Ashford Hospitality Trust has given back the keys to five hotels to a mortgage lender, a move completing a transfer announced earlier this year, to help it shore up its balance sheet after the onset of the pandemic rocked its economic fundamentals.
This leaves the Dallas-based REIT with 95 U.S. hotels in its portfolio, with another 14 hotels expected to officially transfer to a trust representing three borrowing banks by early next year after the real estate investment trust told investors it would hand back the keys to 19 hotels because it made financial sense.
The five hotels that are no longer part of Ashford's portfolio are 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; and the W Atlanta Downtown in Atlanta, Georgia.
The REIT's executives confirmed the successful transfer of the five hotels to its mortgage lender and confirmed it was continuing to work with lenders tied to two other loan pools on "a consensual transfer of ownership of those hotels to the lender," with that transfer expected before early 2024.
"The company is fully cooperating on a consensual transfer of ownership," the REIT said in a statement, adding that it's not in litigation with those lenders.
Morgan Stanley Bank, Barclays Bank and Bank of America originally provided $293.8 million backing the 14 hotels, according to court documents. An attorney representing the special servicer through a trust for their loans — Wilmington Trust NA, acting on behalf of Trimont Real Estate Advisors — has requested the court appoint a receiver to maintain and preserve the value of the hotels until a foreclosure process, which is expected to take several months, is completed, according to court documents.
The REIT said the banks are not party to the litigation in seeking the appointment of a receiver. In the court filings, the trust alleged that Ashford "breached its contract" outlined in loan documents because it failed to pay its indebtedness, the filing with the court states.
The 14 hotels mentioned in the court filings "require a significant influx of cash to continue operating, and defendants do not appear to be able to provide the resources necessary to continue managing the hotels effectively," the trust's attorney said, adding that by appointing a receiver for the properties, the plaintiff hopes to "avoid imminent and severe loss of value to the hotels and to secure plaintiff's remedies under the applicable loans."
The attorney said it would take several months to complete the foreclosure process. Ashford Hospitality Trust said it invests in predominately upscale, full-service hotels. It has about 10 hotels on the market, with a potential sale of these properties helping to pay the remaining debt of more than $180 million left on its loan from Oaktree Capital Management, which is due January 2026.