Ashford Hospitality Trust faces legal action from three major banks over defaulting on loans tied to 14 hotels, as part of its strategy to hand back properties to lenders to improve its financial position.
Ashford Hospitality Trust, a real estate investment trust (REIT), is facing legal action from Morgan Stanley Bank, Barclays Bank, and Bank of America. The banks are suing the REIT for breaching contracts by defaulting on loans tied to 14 hotels located across eight states. In response, the banks are seeking the appointment of a receiver to ensure the hotels remain in compliance with their Marriott-brand agreements and retain their value. This legal action is part of Ashford’s broader strategy to hand back properties to lenders in an effort to strengthen its balance sheet.
The REIT’s Efforts to Improve Financial Position
Ashford Hospitality Trust, based in Dallas, is seeking to hand back a total of 19 hotels to lenders as part of its strategy to improve its financial position. The REIT aims to shore up its balance sheet by returning these properties, including the 14 hotels in question, to lenders. According to court documents filed with the U.S. District Court for the Southern District of New York, the REIT hopes that this move will help it strengthen its capital structure and cash flow.
Banks Seek Receiver to Preserve Hotel Value
Morgan Stanley Bank, Barclays Bank, and Bank of America originally provided $293.8 million in loans to back the 14 hotels in question. Wilmington Trust, National Association, acting on behalf of Trimont Real Estate Advisors, is the special servicer for these loans. The attorney representing the servicer has requested the court to appoint a receiver to maintain and preserve the value of the hotels during the foreclosure process, which is expected to take several months. The banks argue that the hotels require a significant influx of cash to continue operating effectively, and Ashford Hospitality Trust does not appear to have the necessary resources to manage them adequately.
Ashford’s Response and Future Plans
Ashford Hospitality Trust’s CEO, Rob Hays, stated in July that the decision to hand back the keys to 19 hotels was a significant step towards improving the REIT’s capital structure and cash flow. However, the REIT has not yet responded to the latest legal action taken by the three banks. During an earnings call, Ashford’s leaders informed investors that the 19 hotels, including the 14 in question, are still part of the REIT’s portfolio and are being managed by its operational affiliate, Remington. The REIT aims to complete the transfer of these properties back to lenders by the end of the year.
The Hotels in Default and Potential Monetary Claims
The Ashford-affiliated entities in default, with hotel properties used as collateral on the loans, are located in various states, including Arizona, California, Indiana, Maryland, Nevada, New Jersey, Pennsylvania, and Texas. The lawsuits claiming breach of contract could potentially open Ashford up to additional monetary claims from its lenders, such as accrued and unpaid interest on the loans and attorney’s fees.
Conclusion:
Ashford Hospitality Trust is facing legal action from three major banks over its default on loans tied to 14 hotels. The banks are requesting the appointment of a receiver to preserve the value of the hotels and ensure compliance with Marriott-brand agreements. This legal action is part of Ashford’s broader strategy to hand back properties to lenders in an effort to improve its financial position. As the foreclosure process unfolds, the outcome of these lawsuits will determine the impact on Ashford’s balance sheet and its ability to address its accumulated debts.
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