Lawsuits filed against Ashford Hospitality Trust by Morgan Stanley Bank, Barclays Bank, and Bank of America allege breach of contract and seek the appointment of a receiver to preserve the value of 14 hotels tied to defaulted loans.
Ashford Hospitality Trust, a real estate investment trust (REIT) based in Dallas, is facing legal action from three major banks over defaulted loans on 14 Marriott-branded hotels. The banks, Morgan Stanley Bank, Barclays Bank, and Bank of America, claim that Ashford breached its contracts by defaulting on the loans and are seeking the appointment of a receiver to ensure the hotels remain in compliance with their Marriott-brand agreements and retain their value. The lawsuits come as Ashford seeks to hand back a total of 19 hotels to lenders in an effort to strengthen its balance sheet.
The Details of the Lawsuits and Request for a Receiver
According to court documents filed with the U.S. District Court for the Southern District of New York, Morgan Stanley Bank, Barclays Bank, and Bank of America provided a total of $293.8 million in loans for the 14 hotels. The attorney representing the special servicer for the loans, Wilmington Trust, National Association, 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 the foreclosure process is completed. The attorney argues that the hotels require significant cash influx for continued operations, and Ashford does not have the resources to effectively manage them.
Ashford’s Response and Efforts to Improve its Financial Position
Ashford Hospitality Trust CEO Rob Hays stated in July that the decision to hand back the keys to 19 hotels was a significant step to improve the REIT’s capital structure and cash flow. During an earnings call, Ashford’s leaders informed investors that the 19 hotels were still in the portfolio and managed by its affiliate Remington, with the transfer to lenders expected to be completed by the end of the year. The REIT’s executives explained that they chose not to pay the $255 million required to extend the loans tied to the 19 hotels, allowing the lenders to foreclose on the properties.
The Hotels Involved in the Defaulted Loans and Potential Consequences
The Ashford-affiliated entities in default include hotels in Arizona, California, Indiana, Maryland, Nevada, New Jersey, Pennsylvania, and Texas. The lawsuits claiming breach of contract could expose Ashford to additional monetary claims from its lenders, such as accrued and unpaid interest on the loans and attorney’s fees.
Conclusion: Ashford Hospitality Trust’s legal battle with three major banks over defaulted loans on Marriott hotels highlights the challenges faced by the real estate investment trust in the wake of the COVID-19 pandemic. As Ashford seeks to strengthen its balance sheet, the lawsuits and potential foreclosure of the hotels underscore the financial strain experienced by the hospitality industry. The outcome of the legal proceedings will have significant implications for Ashford and could shape the future of its operations and financial stability.
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