Morgans gets extension on $450M loan package

Mortgage backed by beleaguered hotel operator's Hudson New York, Delano South Beach

TRD New York /
Feb.February 18, 2016 04:50 PM

Morgans Hotel Group received a 12-month extension on a $450 million CMBS and mezzanine loan package backed by two of the struggling company’s hotels – the Hudson New York in Midtown and the Delano South Beach in Miami.

The $241.4 million CMBS loan on the properties, which the hotel operator securitized for $257.5 million in May 2013, was due to mature last week before Morgans exercised the first of three options to extend the maturity date by one year. The loan, serviced by Wells Fargo, is now set to mature on Feb. 15, 2017.

The 866-unit Hudson New York, at 356 West 58th Street, is allocated roughly $155.3 million of the balance on the CMBS loan, or nearly 64.35 percent. The 194-unit Delano South Beach assumes the remaining amount – more than $86 million, or 35.65 percent.

The two properties generated aggregate revenues of nearly $128.5 million in 2015 with a combined net operating income of $35.2 million, according to data provided by CMBS analytics firm Trepp.

Alongside the CMBS loan, Morgans announced last week that it had exercised a one-year extension on the maturation of separate, mezzanine loans also backed by the Hudson New York and the Delano South Beach.

The company said it had prepaid $28.2 million of the debt on the total $450 million mortgage – the CMBS loan plus the mezzanine debt – backed by the hotels in conjunction with the extension, bringing its indebtedness on the loans down to $421.8 million.

“The [Hudson and Delano] loan is backed by two trophy hotels, one that most lenders would love to finance,” Trepp research analyst Sean Barrie told The Real Deal.

Despite the strength of the assets backing the CMBS loan, Morgans’ failure to refinance before the end of the initial two-year loan term “is not that crazy, especially with the pessimism currently floating around the CMBS market,” Barrie said.

“Some lenders could begin to scale back in anticipation of risk retention kicking in at the end of 2016, while other smaller shops could be halting their CMBS financing altogether,” he added. “In other words, some of the refinancing slam dunks we’ve seen in the past might not have such a clear path to the basket.”

Morgans saw its stock drop to $0.86 per share on Feb. 10, the day it announced the extension on the mezzanine debt on the two hotels. While shares have since rebounded, closing Thursday at $1.36, the company has been plagued in recent years by shareholder infighting and governance issues.

The hotel operator has been without a CEO since former interim chief executive Jason Kalisman resigned from the position last May. Activist shareholder Gregory Cohen of Rambleside Holdings sent a letter to the Morgans board several weeks ago citing “serious concerns” about the company’s direction and suggesting former Morgans and Wyndham International CEO Fred Kleisner step in as chief executive.

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