Hotel REIT To Turn Control Over To Brookfield In Bankruptcy Deal

Courtyard By Marriott Dallas Market Center

The economy's recent improvements didn't take effect quickly enough to save a hotel REIT focused on urban properties.

Hospitality Investors Trust, a public, nontraded REIT formerly known as American Realty Capital Hospitality Trust, is preparing to hand over all of its assets to Brookfield Asset Management in a prepackaged bankruptcy deal, Bloomberg reports. The REIT announced in its year-end Securities and Exchange Commission filing that it expected to run out of cash needed to pay debt obligations in the first half of this year.

In the same filing, HIT noted that Brookfield would be the only potential source of additional liquidity and that it already owns all of the company's preferred equity, worth $441M. HIT ended 2020 with over $1B in debt obligations and is under forbearance with its mezzanine lenders through the first half of this year, Bloomberg reports. Law firm Proskauer Rose and investment bank Jefferies Financial Group have been advising HIT on its portfolio decisions.

HIT owns around 100 hotels across the U.S., focused in the Southeast but with a scattering of properties in the Northeast and as far west as California. The hotels it manages are all operated under the banners of brands owned by Marriott International, Hilton Worldwide Holdings or Hyatt Hotels Corp.

Though BAM's preferred equity makes up only 43% of the common stock shares of the company, its ability to assume HIT's debt in a takeover would likely wipe out all other ownership shares, Bloomberg reports. Brookfield's ownership deal called for regular cash payments, which HIT had already converted to payment in kind before the latest development.

Though improving weather and widening availability of coronavirus vaccinations have begun to unleash the pent-up demand for travel in the U.S. economy, hotels that depend more on business travel or other nontourism business have not been included in that early turnaround. Eagle Hospitality Trust was a similar casualty, filing for bankruptcy in February.

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