Digital Bridge, formerly Colony, sells off remaining hotel portfolio

Sale is part of a settlement with CMBS bondholders

National /
Aug.August 18, 2021 11:32 AM
Digital Bridge’s Marc Ganzi and the Sheraton San Jose Hotel and Four Points by Sheraton Pleasanton (Ganzi by Sonya Revell, Marriott)

Digital Bridge’s Marc Ganzi and the Sheraton San Jose Hotel and Four Points by Sheraton Pleasanton (Ganzi by Sonya Revell, Marriott)

Digital Bridge, the real estate investment trust formerly known as Colony Capital, is finalizing the disposition of the rest of its troubled hotel portfolio.

The company found a buyer for a 48-hotel portfolio that spans 21 states, according to a motion filed in a lawsuit in the Supreme Court of New York in Dutchess County on August 16.

The sale was announced as part of a settlement between the company and a trust for bondholders of mortgage-backed securities backed by the portfolio. The settlement states that the buyer would assume the loan tied to the portfolio, according to court documents. The buyer was not disclosed, nor was the sale price. A spokesperson for DigitalBridge did not respond to a request for comment.

The deal comes after Colony Capital and its minority partner on the portfolio, Chatham Lodging Trust, defaulted last year on $780 million in CMBS loans when it failed to make interest payments. The balance on the loans as of June 30 was $794 million.

Colony Capital was led by Tom Barrack, who was arrested in July and faces criminal charges for allegedly acting as a foreign agent on behalf of the United Arab Emirates, according to the Department of Justice. Barrack has pleaded not guilty and is out on bail.

At the time of the arrest, the investment firm had distanced itself from its founding CEO.

Barrack stepped down as CEO in 2020 and executive chairman earlier this year and was succeeded as CEO by Marc Ganzi, whose firm Digital Bridge merged with Colony in 2019. Ganzi moved Colony’s headquarters to his home base of Boca Raton, Florida, and proceeded to pivot the firm into focusing on digital infrastructure assets, such as data centers, cell towers and fiber-network properties. In June, Ganzi rebranded the combined firm as DigitalBridge.

In May 2020, Colony had defaulted on $3.2 billion in loans backed by hotel and health care assets. That September, the firm reached an agreement to sell off the remainder of its hotel assets ​​to Highgate Hotels for $67.5 million, plus the assumption of $2.7 billion in debt. Its remaining hotel assets were known as the Inland portfolio, its second largest hotel portfolio.

Colony and Chatham Lodging took over the 48-hotels from the Inland American Real Estate Trust in 2014. That same year, Colony took over Cerberus Capital Management’s majority stake in the Innkeepers portfolio, while Chatham retained its minority interest. The Inland portfolio includes the 229-key Sheraton San Jose Hotel and the 214-key Four Points by Sheraton Pleasanton, both in the Bay Area.

The Inland portfolio was refinanced with a $780 million CMBS loan in 2017, while Innkeepers was refinanced with $755 million in CMBS debt in 2019, plus another $100 million in mezzanine debt from a group of South Korean institutions, according to rating documents.





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