As closed hotels in South Florida lose revenue and fire employees due to the coronavirus, they face debt payments that can be difficult to restructure.
A $ 59 million mortgage-backed commercial securities loan to the 311-room DoubleTree Resort by Hilton Hollywood Beach on 4000 South Ocean Drive is the latest special service loan. The loan has a balance of $ 55.8 million and has been in arrears for less than a month, according to data provider Trepp.
The property is owned by Williamsburg, Virginia, based at Sotherly Hotels. It features 10,000 square feet of meeting space, a resort-style pool, a seafood bar and restaurant. The loan is a refinancing that originated in 2015.
Dave Folsom, president and CEO of Sotherly Hotels, did not immediately return a request for comment.
CMBS loans are secured by a mortgage on a commercial property. The loan is accumulated in a set of loans and sold as bonds to investors. When the borrower misses a payment or requests modifications, CMBS loans are purchased by a third party company known as a “special service provider”. Upon entering into special services, the CMBS loan can be reworked or restructured or the special service provider can find another operator to take control of the property. Industry experts say that modifying CMBS loans can take months or years, during which time the borrower cannot refinance or take on additional debt.
CMBS loans are often considered to be more risky than conventional loans due to the difficulty of modifying them due to the borrower’s obligations to bondholders.
The South Florida hotel industry $ 4.2 billion in CMBS debt, according to Trepp.
Last week, a $ 975 million loan from CMBS for Jeffrey Soffer’s Fontainebleau Miami Beach, he entered special service. The loan is the largest CMBS hotel loan in South Florida.
Brett Mufson, president of Fontainebleau Development, said the hotel is talking to its creditors, bondholders and employees about modifying the hotel’s loan documents. He said the loan is not in default on its payments.
South Florida hotels have been suffering from the impact of the coronavirus for weeks.
Broward County has ordered all non-core businesses to be closed as of March 23. With this request, hotels were not allowed to accept new reservations, with the exception of “essential guests”, such as first responders or health professionals. Since then, hotels have fired thousands of employees.
On Tuesday, Visit Florida President and CEO Dana Young said in a conference call with members of the statewide reopening task force across the state hotel recipe it fell more than $ 1.6 billion between March 1 and April 11 compared to the same period last year.