Signs of Hospitality Distress Growing As Pandemic Drags On
By Lou Hirsh – CoStar News
Jan 22, 2021 | 1:13 AM
A prominent Singapore-based hospitality operator has begun the process of selling off an 18-hotel U.S. portfolio amid a bankruptcy filing, the latest sign of financial struggle for the hard-hit hotel industry.
Eagle Hospitality Trust this week filed for Chapter 11 bankruptcy protection so that it can reorganize its finances and prepare for the potential sell-off of its properties, including the vintage former transatlantic cruise ship The Queen Mary, which was converted into a hotel in the 1970s and is now docked in the harbor of Long Beach, California, south of Los Angeles. Eagle Hospitality Trust did not return requests for comment.
It could be a sign that more such filings are on the way with property owners awaiting a potentially slow return to pre-pandemic levels of leisure and corporate travel.
“I have not heard of others, but do expect more,” said Alan Reay, president of hotel brokerage and research firm Atlas Hospitality Group, referring to recent finance-related events including this week’s bankruptcy filing by Eagle Hospitality Trust.
Hospitality businesses have been hard-hit by the coronavirus pandemic. Hotel owners have been working out financing deferments with lenders and other creditors that have prevented a wave of hospitality bankruptcies. However, hospitality data firm STR, a CoStar Group company, predicts the industry may not bounce back to pre-pandemic levels for several years.
The Eagle Hospitality Trust portfolio, valued at $1.27 billion and spanning more than 5,400 rooms, also includes seven other California hotels, three in Colorado, and one each in Dallas, Texas; Houston, Texas; Atlanta, Georgia; Orlando, Florida; Salt Lake City, Utah; Danbury, Connecticut; and Woodbridge, New Jersey. The hotels operate under banners including Holiday Inn, DoubleTree, Four Points, Crowne Plaza, Embassy Suites and Westin.
Eagle was in talks last summer to sell a majority interest in the 18 properties to Hong Kong-based Far East Consortium, but a deal did not materialize.
Following financial struggles encountered by the operators of two Singapore-based component entities, Eagle Hospitality Real Estate Investment Trust and Eagle Hospitality Business Trust, Eagle officials filed for Chapter 11 bankruptcy protection.
“While the Chapter 11 entities intend to commence a marketing process to sell the relevant hotels, this process will not preclude the continued exploration of other restructuring alternatives,” the filing states.
Eagle has arranged to obtain $100 million in debtor-in-possession financing from lender Monarch Alternative Capital if the bankruptcy court approves, and that loan facility can be increased to a level as high as $125 million if needed for the disposition or reorganization process.
Reay’s Atlas Hospitality Group, which is not involved with the Eagle portfolio, has previously reported that California hotels had their worst year ever for property trades in 2020, as owners and prospective buyers struggle with property valuations amid historic drop-offs in revenue for the hospitality industry.
Reay noted that two hotel companies with liabilities of over $50 million filed for bankruptcy during 2020, the most since 2012.