The owner of a trendy hotel-meets-hostel downtown defaulted on its debt to the tune of $71 million and faces foreclosure.
The borrower, a company connected to Generator Hostels, failed to make payments to lender Trimont on a loan tied to Freehand Los Angeles Hotel at 416 West 8th Street, according to a notice of default and election to sell recorded this month.
London-based private equity firm Queensgate Investments, which owns Generator, purchased the Freehand Hotels brand six years ago for $400 million from Sydell Group, in a deal that included hotels in Miami, Chicago and New York — about 1,000 keys — all operated by Generator. Queensgate later refinanced the acquisition for $230 million.
The firm did not immediately respond to a request for comment.
The property, on the corner of 8th and Olive streets, has 167 private rooms, 59 shared rooms and a rooftop bar called the Broken Shaker. The debt amounts to $314,000 per key.
It was once the 13-story, Beaux-Arts-style Commercial Exchange Building, built in 1924, before Sydell Group redeveloped it in partnership with billionaire Ron Burkle’s Yucaipa.
Freehand Hotels is offering concessions, to book three nights and only pay for two, for all of its locations, including Downtown Los Angeles, according to its website. But it doesn’t appear to have distress related to the others.
Los Angeles’ hotel market is struggling, and downtown is a hot mess.
Homelessness is an ever-prevalent issue, and recent headlines dinged the region’s hospitality industry. Tourism was already dragging, post-pandemic and post-wildfires, when President Donald Trump’s immigration crackdown started, followed by protests.
Besides that, costs are increasing for hoteliers amid a challenging regulatory environment.
Separately, Brookfield Asset Management, is betting on Europe. The company purchased Generator Hostels’ European brand from Queensgate Investments in May for $869 million in a 15-hotel deal.
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