INVESTMENT
debt , and entered into a restructuring support agreement with its largest investor , Brookfield Strategic Real Estate Partners II Hospitality REIT II .
Recent noteworthy lodging sector single asset strategic defaults ( aka jingle mail ) and foreclosures reflects sponsors and / or lenders losing patience waiting for room night demand to return . Examples during the recent past include :
• Sunstone Hotel Investors executed an agreement with the holder of a mortgage loan secured by the 476-room Hilton Times Square in New York City . In exchange for a US $ 20 million payment , the credit of approximately US $ 3 million of restricted cash held by the noteholder , the assignment of Sunstone ’ s interest in the hotel , and the retention of certain potential employee related obligations , Sunstone satisfied all outstanding debt obligations , including regular and default interest or late charges .
• Mack Real Estate completed UCC foreclosure proceedings against the owners of a seven-hotel portfolio in Manhattan , a joint venture between Hersha Hospitality Trust and Chinese investment firm Cindat Capital Management .
• The relatively new 61-room Park James Hotel in Menlo Park , California , proximate to the headquarters of Facebook and Google , and near Stanford University , has been seized by Bixby Bridge Capital , a private real estate investor whose specialties include the purchase of delinquent property loans .
• A New York State Supreme Court has granted a group of lenders led by Natixis SA the right to foreclose on the 452-room The Times Square Edition hotel in New York City , that also includes retail space and digital signage .
• Foreclosure lawsuits against the owners of Chicago , Illinois-area hotels include the JW Marriott Chicago , the Palmer House Hilton Chicago , the Felix Hotel , the Holiday Inn Chicago Magnificent Mile and the Hilton Orrington in downtown Evanston .
• Motcomb Estates , an investment vehicle for billionaire brothers Simon and David Reuben , is pursuing the UCC foreclosure against the 190- key West Hollywood Edition in West Hollywood , California .
• Ladder Capital sold the Washington Park Hotel in Miami Beach for US $ 43.8 million , after foreclosing on the property when it was owned by the Witkoff Group .
• Ahead of a planned foreclosure auction of the Hyatt Regency Austin hotel , Host Hotels & Resorts purchased the property for US $ 161 million in cash .
• Prior to another scheduled foreclosure auction , Host Hotels & Resorts acquired the former 223- room Hotel Alessandra in Houston , Texas for US $ 65 million .
• The developer of the Moxy NYC Downtown hotel in New York City transferred ownership of the property to its lender AllianceBernstein .
• German lender DekaBank foreclosed on the New York Marriott East Side hotel in New York CIty due to a defaulted US $ 53 million mortgage .
An inflection point will soon be reached where both lenders and borrowers have no more to “ give ,” and loan defaults and foreclosures are expected to increase as forbearance periods end . Furthermore , an uncertain recovery trajectory coupled with looming capital expenditures and property improvement plans may force owners to finally capitulate , as many lenders will ultimately lose patience and demand recapitalization and / or enforcement of their remedies .
During the remainder of this year , and well into 2022 , expect more hotel sale transactions , as well as more deployment of rescue capital for troubled lodging deals . Working out distressed hotel assets will take time beyond even when sector supply and demand metrics stabilize , which could be several more years .
Savvy investors who deploy capital into U . S . hotels at market pricing , and if need be , are ready , willing , and able to hold for 10 years , will invariably achieve superior risk adjusted returns when compared with other asset classes .
60 hotelsmag . com September / October 2021