A Richmond-area hotelier is set to lose one of his Henrico properties due to the lockdown, as the pandemic continues to hit the hospitality industry.
Shamin Hotels is in talks to allow the Noteholder on its Hilton Richmond Hotel & Spa at Short Pump to take control of the property at 12042 W. Broad St. through receivership and possible sale. at public auction.
The pending transfer of control comes after Chester-based Shamin, which owns more than 60 hotels mostly around the Mid-Atlantic, fell behind on loan payments on the 254-room Short Pump Hilton in April, as the COVID-related closures and social distancing were in full effect.
Shamin CEO Neil Amin said the Short Pump Hilton has been hit particularly hard during the pandemic due to its reliance on event and conference revenue and room reservations that accompany these large gatherings.
“Our large, full-service conference hotels like the Hilton have been hit the hardest, as 80% of our revenue (at this hotel) is generated from conferences, banquets, and group activities, which will become non-existent in the future. predictable, ”Amin mentioned.
“Our income at the Hilton since the start of the pandemic is just over $ 5 million compared to over $ 15 million last year in those same months,” he added.
Shamin built and opened the Short Pump Hilton in December 2009 and took out a $ 45 million property guaranteed loan in 2013 from JP Morgan Chase. The note was then consolidated into a set of commercial mortgage backed securities or CMBS.
The recovery and foreclosure group is a representative entity of the CMBS loan holders. The group, operating as 12042 West Broad Street Holdings LLC, filed a lawsuit in Henrico County Circuit Court on December 2 to have the court appoint a receiver to take over the hotel.
While Shamin said his company was in negotiations with the noteholder in an attempt to avoid losing the property, a deal could not be reached and the loan remains in arrears. He said the loss of income and the uncertain outlook for the property left Shamin with little choice.
“We are not doing anything to stop the (foreclosure) process and we have told the controlling holder, who appears to be a large global asset manager, that we will cooperate with whatever he decides,” he said. declared. “The start of the receivership and foreclosure proceedings was essentially a process that was agreed upon by both parties together.”
Amin said the two parties are finalizing a consent order to allow the note holder to immediately repossess the property, including using their state liquor license until they can get theirs.
The Noteholder has asked the court to appoint Crescent Hotel Management Services, based in Northern Virginia, as receiver to keep the property open and operational without disruption. Rooms at the Hilton currently range from $ 126 per night to $ 489 for a suite. Once placed in receivership, the noteholder said he plans to pursue a foreclosure and subsequent public auction.
The note holder says in his file that receivership is necessary after Shamin allegedly failed to comply with his terms during negotiations in recent months. Amin said his company was prepared to be flexible, going so far as to offer to pay interest only for a period of time and repay the loan in full at maturity to avoid foreclosure. He said Shamin also offered to repay the loan “at a value significantly higher than the lender’s own appraisal.”
“All of these proposals were rejected and the only proposal provided by the lender included significant lender fees and unsuitable collateral under current conditions,” Amin said, adding that his company was still open to discussing any reasonable solution.
The note holder is represented by attorney Stephen Gallegher of the law firm Venable in Northern Virginia. Gallegher did not respond to a request for comment.
The noteholder said in his Dec. 2 filing that the loan had a balance of $ 46 million and the property could be worth as little as $ 26 million.
Shamin’s decision to let go of the property is made easier since the CMBS loan is a non-recourse loan, meaning the noteholder cannot sue the borrower for the balance remaining after foreclosure.
Amin said Shamin typically uses non-recourse loans for his larger properties as their values fluctuate. Eighteen of the company’s 62 hotels are non-recourse CMBS loans.
He said these loans offer protection if something unforeseen significantly affects the value of a property, such as a pandemic – but no one, neither the borrower nor the lender, has predicted such a pandemic.
“I don’t think anyone in our industry anticipated this,” Amin said.
Shamin has not lost any of his other hotels to receivership or foreclosure during the pandemic, Amin said, adding that most of his lenders have been patient.
“All of our traditional lenders and most of the non-recourse lenders have been extremely supportive,” he said.
Many lenders have allowed Shamin to be flexible in ways that the Hilton Noteholder would not, such as deferring loan payments and using certain reserve amounts for mortgage payments in the interim.
“Traditional lenders are realizing that this is a temporary situation,” he said, adding that the company has informed its other lenders about the Hilton Short Pump situation and they are supportive.
Amin does not hide that the pandemic has hit Shamin hard. He said the company’s revenue fell 90 percent in the early days of the recession. It had to put some of its 1,500 employees on leave at the start of the pandemic, but has since brought back many of them as hotel occupancy rates slowly increased.
She was able to get PPP loans on some of her properties and donated $ 100,000 to set up a relief fund for her workers.
“We also have not reduced wages or salaries at any time and have paid over $ 500,000 in discretionary bonuses to our associates to support them during this pandemic,” Amin said.
Amin said extended stay hotels are among the top performers in his portfolio right now with around 60% occupancy, as these properties allow guests to stretch out a bit with in-room kitchens. and other equipment.
And the company continues to invest in new properties, beyond the pandemic, including two that will make the loss of the Short Pump property easier to swallow.
Visible from the Hilton within the same Town Center West development, construction on the company’s new Home2Suites is well underway at 209 Towne Center West Blvd.
Just to the west, the company also has a Hampton Inn & Suites in the works next to the GreenGate development. Shamin also recently opened a Home2Suites next to his Embassy Suites property at the corner of West Broad Street and Glenside Drive.
“We will continue with the projects that we have,” Amin said. “We are convinced that in the long term, hospitality will come back strongly.”