Cerberus Capital Management and Highgate have missed two months of payments on a loan for 30 Courtyard by Marriott hotels. The loan amounted to $415 million.
Cerberus and Highgate have reportedly sought an extension of the floating-rate loan, which matured this month. The two hotel owners have indicated that they don’t have the funds to pay for the months they missed and the monthly debt service, according to a servicer report.
Some properties in the 30-hotel Courtyard by Marriott portfolio have higher insurance payments after Hurricane Ian and Tropical Storm Nicole hit the U.S. in 2022. Property insurance rates in the U.S. jumped 17% in the first quarter, according to data from Marsh McLennan.
“The default of the Courtyard by Marriott portfolio took us by surprise,” Barclays Plc analysts Lea Overby and Anuj Jain wrote in a note on Monday. “This shortage is due to a large hurricane insurance payment, although only three of the 30 are located in Florida.”
Cerberus and Highgate acquired these hotels from Colony Capital, now known as DigitalBridge Group Inc., in 2021. According to loan documents, the loan was initially issued to Colony Capital in 2018 and is eligible for two more one-year extensions till July 9, 2026.
Cerberus and Highgate are the latest to join a list of hoteliers struggling to pay loans. Earlier this month, Dallas-based Ashford Hospitality Trust said it would be returning 19 hotels to its lenders instead of paying around $255 million to extend three pool loans. Located in cities like Atlanta and Las Vegas, the hotels are part of a $982 million mortgage pool that missed a repayment deadline in June.
In June, Park Hotels & Resorts stopped payments for a $725 million non-recourse loan for two hotels in San Francisco, which would mature in November.
However, some hotel owners have successfully extended their mortgages. In June, Braemar Hotels & Resorts announced it had finalized an extension of its $435 million mortgage loan secured by four properties. The four hotels were The Notary Hotel, The Clancy, Sofitel Chicago Magnificent Mile, and Marriott Seattle Waterfront. The loan was extended over its initial maturity this June for 12 additional months.