A financially troubled real estate investment trust is seeking to extend a $409.8 million loan securing more than a dozen U.S. hotels as the financing is transferred to special servicing because of imminent maturity default.
Ashford Hospitality Trust, a Dallas-based REIT that's been struggling with operational challenges since the onset of the COVID-19 pandemic, is "actively pursuing an extension" of a commercial mortgage-backed securities loan secured by 17 full-service, limited-service and extended-stay hotels in what is expected to be "the most effective path forward," a spokesperson told CoStar News.
The loan must first be transferred to special servicing in order to secure more time, according to Ashford's spokesperson: "Ashford Trust does not currently intend to default on the loan and is actively working with the special servicer on an extension."
The loan backing the portfolio of 3,128 hotel rooms spanning seven U.S. states is scheduled to mature in November. Each hotel operates under nationally recognized flags, including Hilton Worldwide Holdings and Marriott International. Ashford's spokesperson declined to disclose the hotels secured by the loan.
The CMBS loan, called MSC 2017-ASHF, was transferred to special servicing on Aug. 30, according to a recent Morningstar Credit report. The loan's transfer to a special servicer comes as the REIT has been working with lenders to refinance loans tied to its other hotels. In May, Ashford Hospitality closed on a $267.2 million loan to refinance the Renaissance Nashville hotel in Nashville, Tennessee. The proceeds from refinancing the hotel are expected to help the REIT pay down the strategic corporate financing it took from Oaktree Capital Management.
Ashford Hospitality has also been shopping hotels to potential buyers and handing back the keys of some properties to lenders, CoStar News previously reported. The REIT had 69 hotels in its U.S. portfolio as of June 30, the company said in its latest earnings filed with the Securities and Exchange Commission.
Before the pandemic, Ashford had more than 100 hotels throughout the United States in its portfolio.
CMBS loans issued for hotels increased substantially to $1.7 billion in July from the prior year when only $600 million of CMBS loans were issued on hotels, according to CBRE's latest U.S. Hotels State of the Union report. The average loan count increased slightly while the average loan size more than doubled from $53.9 million in July 2023 to $118.1 million in July 2024, CBRE said in the report.
The borrowing rates for CMBS hotel loans remain elevated at 7.4% but are off the highs from prior years, according to CBRE. Hospitality experts are keeping a close eye on consumer risks, including a softening employment market and persistent inflation, for the industry, the report said.