Hospitality Investors Trust Inc., a publicly registered non-traded REIT formerly known as American Realty Capital Hospitality Trust, has again amended its limited partnership agreement with its investment partner, Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC. Brookfield holds all of the outstanding Class C units, which are limited partner interests in the REIT’s operating partnership.
Hospitality Investors Trust has been engaged in ongoing discussions with Brookfield about possibly entering into a series of deleveraging or restructuring transactions that would include, among other things, filing a pre-packaged Chapter 11 bankruptcy. The REIT previously disclosed its “liquidity dilemma,” and has made a series of moves to preserve its short-term cash position.
In April 2017, Hospitality Investors Trust became a self-managed REIT following the close of an initial $135 million investment from an affiliate of Brookfield Asset Management, which committed $400 million in convertible preferred limited partnership units of the REIT’s operating partnership.
Brookfield was entitled to receive fixed, quarterly cash distributions at a rate of 7.50 percent per year, as well as fixed, quarterly distributions paid in additional Class C units at a rate of 5 percent per year. Following two previous amendments to its LP agreement with Brookfield, the fourth quarter 2020 and first quarter 2021 distributions were paid in the form of Class C units at a rate of 12.5 percent per year, instead of cash.
The amendments also provided that, if a restructuring agreement was not reached by April 30, 2021, the REIT’s operating partnership would be required to redeem 60 percent of the Class C units that were paid to Brookfield as distributions for both quarters.
In this latest amendment, Brookfield has agreed to extend the date until May 14, 2021.
In February 2021, the REIT defaulted on the ground lease of Georgia Tech Hotel & Conference Center located in Midtown Atlanta, which it purchased in March 2014 as part of a six-hotel, $101.5 million portfolio acquisition. The ground lessor terminated the lease on March 31, 2021.
The Georgia Tech hotel served as collateral for a mortgage loan that was secured by interests in 15 hotels. A forbearance agreement was reached with the lenders under the loan, which is set to expire on June 30, 2021, or earlier, if a pre-packaged bankruptcy becomes effective or if a forbearance termination event occurs before that date.
Hospitality Investors Trust invests primarily in premium-branded select-service lodging properties in the United States. As of the fourth quarter of 2020, the REIT’s $2 billion hotel portfolio included 101 properties. The offering was declared effective in January 2014 and suspended sales activities in November 2015 after raising $903 million in investor equity. The company severed ties with its external advisor, an affiliate of AR Global, and became self-managed in 2017.