Ashford Hospitality Trust Inc is a real estate investment trust that invests in the hospitality industry through direct real estate, equity, and debt. Credit: Pavel Kapysh via Shutterstock.

Dallas-based Ashford Hospitality Trust Inc has announced that it expects to return 19 hotels to their lenders, including properties in Las Vegas and Atlanta. The decision comes after a $982 million mortgage pool, of which these hotels are a part, missed a repayment deadline in June 2023.

Rather than injecting more cash into the properties, Ashford Trust has chosen not to retain ownership.

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To continue owning the hotels, Ashford Trust needed to pay down approximately $255 million to extend the financing, along with an additional $80 million for capital expenditures by 2025.

But the equity in the properties was already in negative territory, given comparable sales and brokers’ opinions of value.

Market challenges and future debt maturity

Ashford Trust has therefore stated that the most likely outcome will be a consensual transfer of the hotels to their respective lenders. The company has already managed to negotiate debt extensions for 15 other hotels in its portfolio, providing a total of $129 million in paydowns.

This move aligns with a trend observed in the industry, as lenders request borrowers to pay down debt or contribute extra capital to extend loans as interest rates rise and property values decline.

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The Ashford Trust points out that the majority of the hotels they expect to return are located in markets that have faced significant challenges during their post-pandemic recoveries.

Some of these markets are not projected to reach pre-pandemic revenue levels until 2025 or 2026. Among the properties to be returned are hotels with well-known brands, including Residence Inn, SpringHill Suites and Marriott.

Ashford Trust’s next upcoming debt maturity is a Morgan Stanley loan pool secured by 17 hotels, set to mature in November 2023.

Rob Hays, Ashford Trust’s president and CEO, has expressed confidence that this loan can be extended without requiring a paydown.