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North America

Ashford REIT to Return 19 Hotels To Lenders

Alan Woinski and Kim Woinski
July 9th, 2023 at 9:29 AM EDT

Skift Take

  • Financial markets experienced declines with the DJIA falling 187 points and the S&P 500 down 13 points, while Nasdaq dropped 18 points. However, lodging stocks showed mixed to higher performance despite the overall market decline.
  • Ashford Hospitality Trust (AHT) expects to return 19 hotels to lenders in various cities, including Las Vegas and Atlanta, due to missed repayment deadlines on a $982 million mortgage pool. AHT faced negative equity in the properties and opted not to pay for an extension, potentially impacting the hotel industry’s debt situation.
  • STR’s global “bubble chart” update revealed that 85% of markets saw growth in Revenue Per Available Room (RevPAR) compared to 2019. Occupancy rates played a significant role in driving RevPAR, with coastal countries along the Mediterranean Sea showing strong growth. However, Saudi Arabia experienced the largest decline in RevPAR at 51%.

The DJIA fell 187 points on Friday while Nasdaq was down 18, the S&P 500 fell 13 points and the 10-year treasury yield was up .01 to 4.05%. Lodging stocks were mixed to higher despite the overall market decline. SOND was back up 9%, BHR and AHT were both up 6%.

We expect a lot more jingle mail than just from Park Hotels. Ashford Hospitality Trust provided an update on their mortgage extensions and in that update they disclosed they expect to return 19 hotels to lenders in various cites including Las Vegas and Atlanta. This is part of a $982 million mortgage pool they missed a repayment deadline on last month. AHT said they would have had to pay down $255 million for an extension and spend $80 million in capex through 2025 but the properties already have negative equity. 15 other hotels had mortgage extensions renegotiated with AHT paying down $129 million in debt. Think about all the debt coming due, the new rates these companies will have to pay if they can refinance and whether the paydown for extensions will be worth it. It is going to be a very interesting next few years for hotel owners, lenders and brokers.

CoStar backed up to the mood of attendees of the NYU Hotel Investment Conference about hotel asset transactions. Operators liked what they saw so far this year, and managers and brands felt good about continued pricing power and urban hotel recovery. On the other hand, developers, brokers and finance professionals complained about the lack of activity. The second quarter data hotel transaction data proves out this trend. Total transaction volume was around $3.5 billion, a 70% fall from the second quarter of 2022 and a 49% decline from the second quarter of 2019. When looking ahead to the second half of the year, it is hard to envision a catalyst that will jump-start transaction volume, short of the Fed announcing a decrease in the Fed fund rate. Absent this unlikely scenario, debt costs for hotel transactions will continue to rise and make deals harder to write. Owners who do not have to sell, will not. Owners who have debt coming due will likely try to avoid selling at a discount, and will more likely take on expensive debt for a short period of time, hoping interest rates fall in the coming years.

STR’s global “bubble chart” update as of June 17, 2023 shows that 85% of markets experienced growth in RevPAR when compared to 2019. Additionally, occupancy continues to play a significant role in driving RevPAR. Among all the countries with a room supply of more than 50,000 rooms, Israel, Switzerland, Greece, Italy and France led in RevPAR on an actual basis. All 48 countries in the group reported occupancy rate above 50%,while four reported a four-week average occupancy more than 80% including Greece, the United Kingdom, and the Netherlands. Continuing the same trend as the last review, occupancy remained strong in markets outside of North America, with 21 of 48 counties surpassing their 2019 comparable. Indonesia had the highest occupancy growth, experiencing a 28% surge compared to pre-pandemic levels. The country’s ADR remained steady at +2%. Coastal countries along the Mediterranean Sea, Greece, Italy, Tunisia andMorocco, dominated the top five in terms of RevPAR growth. Among the bottom five performers in RevPAR percentage change, Saudi Arabia experienced the largest decline at 51%. 

The 167-room Hotel ZaZa, in uptown Dallas, along with ZaZa hotels in Houston and Austin, have recently been offered for sale. Developer Charles Givens created the ZaZa Concept and now hopes to sell the properties. Eastdil Secured has been marketing the portfolio of Texas hotels to investors. According to Real Estate Alert, the package of 641 rooms is expected to fetch more than $300 million

A new luxury apartment complex is being planned for downtown Titusville, Florida. The plans include a new hotel as well. Site plans have been approved for the multifamily residential complex called Horizon at Sand Point and is expected to be finished next spring. The ground floor, of the eight-story building, will include retail and offices with residential apartments and condominiums on the upper floors. The property will also include a six-story garage and a seven-story, 120-room Marriott Springhill Suites

The Younes Campus in Kearney, Nebraska is looking to expand. The hospitality district developed by Paul Younes and his family already includes seven hotels, three conference centers and restaurants. By the end of next year, the campus will also include a new dual hotel and a multipurpose district known as Younes Landing. The dual hotel will be four stories and feature the brands Tru by Hilton and Home2 Suites. Expected to open next November, the new hotel will have a pool and a market. Younes Landing will include two buildings. Restaurants and retail space will occupy the main floor and apartments will take up some of the second floor. 

A nearly century-old hotel in downtown Boston, Massachusetts is undergoing renovations ahead of rebranding. The Hilton Boston Downtown/Faneuil Hall will become The Dagny Boston following a $39 million renovation that includes an overhaul of all 403 guestrooms, meeting rooms and an expanded fitness center. According to the hotel’s general manager, the rebranding as an independent hotel is part of owner DiamondRock Hospitality Co.’s broader plans to do so across more of its portfolio. The renovation of the 14-story hotel is about 90% complete ahead of the planned August 1 reopening. The Dagny will include a café and a seafood restaurant. 

Developer Tom Intrator of 18 Main is proposing to build a Dream-branded hotel in downtown Memphis, Tennessee. Plans for the $99 million project include a restaurant, bar and café. Construction is planned to start later this year.

Great Wolf Lodge broke ground on its newest New England location, which is expected to open mid-2025. Located in Mashantucket, Connecticut, it will have 549 rooms and will be adjacent to Foxwoods Resort Casino. Along with the indoor water park, it will have a family entertainment center, 7,500 square feet of flexible conference space with breakout rooms and several dining options. 

IHG Hotels & Resorts announced the opening of a new Holiday Inn Express hotel in Strathroy, Ontario. Owned by 2414959 Ontario Inc. and managed by Sunray Group, the Holiday Inn Express Strathroy features 90 guestrooms and 702 square feet of meeting space.

FDR Miami Hotel LLC and Parmco Airport Hospitality LLC are competing to secure a 50-year lease from Miami-Dade county to build a new hotel connected to the Miami International Airport. FDR’s proposed total budget is around $265 million and Parmco’s is around $241.7 million. The commission is expected to make its decision on July 18. If selected, FDR would build a Westin hotel and Parmco would build a Hilton hotel.

Steel Hospitality LLC broke ground on a new hotel along Route 33 in Northampton County. The WoodSpring Suites extended-stay hotel will feature 122 suites across four stories in Palmer Township, Pennsylvania. Steel Hospitality is eyeing a summer 2024 opening of the new hotel.

A historic downtown building in Madison, Wisconsin will open in January 2024 as a hotel-apartment hybrid, according to NCG Hospitality. The Saddlery will offer 46 suites, fitness facilities and housekeeping.

The SureStay Plus by Best Western Pigeon Forge has opened in Pigeon Forge, Tennessee. The completely reconstructed $6 million hotel features 65 guestrooms, guest laundry facilities and a business center.

Best Western Hotels & Resorts announced the opening of the Best Western Lubbock West Inn & Suites in Lubbock, Texas. The fully updated property features 75 guestrooms, outdoor pool and spa, fitness center, meeting space and guest laundry facilities. Tariq Farooq is the owner of the Best Western Lubbock West Inn & Suites.

During a Blacksburg, Virginia Town Council session, members reviewed a request to further develop the future Midtown site. The proposed Midtown development would include mixed residential and commercial spaces and now developers want to build a second hotel with 144 guestrooms. 

Sportiff USA wants to build a multi-million dollar sports and entertainment complex in Conyers, GeorgiaAtlanta Marketing Agency has partnered with Sportiff USA to build the proposed venue which would include condos, a hotel, restaurants, and a 10,000-seat stadium. 

Hotel Mankato LLC purchased the City Center Hotel, in Mankato, Minnesota, from MHIH for $5.4 million. The new owners intend to combine the City Center with the adjacent Landmark Center building to create a combined 173 hotel rooms with new amenities including solar panels and a rooftop lounge. TPI Hospitality is a partner in the development. The Landmark Center will be converted into a 40-room hotel and will also include upscale apartments on the fourth floor.

JLL Capital Markets arranged the sale of the Home2 Suites by Hilton, a 103-key hotel in Blacksburg, Virginia and the sale of the Residence Inn Tuscaloosa, a 111-key hotel in Tuscaloosa, Alabama. JLL represented the seller, KM Hotels and procured the buyer, Mission Hill Hospitality.

Berkadia announced the sale of the Hampton Inn & Suites Pittsburgh Meadowlands located in Washington, Pennsylvania. The 103-room hotel features a fitness center, indoor pool, business center and 648 square feet of meeting space. Berkadia Hotels & Hospitality led the transaction on behalf of the seller.

Fresh off plans to surrender two of San Francisco’s largest hotels, Park Hotels & Resorts is suing the city over what it alleges were “illegally and erroneously imposed” tax assessments on three other local hotels it acquired in 2019. In three separate lawsuits filed in San Francisco Superior Court on June 27, Park Hotels & Resorts said city tax assessments overvalued the 360-room Le Meridien San Francisco, the 171-room Hotel Adagio and the 316-room Hyatt Centric Fisherman’s Wharf. It took ownership of the hotels through its 2019 merger with Chesapeake Lodging Trust. Park Hotels is seeking a tax refund of about $8 million and additional payment factoring in legal costs and accumulated interest. Park Hotels already sold two of those properties, the Le Meridien and the Hotel Adagio, separately to KHP Capital Partners and to an affiliate of Magna Hospitality group, respectively, in 2021. Park Hotels still owns the Hyatt Centric Fisherman’s Wharf.

Alan Woinski and Kim Woinski
July 9th, 2023 at 9:29 AM EDT

Companies: Ashford Hospitality Trust, Best Western, Best Western Hotels & Resorts, Braemar Hotels & Resorts Inc., Chesapeake Lodging Trust, Choice Hotels International, Dream Hotels, Great Wolf Resorts, Hilton, Hilton Hotels & Resorts, Holiday Inn Express, Home2 Suites by Hilton, Hyatt Centric, Hyatt Hotels Corporation, IHG Hotels & Resorts, JLL, Le Meridien, Marriott International, Park Hotels and Resorts Inc., Residence Inn by Marriott, Sonder Holdings Inc., SpringHill Suites, SureStay Plus, TPI Hospitality, Tru by Hilton, Westin Hotels & Resorts, Woodspring Suites, ZaZa

Locations: Alabama, Atlanta, Austin, Connecticut, Dallas, Florida, Houston, Las Vegas, Memphis, Miami, Minnesota, Nebraska, Ontario, Pennsylvania, Pittsburgh, San Francisco, Tennessee, Texas, Virginia, Wisconsin

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