The Renaissance Hotel Philadelphia Airport has fallen into foreclosure after the property’s Kentucky-based owner failed to pay off a nearly $34 million mortgage balance that came due last year, according to a report this month from commercial real-estate debt-tracker Trepp LLC.
Special servicer CWCapital Asset Management assumed control of the 249-room hotel from owner Columbia Sussex Corp. last year and is working to "stabilize" the property, according to Trepp.
Special servicers are appointed when there is a loan default or concern that a property's value has deteriorated. They are generally responsible for preserving the property’s value so that bondholders can be repaid as much of the loan amount as possible through an eventual sale.
The airport hotel is the latest of Crestview Hills, Ky.-based Columbia Sussex’s properties to run into financial trouble, according to a January report by the labor union Unite Here, which has been attempting to secure a contract for workers it represents at a Hilton-branded hotel owned by the company in Anchorage, Alaska.
Since 2007, 44 of Columbia Sussex’s hotels — comprising 20,169 rooms — have been lost due to foreclosure, bankruptcy or other debt-related circumstances, the Unite Here study authors wrote.
Five of its remaining properties — including the Renaissance Hotel Philadelphia Airport — are currently facing debt problems that could result in their loss, the union's report said.
“The company grew during the boom years; credit was easy and Columbia Sussex borrowed heavily,” the report’s authors wrote. Much of its subsequent shrinkage “is attributable to the company’s failure to meet debt obligations.”
The Philadelphia hotel is owned by Columbia Sussex but run as a Renaissance property through a licensing agreement with Marriott International, which owns the Renaissance brand. Such arrangements are typical in the hotel industry.
Joseph Yung, vice president for development at Columbia Sussex, and Marriott spokeswoman Brittany Troy did not respond to phone messages seeking comment. CWCapital spokesman Michael Goodwin said it is his firm’s policy to not comment on properties it is servicing.
The Renaissance Hotel Philadelphia Airport is no longer listed among Columbia Sussex’s hotels on its website.
Wachovia Bank originated the company's $39.9 million loan against the hotel in December 2005, according to Trepp. Wachovia was acquired by Wells Fargo three years later, after experiencing heavy losses attributable in part to its aggressive lending practices.
The financing was originated by Wachovia as a 10-year-loan with a 30-year amortization, resulting in a so-called balloon payment at maturity, according to Trepp.
Such loan terms, which are common in commercial real estate deals, require borrowers to repay the bulk of what they owe in one lump sum after 10 years.
Most borrowers who don’t intend to sell their properties refinance before the big lump-sum payment comes due. But that can be difficult when a loan amount exceeds the value of the property against which it is secured.
Columbia Sussex was responsible for a $33.6 million balloon payment when its loan against the Renaissance Hotel Philadelphia Airport matured in January 2016, according to Trepp. The hotel’s appraised value was $26.2 million then, down from $61 million when the loan was originated, the Trepp report said.
Shelli Sareen, the financial analyst with Unite Here who led the union's report on Columbia Sussex, said she has not examined the Philadelphia hotel’s circumstances so could not speculate on the reason for its loss in value.
But “at times there have been questions over whether Columbia Sussex has sufficiently maintained some of its assets,” she said in an email.
The Philadelphia hotel suffered damage from Hurricane Irene in 2011 but was "found to be in good condition" during an inspection last year, according to the Trepp report.