NEW YORK--(EON: Enhanced Online News)--UNITE HERE released an analysis today of Columbia Sussex Corporation for lenders and CMBS bondholders. The report draws attention to Columbia Sussex’s failure to meet debt obligations on numerous hotel properties it has owned since 2007, an issue the company has struggled with even after the lodging industry recovered following the global financial crisis. The report also provides lenders with information on the Hilton Anchorage loan, which matures in March 2017; the loan was placed on a servicer watchlist in June 2016.
“wiped out the G and H classes of bondholders and about 85% of the F class”
Highlights from the report:
- In 2007 Columbia Sussex owned 85 hotels with 32,604 rooms; today the company has only 39 hotels with 13,314 rooms
- 44 hotels representing 20,169 rooms – about 62% of its 2007 portfolio - were lost as a result of a failure to meet debt obligations, according to the union’s analysis. Five of its 39 hotels are facing debt problems which could result in the loss of these properties.
- Some of Columbia Sussex’s debt problems occurred at a time of sustained recovery in the hotel industry; now that several indicators suggest the upcycle may be drawing to a close, this raises questions whether Columbia Sussex can weather a more challenging economic environment.
- In 2010, Columbia Sussex defaulted on a $134.3 million loan at the Westin Casuarina in Las Vegas. The hotel loan was resolved when the property was sold at a $66.6 million loss which “wiped out the G and H classes of bondholders and about 85% of the F class” according to business press reports.
- Columbia Sussex owner William Yung lost several of his gaming assets including the Atlantic City Tropicana casino to bankruptcy after the New Jersey Casino Control Commission (NJCCC) denied a subsidiary’s license renewal in Atlantic City in 2007. Columbia Sussex had “cut nearly 1,000 jobs, leading to problems with cleanliness, service and compliance with state casino regulations.”
- For period ending June 30, 2016 the Hilton Anchorage had a Debt Service Coverage Ratio (DSCR) of only 1.16. The property also experienced a drop in its occupancy levels from the same period the year before. The Hotel has been combatting persistent mold since at least 2014. Lead and asbestos have also been identified at the property.
The report concludes by pointing out that lenders must exercise heightened caution when giving out loans as lodging industry fundamentals weaken and hotel properties face the prospect of a more challenging economic environment.
Read the report and the sources: http://unitehere.org/wp-content/uploads/LenderReport5.pdf
UNITE HERE is a labor union that represents 270,000 working people across Canada and the United States. Its members work in the hotel, gaming, food service, manufacturing, textile, distribution, laundry, transportation, and airport industries. UNITE HERE Local 878 represents workers at the Hilton Anchorage where there is currently an active labor dispute.