Hospitality Investors Trust Inc., a publicly registered non-traded REIT formerly known as American Realty Capital Hospitality Trust, has signed a forbearance agreement with lenders relating to its ground lease for the Georgia Tech Hotel & Conference Center located in Midtown Atlanta.
The REIT purchased the hotel’s leasehold interest in March 2014 as part of a six-hotel portfolio acquisition that had a total purchase price of $101.5 million, excluding closing costs.
According to a filing with the Securities and Exchange Commission, Hospitality Investors Trust sent a notice to the ground lessor stating that it will discontinue paying rent beginning with the payment due on February 1, 2021.
The REIT also notified Crestline Hotels & Resorts LLC, which manages the hotel, that it no longer intends to continue to support the hotel.
Hospitality Investors Trust indicated that the hotel’s operating expenses have exceeded revenues since the beginning of the coronavirus pandemic, and the REIT has previously contributed “substantial” capital to meet its current obligations.
The company indicated that the actions constitute defaults and could result in the termination of the ground lease interest in the hotel and the forfeiture of any equity in the investment.
The lenders agreed to forbear any loan default that may result from the default and termination of the ground lease or its management agreement with Crestline.
The forbearance period ends on April 30, 2021, or earlier, if a forbearance termination event occurs before that date.
The lenders in the agreement are Citibank, Deutsche Bank, JP Morgan Chase Bank, Morgan Stanley, Goldman Sachs, CTBC Bank, and BBVA.
In a previous SEC filing, the REIT disclosed that, due to the impact of the coronavirus pandemic, it expects to have insufficient cash on hand to continue to pay its current obligations during the first half of 2021.
Last month, Hospitality Investors Trust amended its limited partnership agreement with its investment partner, an affiliate of Brookfield Asset Management. The REIT said that the amendment was made “to preserve at least in the short-term the company’s cash position as it continues discussions with [Brookfield] regarding a holistic solution to the company’s liquidity dilemma.”
In June 2020, the REIT entered into forbearance agreements with certain mortgage and mezzanine debt lenders, as reported by The DI Wire.
Hospitality Investors Trust invests primarily in premium-branded select-service lodging properties in the United States. As of the third 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.