REAL ESTATE NEWS

Starwood Capital Group is looking to change the structure of its $577.3 million commercial mortgage-backed security (CMBS) loan that covers 65 hotels across the country, as reported by Bisnow.

The move comes after the debt hit special servicing in February. The hotel portfolio across 21 states and 6,300 rooms has struggled to recover from the pandemic. In 2024, occupancy went down to 67 percent compared with 73 percent in the previous year, an S&P Global report found. Also, net cash flow has gone from $63.3 million in 2019 to $37.4 million at the end of 2023.

"The portfolio performance has not recovered to pre-pandemic levels and appears to have stagnated recently," S&P Global added.

The specific reasons for the troubles in the post-pandemic world? It was the "elevated expense growth" for hotels in general, and underperformance among assets located in Western tech markets, a spokesperson told Bisnow. The bulk of the portfolio is located in California (10) and Texas (20).

Also, the spokesperson confirmed that it has already signed a term sheet with LNR Securities Holdings to revise the loan. In anticipation of the deal closing, Starwood is hoping to sell some assets in the portfolio in an effort to improve the debt service coverage. That will provide "better access to certain reserve accounts for value-add renovations,” the spokesperson said.

“[We] are now working through the due diligence and loan documents, expecting to close sometime in April."

As of now, the CMBS is scheduled to mature in June 2027.

At least sentiment among hotel investors is starting to pick up. A recent survey conducted by CBRE found that 94 percent planned to keep or bolster their investments this year, compared with 85 percent in 2024. It comes as more are bullish about distressed opportunities and returns. CBRE forecasts that revenue per available room will grow by 2.2 percent in urban locations in 2025.

Source: GlobeSt/ALM