Lawsuits filed by Morgan Stanley, Barclays, and Bank of America seek to appoint a receiver for hotels in default.
Three major banks, Morgan Stanley, Barclays, and Bank of America, have filed lawsuits against Ashford Hospitality Trust, a real estate investment trust (REIT), alleging breach of contract. The banks claim that Ashford defaulted on loans tied to 14 hotels in eight states. In response, they are requesting the court to appoint 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 effort to hand back 19 hotels to lenders in an attempt to stabilize its balance sheet.
Banks Seek Receiver to Preserve Hotel Value
According to court documents filed with the U.S. District Court for the Southern District of New York, the 14 hotels in question were originally backed by $293.8 million from Morgan Stanley Bank, Barclays Bank, and Bank of America. 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 to appoint a receiver. The receiver’s role would be to maintain and preserve the value of the hotels until the foreclosure process is completed, which is expected to take several months.
Cash Infusion Required for Hotel Operations
The attorney, Frederick Whitmer, argues that the hotels in question require a significant influx of cash to continue operating effectively. Ashford Hospitality Trust, as the defendant, does not appear to have the necessary resources to manage the hotels adequately. By appointing a receiver, the banks hope to prevent a severe loss of value to the hotels and secure their remedies under the applicable loans. Given the number of hotels and states involved, the foreclosure process is expected to take several months.
Ashford’s Efforts to Improve Capital Structure
Ashford Hospitality Trust CEO Rob Hays previously stated that the decision to hand back the keys to 19 hotels was a significant step toward improving the REIT’s capital structure and cash flow. The REIT, which has over 100 hotels in its U.S. portfolio, is currently seeking to sell off properties and aggressively market others to pay down its debts accumulated during the pandemic. However, Ashford did not provide immediate comment on the latest legal action.
Plan to Transfer Properties Back to Lenders
During an earnings call, Ashford’s leaders informed investors that the 19 hotels in question are still part of the REIT’s portfolio and managed by its operational affiliate, Remington. The goal is to complete the transfer of these properties back to the lenders by the end of the year. Ashford opted not to pay the $255 million required to extend the loans tied to these hotels, giving lenders the opportunity to foreclose and gain control of the properties.
Defaulted Ashford-Affiliated Entities and Collateral
The Ashford-affiliated entities in default, with hotel properties used as collateral on the loans, include various locations across multiple states. They are as follows:
– Arizona: Ashford Scottsdale LP and Ashford Phoenix Airport LP
– California: Ashford Newark LP, Ashford Oakland LP, Ashford Manhattan Beach LP, Ashford Hawthorne LP, and Ashford San Jose LP
– Indiana: Ashford Tipton Lakes LP
– Maryland: Ashford BWI Airport LP
– Nevada: Ashford LV Hughes Center LP
– New Jersey: Ashford Basking Ridge LP
– Pennsylvania: Ashford Plymouth Meeting LP
– Texas: Ashford Plano-C LP and Ashford Plano-R LP
Conclusion:
Ashford Hospitality Trust is facing legal action from three major banks over defaulted loans tied to 14 hotels. The banks are seeking 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 19 hotels to lenders to improve its capital structure and cash flow. The outcome of these lawsuits could have significant financial implications for Ashford, including additional monetary claims from lenders. As the foreclosure process is expected to take several months, the future of these hotels remains uncertain.
Leave a Reply