Struggling hotel company handing Brookfield the keys

Hospitality Investors Trust to be acquired by property giant through bankruptcy

Photo illustration of Brookfield Property Partners’ Brian Kingston (Brookfield, iStock)
Photo illustration of Brookfield Property Partners’ Brian Kingston (Brookfield, iStock)

Out of options, a struggling hospitality trust is handing over its control to Brookfield Asset Management through the bankruptcy process.

Hospitality Investors Trust is negotiating a deal that would give Brookfield financial control over its 100 hotels as part of a possible Chapter 11 filing, Bloomberg News reported.

Hospitality Investors Trust CEO Jonathan Mehlman

Hospitality Investors Trust CEO Jonathan Mehlman

The trust doesn’t have enough cash to fund its duties, and Brookfield, its largest investor, might be its only source of additional liquidity, the publication reported. The asset management company holds all $441 million worth of its preferred equity.

In December, Hospitality Investors Trust turned the cash payment to payment-in-kind to preserve liquidity.

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The REIT primarily owns Hilton, Marriott and Hyatt brands. Previously known as American Realty Capital Hospitality Trust, it came under fire for a 2017 investment deal that gave Brookfield substantial control over the company and led Hospitality Investors to suspend stockholder distributions.

Hospitality Investors is among a growing number of U.S. hotel companies that have considered bankruptcy to address challenges caused by the Covid-19 pandemic.

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California-based REIT Sunstone Hotel Investors gave control of the Hilton Times Square to its special servicer, Torchlight Investors, in December. Ashford Hospitality Trust gave up a portfolio of 13 hotels as it struggled to stem losses and fumbled with forbearance agreements in an effort to avoid defaults.

Hospitality Investors Trust is under forbearance with its mezzanine loan lenders until June 30, according to Bloomberg News. The loan was modified to include a new repayment schedule and waive any default from a bankruptcy filing.

[Bloomberg News] — Cordilia James