By Craig Karmin and Konrad Putzier
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 30, 2020).
Lawmakers and businesses are pushing the U.S. government to
offer debt relief to hundreds of small hotel owners who borrowed
with the help of bond markets.
But the biggest beneficiaries of any assistance could be large
real-estate owners affiliated with properties that owe troubled
hotel debt, according to an analysis by hotel union Unite Here
International, which analyzed public filings and data from research
firm Trepp LLC as of June 16.
The hotel owner with the most money in these troubled commercial
mortgage-backed-securities loans is Monty Bennett. The Dallas
businessman is affiliated with companies including Ashford
Hospitality Trust and Braemar Hotels & Resorts that had loans
valued at nearly $2.3 billion with special servicers, according to
Unite Here's analysis of the Trepp data.
Meanwhile, Colony Capital Inc., a $50 billion private-equity
firm run by Thomas Barrack, owed about $2 billion, according to the
The third-biggest hotel borrower named in the analysis was the
real-estate firm Hospitality Investors Trust Inc., with $723
million owed in loans with special servicers. Brookfield Asset
Management, an investment firm with more than $500 billion in
assets under management, is a stakeholder in the firm and appointed
two board members. Hospitality Investors Trust recently reached an
agreement with lenders for the debt that was in special servicing,
according to a securities filing.
Treasury Secretary Steven Mnuchin acknowledged the CMBS issue at
a recent Senate hearing and suggested that the administration might
need to come back to Congress to work on a potential fix. Fed
Chairman Jerome Powell indicated in House testimony that the issue
might be better addressed by Congress.
The hotel industry was among the hardest hit by the pandemic,
causing thousands of properties to close and occupancy rates to
fall below 25%, according to data tracker STR. Occupancy levels
nationwide have been rising for weeks and are now back above 40%.
But it is still well below that mark in resort hot spots like
Orlando, Fla., and Hawaii, and lower in big cities such as Boston
Representatives of the real-estate companies either declined to
comment or didn't respond to requests for comment.
Last month in a webinar interview, Mr. Bennett made a case for
government aid for the lodging business. "The hotel industry needs
help, " he said. "And giving hoteliers debt on top of the debt that
they already can't repay seems foolish. The industry needs grants
along the lines of what the airline industry has received."
Mr. Bennett's companies were also among the biggest
beneficiaries of the government's Paycheck Protection Program,
receiving more than $68 million in assistance. He ultimately
decided to return the money after the Treasury Department said that
borrowers with access to capital markets or other sources of funds
didn't qualify for government assistance.
Hotel operators involved in the CMBS financing market have some
particular challenges because the market wasn't designed to provide
borrowers with temporary payment relief. Those who need to pause
payments must work with special servicers, which are hired to
negotiate on behalf of the bondholders that own the loans.
The Fontainebleau hotel in Miami Beach is in discussions with
lenders related to CMBS debt even though it is current on its debt
service, according to Brett Mufson, president of Fontainebleau
Development, which owns the hotel.
The two biggest borrowers represented about 31% of the $14
billion of hotel CMBS debt with special servicers as of May, the
Unite Here analysis shows. A representative for the union said it
was important to determine who would benefit from any government
relief on CMBS debt.
More than half of the hotel debt is owed by asset managers,
public companies or other large firms, the union analysis added,
which suggests any government bailout effort could potentially
steer much of the assistance toward companies with more financial
It couldn't be determined if the Federal Reserve and Treasury
will enact specific relief for borrowers who used the CMBS market,
or if they do, how they will handle larger borrowers versus smaller
The majority of the troubled hotel loans tracked by Trepp --
more than 200 -- had balances of $20 million or less, a sign that
most of the borrowers are smaller businesses. These firms often
don't have the resources to work through their obligations during
this difficult period without government assistance.
"Only 20% of hotels with CMBS loans have been able to obtain any
debt relief," said Chip Rogers, chief executive of the American
Hotel & Lodging Association. "The impact has been most
significant for our small business operators who represent 61% of
all hotel properties in the U.S."
Rep. Van Taylor (R., Texas), who is leading the bipartisan group
of lawmakers in the effort to get aid for hotel borrowers, said:
"These industries don't need a bailout, but they do need
flexibility and support to keep their doors open, provide millions
of jobs in communities across the country, and drive their local
Cecil P. Staton, CEO of the Asian American Hotel Owners
Association, said his organization supports government aid related
to troubled CMBS loans.
"The hotel industry is comprised primarily of small-business
owners, and the pandemic's economic impact is leaving them
struggling to stay current on their debt obligations," he said.
"The impact of these potential delinquencies and foreclosures would
have a disastrous ripple effect on employees, vendors, and local
governments' tax revenues."
Write to Craig Karmin at firstname.lastname@example.org and Konrad Putzier
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