The Detroit Marriott Troy is the latest key regional hotel to face foreclosure amid plummeting revenue during the COVID-19 pandemic, a challenge that has spanned the industry during the public health crisis.
But there are signs that a workout agreement could give the ownership group a lifeline to keep its hands on the 350-room hotel at 200 W. Big Beaver Road.
The ownership group, which includes Hadidi Capital, has been late on a $48 million commercial mortgage-backed securities loan from Barclays since October and have a remaining balance of approximately $44.8 million, according to loan data posted to CoStar Group Inc., a Washington, D.C.-based real estate information service.
Loan commentary said the loan was transferred to special servicing on Dec. 18 “due to imminent payment and maturity default,” and the loan on the 13-story, 31-year-old hotel matured Feb. 6.
Although a foreclosure has been filed and a receiver has been requested, commentary updated earlier this week says that Hadidi Capital and Barclays, through its special servicer, Midland Loan Services, are “working … on proposed (maturity) extension through 4/30/2023 with (the) loan brought current and a 5 percent principal curtailment.”
That “curtailment” could mean a number of different things, including a 5 percent reduction of the $44.8 million owed or bringing additional equity to the table to reduce it, or some combination thereof.
“It has been a difficult year for everyone in the hospitality industry, ourselves included,” Gehad Hadidi, a member of the ownership group, said in a Monday morning email to Crain’s. “However, the ownership group of the Troy Marriott are committed to Metro Detroit and to our assets in the market, including the Troy Marriott. We entered into good faith negotiations with the lender and are confident that a settlement is within reach that will result in our continued ownership of the property.”
Hadidi declined further comment.
The company, which has offices in Rochester Hills and New York, paid $68 million for the property in January 2016, according to CoStar. It also owns the Hotel Indigo in Traverse City, as well as properties in New York City, according to the company’s website.
The last appraisal from February gives the hotel a value of $57.5 million.
Gross income plunged a little over 69 percent from about $18.4 million to just $5.7 million last year as the occupancy rate fell from 57 percent to 27 percent.
COVID wasn’t the only thing that shook things up at the hotel.
Food and beverage revenue dropped precipitously from $6.15 million in 2018 to just $1.6 million in 2019, a 74-percent decline. Some of that decline in 2019 was made up in room revenue, which bounced from $13.8 million in 2018 to $16.7 million in 2019, an increase of about 20.7 percent.
In March, the owner of the Westin Book Cadillac in downtown Detroit told Crain’s he was bracing for foreclosure on his iconic 453-room hotel as well, having fallen behind on $77 million in CMBS debt.