Hospitality Investors Trust Enters Forbearance Agreement
June 15, 2020
On June 10, 2020, Hospitality Investors Trust, Inc. (the “Company”) and its operating partnership, Hospitality Investors Trust Operating Partnership, L.P. (the “OP”), together with certain wholly-owned subsidiaries of the OP, entered into forbearance agreements with the lenders under certain of the Company’s mortgage and mezzanine indebtedness (the “92-Pack Loans”).
The Company’s 92-Pack Loans comprise three separate loans each entered into on May 1, 2019, with an aggregate outstanding principal balance as of March 31, 2020 of approximately $852.4 million secured by the Company’s interest in 63 hotel properties: (i) a mortgage loan with Wells Fargo Bank, National Association, as trustee for the benefit of the certificate holders of HPLY Trust 2019-HIT, Commercial Mortgage Pass-Through Certificates, Series 2019-HIT and the RR Interest Owners (the “Mortgage Lender”); (ii) a senior mezzanine loan with Nonghyup Bank, as Trustee of Meritz Private Real Estate Fund 20; and (iii) a junior mezzanine loan with CC6 Investments Ltd. and NC Garnet Fund, L.P.
As previously disclosed, during April and May 2020, as part of ongoing liquidity preservation measures being taken by the Company in response to the coronavirus pandemic and in conjunction with actions taken by the Company’s franchisors temporarily suspending obligations of hotel owners to perform capital improvements and fund capital reserves, the Company decided not to make required capital reserve payments to the Mortgage Lender which resulted in events of default under the 92-Pack Loans. The forbearance agreements relate to those events of default.
Pursuant to the terms of the forbearance agreements:
• the Company’s capital reserve obligations with respect to its brand mandated property improvement plans (“PIP Reserves”), starting with the payment that was not made in April 2020, have been deferred for nine months and re-scheduled, such that no further PIP Reserve payments are required during 2020, and the total of $8.3 million in PIP Reserve payments that had been scheduled to be made between April 2020 and May 2021 (the “Deferred PIP Amount”) is now scheduled to be made between January 2021 and February 2022 (including $5.8 million of PIP Reserves that had been scheduled to be made during 2020);
• the Company’s monthly capital reserve obligations with respect to repair and replacement of furniture, fixtures and equipment and routine capital expenditures will not be required for April through December 2020; and
• the Company has agreed to pay all excess cash flows from the 63 hotel properties that serve as loan collateral (after payment of interest on the 92-Pack Loans, property operating expenses and certain other amounts) to the account for PIP Reserves with the Mortgage Lender, with such funds to be applied to future PIP Reserve obligations, until the entire Deferred PIP Amount has been deposited.
The existing events of default will continue to exist in full force and effect until the entire Deferred PIP Amount has been deposited and certain other conditions are satisfied, but the lenders have agreed to forbear from collecting default interest and enforcing their rights and remedies under the loan documents as a result of the events of default during that period.
Source: SEC
