By Alex Barreira and Emma Dooling
Ashford Hospitality Trust plans to surrender its SpringHill Suites Philadelphia hotel in Plymouth Meeting to the lenders behind a commercial mortgage-backed securities loan securing the property.
The Montgomery County hotel is among 19 that the Dallas-based real estate investment trust will return to lenders after the properties failed to meet debt yield tests or attract offers for more than the debt that is owed on them. Ashford said in a press release issued last week that the hotels would have required capital expenditures averaging more than 18% of annual revenues through 2025, compared with the industry standard benchmark of between 4% and 5% of annual revenues.
Ashford, which focuses primarily on upscale and full-service hotels, said it would need to pay down approximately $255 million on the loans in order to keep all 19 hotels it plans to surrender. The company "believes that there is negative equity value" in following that route, so it has opted to return the keys instead.
"For the most part, the [hotels] are located in markets that have experienced significant headwinds throughout their post-pandemic recoveries, and a number of these markets are not forecasted to reach pre-pandemic top-line levels until 2025 or 2026," the company said.
Ashford Hospitality Trust (NYSE: AHT) owns 34 hotels across the country secured by six CMBS loans, none of which passed their required debt yield tests, the company said. Under terms of the loans, each of which had an initial maturity date in June, Ashford could opt to extend the loans by making additional payments on them. The company did choose to extend the loans related to 15 of those hotels for a combined cost of $129 million, while returning the rest of the hotels to lenders that include Bank of America, Barclays Bank and Morgan Stanley.
Among those Ashford said it has chosen to extend are loans for two other area hotels, the Embassy Suites Philadelphia Airport and the Sheraton Bucks County Langhorne, though the Sheraton has been put up for auction.
Of Ashford's three Philadelphia-area properties, the 199-room SpringHill Suites, a Marriott brand located at 430 Plymouth Road across from the Plymouth Meeting Mall, was the worst performing in 2022. The hotel recorded total revenue of $4.37 million, per CMBS reports.
Ashford took on ownership of the SpringHill Suites Philadelphia in 2007 as part of a 51-hotel portfolio it acquired for $2.4 billion, according to a company release announcing the deal.
The hotel was built in 2001 and had an appraised valued of $26 million in 2018, CMBS reports show, but the property's assessed value dropped 57% to $11.2 million when it was appraised again in July 2020.
The Embassy Suites by Hilton Philadelphia Airport, located at 9000 Bartram Ave., was Ashford's best performing Philadelphia-area property in 2022. The 263-key property generated more than $13 million in revenue last year and was most recently appraised at $34.8 million in July 2020, according to CMBS reports.
Ashford recently put the Sheraton Bucks County Langhorne, a 186-key hotel located at 400 Oxford Valley Road, up for auction with a starting bid of $3.9 million. Built in 1986, the Sheraton recorded revenue of almost $7.8 million last year and was last appraised at $10.9 million in 2020, CMBS reports show.
The auction for the Sheraton Bucks County Langhorne will take place from Aug. 7-9 on the online commercial real estate auction platform RI Marketplace. A member of the JLL Hotels & Hospitality team representing Ashford in the auction previously declined to comment.
Ashford said last week that in addition to seeking refinancing or extensions on the loans, it also explored selling the assets, though it's not clear to what extent the Philadelphia properties specifically were marketed or if they were advertised individually.
"At this time, it appears that the most likely outcome will be a consensual transfer of these hotels to the respective lenders," the company said.