underneath the hotel's three-story convention center and garage totaling about 5% of the property was $88,674 at the start of 2025. The rent is expected to escalate by 3% annually until the deal expires on June 30, 2115, the report said.
Cash equity
The loan is expected to be used to refinance $270 million of existing debt that was secured last year, pay closing costs and return about $30 million of cash equity to the hotel's owners, according to a presale report compiled by Kroll Bond Rating Agency. The report also outlines that the $30 million mezzanine loan provided by an affiliate of Driftwood Capital was amended and upsized to $35 million.
The Sheraton Dallas' ownership group acquired the hotel in 2017 for about $224.5 million, or about $121,945 per key. Since 2015, the hotel has undergone more than $100 million in capital improvements, including full guestroom renovations.
The hotel, constructed in 1959, is managed by a subsidiary of Marriott International in a 30-year agreement set to expire in December 2038, about eight years after the fully extended maturity date of the loan, Kroll said in its report.
The bond rating agency added, "The Dallas lodging market has been one of the fastest major markets to recover from the pandemic" thanks to robust leisure travel with few restrictions in the wake of the pandemic. The report said group business has been slower to return.