Trump-Connected Hotel Owners Lobby For Federal Bailout On CMBS Loans
Some of President Donald Trump's biggest political allies in the hotel industry are pleading for federal bailouts.
Thomas Barrack, Monty Bennett and Doug Manchester have given millions of dollars to Trump's campaign and inauguration funds, and their companies are saddled with billions of dollars in CMBS debt that is either distressed or already in default, The New York Times reports. Trade organizations for the industry like the American Hotel & Lodging Association have urged their members to lobby Congress, Trump and the United States Federal Reserve for assistance.
Barrack's company, Colony Capital, defaulted in May on over $3B in CMBS loans tied to, among other portfolios, 174 hotel properties. In June, The Real Deal reported the company's hotel debt issues might be even more extensive. Though Barrack's firm has spent billions acquiring data infrastructure properties, it ceased payments on its hotel debt soon after the coronavirus pandemic hit and could lose possession of two portfolios totaling 137 buildings to debt servicers, TRD reports.
Bennett's three companies, Ashford Inc., Ashford Hospitality Trust and Braemar Hotels & Resorts, had been tied to controversy regarding federal aid months ago. The companies received over $50M in loans from the Paycheck Protection Program in the spring before returning the money over outcry that it had manipulated a program meant to save small businesses. Bennett's companies have stopped payments on $2.6B in CMBS debt, the NYT reports.
Manchester Financial Group, owned by erstwhile Trump ambassador appointee to the Bahamas Doug Manchester, was labeled by analysis firm Trepp as in "imminent" danger of default on a $300M loan against the Fairmont Austin hotel in Texas' capital city in June. Manchester disputed the notion that it was in danger of default through a spokesperson's comment to the NYT.
CMBS loans are often the first to default during a downturn because of the rigidity of their terms, which leave little room for restructuring or long-term forbearance before they mature, according to experts interviewed by TRD and the Times. Industry representatives claimed in letters to Congress that if major portfolios go into default, large swaths of hotels would be forced to close permanently, eliminating thousands of jobs, Rep. Van Taylor (R-TX) said in a statement introducing an aid bill.
In June, hotel employee union UNITE HERE sent its own letter to Congress asking it not to bail out the hotel industry, claiming that over 90% of its members had already been laid off and that federal bailout dollars would go primarily into the pockets of the private equity players that deal in CMBS loans.
"The calamitous job losses in the hotel industry resulted from a collapse in global demand for travel and tourism-related services," the letter read. "It won't be solved by taxpayers funding the indebtedness of real estate owners who took out risky CMBS loans."
UNITE HERE called out Bennett's and Barrack's connections to Trump as reasons to be suspicious of bailing out their companies, which have the largest and second-largest CMBS defaults in the industry.
Bennett and Barrack have claimed in the past few months that their connections to Trump have made the federal government unfairly cautious in providing assistance so as to avoid the appearance of playing favorites in an election year, the Times reports. Treasury Secretary Steven Mnuchin has said he has so far not been able to find legal ways to apply on-the-books federal assistance programs to commercial real estate.