As closed South Florida hotels lose revenue and lay off workers due to the coronavirus, they face debt payments that can be difficult to restructure.
A $ 59 million commercial mortgage-backed securities loan for the 311-room DoubleTree Resort in Hilton Hollywood Beach at 4000 South Ocean Drive is the latest loan to enter the special service. The loan has a balance of $ 55.8 million and is less than a month past due, according to data provider Trepp.
The property is owned by Sotherly Hotels, based in Williamsburg, Virginia. It has 10,000 square feet of meeting space, a resort-style swimming pool, bar and seafood restaurant. The loan is a refinancing initiated in 2015.
Dave Folsom, president and CEO of Sotherly Hotels, did not immediately return a request for comment.
CMBS loans are secured by a mortgage on commercial real estate. The loan is accumulated in a loan pool and sold as bonds to investors. When the borrower misses a payment or requests modifications, the CMBS loans are taken over by a third party company called “special service”. By entering the special service, the CMBS loan can be reworked or restructured, or the special service can find another operator to take over the asset. Industry experts say CMBS loan modification can take months or years, and during that time the borrower cannot refinance or take on additional debt.
CMBS loans are often considered riskier than conventional loans because of the difficulty in modifying them due to the obligations that the borrower has to bondholders.
The South Florida hospitality industry has $ 4.2 billion in CMBS debt, according to Trepp.
Last week a CMBS loan of $ 975 million for Jeffrey Soffer’s Fontainebleau Miami Beach has entered special service. The loan is South Florida’s largest CMBS hotel loan.
Brett Mufson, president of Fontainebleau Development, said the hotel is in talks with its lenders, bondholders and service agents about amending the hotel’s loan documents. He said the loan was not in default.
For weeks, hotels in South Florida have been suffering from the impact of the coronavirus.
Broward County has ordered all non-essential businesses shut down effective March 23. With the ordinance, hotels were not allowed to accept new bookings except for “essential tenants,” such as first responders or healthcare workers. Since then, hotels have punish thousands of employees.
Visit Florida President and CEO Dana Young said on Tuesday in a conference call with members of the State Reopening Task Force that hotel income was down more than $ 1.6 billion between March 1 and April 11 compared to the same period last year.