Three Big Banks Sue Ashford Hospitality Trust Over Defaulted Loans on 14 Hotels

Three Big Banks Sue Ashford Hospitality Trust Over Defaulted Loans on 14 Hotels

Lawsuits Filed to Appoint Receiver and Protect Marriott-brand Agreements

Ashford Hospitality Trust, a real estate investment trust (REIT) based in Dallas, is facing legal action from three major banks over defaulted loans tied to 14 hotels in eight states. The banks—Morgan Stanley Bank, Barclays Bank, and Bank of America—are seeking court intervention to appoint a receiver who can ensure the hotels remain in compliance with their Marriott-brand agreements and retain their value. This move comes as Ashford Hospitality Trust aims to hand back a total of 19 hotels to lenders in an effort to strengthen its balance sheet.

1: The Lawsuits and Request for a Receiver

The three banks originally provided $293.8 million in financing for the 14 hotels, according to court documents. The attorney representing the special servicer for their loans, acting on behalf of Trimont Real Estate Advisors, has requested the court to 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 a significant influx of cash to continue operating effectively, and the defendants, Ashford Hospitality Trust, do not appear to have the necessary resources. The appointment of a receiver aims to prevent a severe loss of value to the hotels and secure the plaintiff’s remedies under the loans.

2: Ashford Hospitality Trust’s Strategy and Response

Ashford CEO Rob Hays stated that handing back the keys to 19 hotels is a significant step to improve the REIT’s capital structure and cash flow. The REIT, which manages over 100 hotels in its U.S. portfolio, has not yet responded to the latest legal action. During an earnings call, Ashford’s leaders informed investors that the 19 hotels are still in the portfolio and managed by its operational affiliate, Remington. The company aims to complete the transfer of these properties back to lenders by the end of the year. Ashford chose not to pay the $255 million required to extend the loans tied to these hotels, giving lenders the opportunity to foreclose on the properties.

3: Hotels in Default and Collateral Properties

The Ashford-affiliated entities in default, with hotel properties used as collateral, include locations in Arizona, California, Indiana, Maryland, Nevada, New Jersey, Pennsylvania, and Texas. These hotels are part of the 19 properties that Ashford intends to hand back to lenders. The list of hotels includes Courtyard by Marriott Scottsdale Old Town in Scottsdale, Courtyard by Marriott Silicon Valley in Newark, and Residence Inn by Marriott Las Vegas Hughes Center.

4: Potential Monetary Claims and Debt Repayment Efforts

The lawsuits alleging breach of contract could expose Ashford to additional monetary claims from its lenders, including accrued and unpaid interest on the loans and attorney’s fees. Ashford has been actively working to pay down its debts, selling off properties where possible and aggressively marketing other hotels. The REIT aims to repay Oaktree Capital Management, which loaned Ashford $200 million in January 2021, next year.

Conclusion:

The legal action taken by three major banks against Ashford Hospitality Trust highlights the challenges faced by the REIT as it seeks to address its financial difficulties caused by the COVID-19 pandemic. The appointment of a receiver and the potential foreclosure of these hotels could have a significant impact on Ashford’s portfolio and overall financial health. As the lawsuits progress, the outcome will determine the future of these hotels and the broader implications for the hospitality industry.