Starwood Capital Gets 16-Month Term Extension for Big Hotel Loan
Commercial Real Estate Direct · OREST MANDZY — 2022-12-14
Iron Hound Management Company advised Starwood Capital Group in the successfull negotiation of a 16-month term extension for what had been an $800 million loan against a portfolio of 138 limited-service hotels with 10,576 rooms that it owns.
The loan is divided into three pieces and securitized through GS Mortgage Securities Corp., 2017-SLP, which held a $725 million piece; GSMS 2017-GS8, which held a $50 million piece; and GSMS 2018-GS9, with a $25 million piece. It had transferred to special servicing in October as it was expected to default at its maturity that month. It wasn't paid off, but continued to make its regular payments as if it hadn't matured.
The loan's transfer had helped balloon special servicing volumes last month. The modification had been expected, but its timing was in question.
The loan, which pays a fixed coupon of 4.598 percent, was extended to February 2024 and, under certain circumstances, can be extended for another 12 months.
Starwood, a Miami investment manager, also has to sell 48 of the collateral properties quickly, applying proceeds to pay down the loan's principal and will be required to further pay down principal by $15 million by January. That had been its aim. It struggled to refinance the loan as the performance of some of the properties in the portfolio brought down overall performance.
Nine properties were sold in October, another 32 last month and seven are under contract to be sold this month. Sales proceeds, along with allocated balances in the hotels' reserve accounts amount to $177.3 million. And while the loan doesn't amortize, Starwood is required to pay down principal by 90 basis points every month. Last month, it paid $1.2 million. It also has to pay down the loan's principal by $15 million by the end of next month.
The loan now has a balance of $656.97 million.
The collateral portfolio had operated at a 62 percent occupancy rate in 2021 and generated $56.74 million of net cash flow, according to servicer data compiled by Trepp Inc. That compares with the 72 percent occupancy level at which it had operated in 2018 and $82.64 million of cash flow it had generated that year.
In 2017, hotels in the portfolio operated at a 72.7 percent occupancy rate and generated an average daily rate of $110.86, for revenue per available room of $80.64.
This year through June, the portfolio was operating at a 44 percent occupancy level and was on pace to generate $62.44 million of cash flow for the year.
The portfolio's largest property is the 150-room Hilton Garden Inn at 85 Glastonbury Blvd. in Glastonbury, Conn., which is managed by Hersha Hospitality Trust and was constructed in 2003.
Starwood had purchased the properties in 2016 in deals valued at $1.29 billion. A total of 100 of the properties operate under various Marriott limited-service brands, 25 fly Hilton flags while the remainder are branded through Choice, IHG and Carlson. The properties were constructed between 1987 and 2013, with most having been renovated between 2009 and 2017.