July 30, 2009
By Alby Gallun
Westin O'Hare at risk of default: report
(Crain’s) — The owner of the Westin O’Hare is in danger of defaulting on a $101-million loan because of falling occupancy levels and room rates at the 525-room hotel, according to a recent report.
The hotel is no longer generating enough cash flow to cover its monthly interest payments, and its owner, Dallas-based Ashford Hospitality Trust Inc., “is asking for debt service relief during the downturn,” according to the report by a so-called special servicer overseeing the loan. The loan is in a danger of “imminent default,” the report says.
Ashford, a real estate investment trust, acquired the Westin O’Hare for $125 million, or $238,000 a room, in November 2006, as the hotel market was nearing its peak. Ashford financed the property at 6100 N. River Road in Rosemont with the loan from Morgan Stanley, which packaged it with other loans and sold them as commercial mortgage-backed securities.
Business and leisure travel has plunged since then, squeezing many hotels that loaded up on debt when it was plentiful. The average occupancy at the Westin O’Hare fell to 53% in the first five months of the year, down from 69% in 2008, and the average daily rate (ADR) fell to $117 a room, down from $145 last year, according to the report by Centerline Servicing Inc., a special servicer hired to work out problem loans.
With the hotel unable to cover operating and debt service costs with its own cash flow, Ashford spent $2.2 million in the first five months of the year to cover the deficits, the report says. The loan was transferred to Centerline in June when the REIT said it would “be unable to continue to fund the shortfalls.”
Calls to Centerline and Ashford were not returned.
“The Westin O'Hare situation is not very uncommon these days,” Dan Kastilahn, assistant vice-president in the Chicago office of DBRS Inc., a ratings agency, writes in an e-mail. “Hotels are getting beat up pretty bad on occupancy and ADR due to the general national economic woes. They are showing up on servicer watchlists and transferring for imminent default at an increased rate pretty much every month.”
The Westin O’Hare’s loan problems were first reported Wednesday by Real Estate Alert, a newsletter.
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