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Indebtedness, net
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Indebtedness, net Indebtedness, net
Indebtedness consisted of the following (in thousands):
Indebtedness
 
Collateral
 
Maturity
 
Interest Rate (1)
 
Default Rate (2)
 
September 30, 2020
 
December 31, 2019
Mortgage loan(4)
 
1 hotel
 
June 2020
 
LIBOR(3) + 5.10%
 
n/a
 
$

 
$
43,750

Mortgage loan(5)
 
8 hotels
 
July 2020
 
LIBOR(3) + 4.33%
 
n/a
 

 
144,000

Mortgage loan(6)
 
1 hotel
 
November 2020
 
6.26%
 
5.00%
 
90,063

 
91,542

Mortgage loan(7)
 
1 hotel
 
November 2020
 
LIBOR(3) + 2.55%
 
n/a
 
25,000

 
25,000

Mortgage loan(6) (8)
 
17 hotels
 
November 2020
 
LIBOR(3) + 3.00%
 
4.00%
 
419,000

 
419,000

Mortgage loan(6) (9)
 
8 hotels
 
February 2021
 
LIBOR(3) + 2.92%
 
5.00%
 
395,000

 
395,000

Mortgage loan(10)
 
2 hotels
 
March 2021
 
LIBOR(3) + 2.75%
 
n/a
 
240,000

 
240,000

Mortgage loan(11)
 
19 hotels
 
April 2021
 
LIBOR(3) + 3.20%
 
n/a
 
913,093

 
907,030

Mortgage loan(12)
 
7 hotels
 
June 2021
 
LIBOR(3) + 3.65%
 
n/a
 
180,720

 
180,720

Mortgage loan(12)
 
7 hotels
 
June 2021
 
LIBOR(3) + 3.39%
 
n/a
 
174,400

 
174,400

Mortgage loan(13)
 
5 hotels
 
June 2021
 
LIBOR(3) + 3.73%
 
n/a
 
221,040

 
221,040

Mortgage loan(14)
 
5 hotels
 
June 2021
 
LIBOR(3) + 4.02%
 
n/a
 
262,640

 
262,640

Mortgage loan(15)
 
5 hotels
 
June 2021
 
LIBOR(3) + 2.73%
 
n/a
 
160,000

 
160,000

Mortgage loan(14)
 
5 hotels
 
June 2021
 
LIBOR(3) + 3.68%
 
n/a
 
215,120

 
215,120

Mortgage loan(5)
 
1 hotel
 
February 2022
 
LIBOR(3) + 3.90%
 
n/a
 

 
145,000

Mortgage loan(16)
 
1 hotel
 
July 2022
 
LIBOR(3) + 3.95%
 
n/a
 
34,200

 
35,200

Mortgage loan(6) (17)
 
1 hotel
 
November 2022
 
LIBOR(3) + 2.00%
 
5.00%
 
97,000

 
97,000

Mortgage loan(18)
 
1 hotel
 
December 2022
 
LIBOR(3) + 2.25%
 
n/a
 
16,100

 
16,100

Mortgage loan(4) (19)
 
1 hotel
 
January 2023
 
LIBOR(3) + 3.40%
 
n/a
 
37,000

 

Mortgage loan(5)
 
1 hotel
 
May 2023
 
5.46%
 
n/a
 

 
51,843

Mortgage loan(20)
 
1 hotel
 
June 2023
 
LIBOR(3) + 2.45%
 
n/a
 
73,450

 
73,450

Mortgage loan(6)
 
1 hotel
 
January 2024
 
5.49%
 
5.00%
 
6,727

 
6,759

Mortgage loan(6)
 
1 hotel
 
January 2024
 
5.49%
 
5.00%
 
9,818

 
9,865

Mortgage loan(6)
 
1 hotel
 
May 2024
 
4.99%
 
5.00%
 
6,260

 
6,292

Mortgage loan(21)
 
1 hotel
 
June 2024
 
LIBOR(3) + 2.00%
 
n/a
 
8,881

 
8,881

Mortgage loan(5)
 
3 hotels
 
August 2024
 
5.20%
 
n/a
 

 
64,207

Mortgage loan(6)
 
2 hotels
 
August 2024
 
4.85%
 
4.00%
 
11,792

 
11,845

Mortgage loan(6)
 
3 hotels
 
August 2024
 
4.90%
 
4.00%
 
23,578

 
23,683

Mortgage loan(6)
 
2 hotels
 
February 2025
 
4.45%
 
4.00%
 
19,369

 
19,438

Mortgage loan(6)
 
3 hotels
 
February 2025
 
4.45%
 
4.00%
 
50,098

 
50,279

Mortgage loan(6)
 
1 hotel
 
March 2025
 
4.66%
 
5.00%
 
24,794

 
24,919

 
 
 
 
 
 
 
 
 
 
3,715,143

 
4,124,003

Premiums (discounts), net
 
 
 
 
 
 
 
 
 
(305
)
 
655

Capitalized default interest and late charges
 
 
 
 
 
 
 
 
 
35,899

 

Deferred loan costs, net
 
 
 
 
 
 
 
 
 
(11,000
)
 
(18,140
)
Indebtedness, net
 
 
 
 
 
 
 
 
 
$
3,739,737

 
$
4,106,518

_____________________________
(1) 
Interest rates do not include default or late payment rates in effect on some mortgage loans.
(2) 
Default rates are presented for mortgage loans which were in default, in accordance with the terms and conditions of the applicable mortgage agreement, as of September 30, 2020. The default rate is accrued in addition to the stated interest rate.
(3)  
LIBOR rates were 0.148% and 1.763% at September 30, 2020 and December 31, 2019, respectively.
(4) 
On January 9, 2020, we refinanced this mortgage loan totaling $43.8 million with a new $37.0 million mortgage loan with a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 3.40%.
(5)  
During the quarter, we disposed of the properties securing this mortgage loan. The assets and liabilities associated with this mortgage loan have been removed from the Company’s consolidated balance sheet. See note 5.
(6) 
As of September 30, 2020, this mortgage loan was in default under the terms and conditions of the mortgage loan agreement. Default interest has been accrued, in accordance with the terms of the mortgage loan agreement, and is reflected in the Company’s consolidated balance sheet and statement of operations.
(7) 
Effective June 29, 2020, we executed a consent and loan modification agreement for this mortgage loan. In connection with the agreement, lender-held reserves were made available to fund monthly interest payments due under the loan and monthly FF&E escrow deposits were waived until April 2021. This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a LIBOR floor of 1.25%.
(8) 
This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in November 2019.
(9) 
This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in February 2020.
(10) 
Effective August 5, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, with deferred interest due in twelve monthly installments beginning January 2021, lender-held reserves were made available to fund property-level operating expenses, and monthly FF&E escrow deposits were waived through December 2020. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions.
(11)  
Effective July 9, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, lender-held reserves were made available to fund property-level operating expenses, monthly FF&E escrow deposits were waived through November 2020, and monthly tax deposits were waived until July 2021. In conjunction with the forbearance agreement, deferred interest payments of $6.1 million are capitalized into the principal balance and are to be repaid over twelve months following the deferral period. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in April 2020.
(12)  
Effective September 30, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, with three one-month extension options for the mezzanine debt subject to the satisfaction of certain conditions. Deferred interest is to be repaid in monthly installments and fully repaid by June 2021 following the deferral period. Lender-held reserves were made available to fund property-level operating expenses, and monthly FF&E escrow deposits were waived through December 2020. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in June 2020.
(13)  
Effective September 30, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, and an extension option for the mezzanine debt to June 2021. Deferred interest is to be repaid in monthly installments and fully repaid by June 2021 following the deferral period with any remaining balance due at maturity. Lender-held reserves were made available to fund property-level operating expenses, and monthly FF&E escrow deposits were waived through the remainder of 2020. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in June 2020.
(14) 
Effective September 30, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, with two one-month extension options for the mezzanine debt subject to the satisfaction of certain conditions. Deferred interest is to be repaid in monthly installments and fully repaid by June 2021 following the deferral period. Lender-held reserves were made available to fund property-level operating expenses, and monthly FF&E escrow deposits were waived through December 2020. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in June 2020.
(15) 
Effective September 30, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months. Deferred interest is to be repaid in monthly installments and fully repaid by June 2021 following the deferral period. Lender-held reserves were made available to fund property-level operating expenses, and monthly FF&E escrow deposits were waived through December 2020. This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in June 2020.
(16) 
Effective August 3, 2020, we executed an amendment for this mortgage loan. Terms of the amendment included a $1.0 million principal pay down. The amended mortgage loan has a two-year initial term and one one-year extension option, subject to satisfaction of certain conditions, is interest only and bears interest at a rate of LIBOR + 3.95%, and has a LIBOR floor of 0.25%.
(17)  
Effective October 2, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, with deferred interest due in twelve monthly installments beginning January 2021, lender-held reserves were made available to fund property-level operating expenses, and monthly FF&E escrow deposits were waived through December 2020.
(18)  
Effective May 1, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for three months, with all deferred payments due at maturity, lender-held reserves were made available to fund property-level operating expenses, monthly FF&E escrow deposits were waived through December 2020 and tax escrow deposits were waived through October 2020. This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.
(19)  
Effective July 7, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for two months, lender-held reserves were made available to fund debt service or property-level operating expenses, and monthly FF&E escrow deposits were waived from April 2020 through March 2021. Deferred interest payments will accrue interest at the stated rate of the mortgage loan and are to be repaid over twelve months following the deferral period.
(20)  
Effective May 20, 2020, we executed a forbearance agreement for this mortgage loan. Terms of the agreement included deferral of interest payments for six months, lender-held reserves were made available to fund property-level operating expenses and monthly FF&E escrow deposits were waived through March 2021. Deferred interest payments will accrue interest at the stated rate of the mortgage loan and are to be repaid over twelve months following the deferral period.
(21)  
Effective April 7, 2020, we executed a forbearance agreement for this mortgage loan, which amended the terms. Terms of the agreement include an initial interest payment deferral for three months, with the option to extend the interest payment deferral an additional three months, which was exercised on September 24, 2020. All deferred interest is due at maturity.
On January 9, 2020, we refinanced our $43.8 million mortgage loan, secured by the Le Pavillon in New Orleans, Louisiana. In connection with the refinance we reduced the loan amount by $6.8 million. The new mortgage loan totals $37.0 million. The new mortgage loan is interest only and provides for an interest rate of LIBOR + 3.40%. The stated maturity is January 2023 with two one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is secured by the Le Pavillon.
In April 2020, certain subsidiaries of the Company applied for and received loans from Key Bank, N.A. under the Payroll Protection Program (“PPP”), which was established under the CARES Act. All funds borrowed under the PPP were returned on or before May 7, 2020.
Beginning on April 1, 2020, we did not make principal or interest payments under nearly all of our loans, which constituted an “Event of Default” as such term is defined under the applicable loan documents. Pursuant to the terms of the applicable loan documents, such an Event of Default caused an automatic increase in the interest rate on our outstanding loan balance for the period such Event of Default remains outstanding. Following an Event of Default, our lenders can generally elect to accelerate all principal and accrued interest payments that remain outstanding under the applicable loan agreement and foreclose on the applicable hotel properties that are security for such loans.
The lender who holds the mortgage note secured by the Hilton Scotts Valley hotel in Santa Cruz, California ($24.8 million mortgage loan) has sent us an acceleration notice which accelerated all payments due under the applicable loan documents. The Company is in the process of negotiating forbearance agreements with its lenders. At this time, forbearance agreements have been executed on some, but not all of our loans. On July 16, 2020, we reached a forbearance agreement with our lenders for the Highland Pool loan, which is a $907.0 million loan secured by nineteen of our hotels. Additionally, on August 5, 2020, we entered into a forbearance agreement with our lender for the loan secured by the Renaissance Nashville and Westin Princeton. On September 30, 2020, we signed forbearance agreements on our KEYS Loan Pools representing 34 hotels and approximately $1.2 billion of debt. In the aggregate, including the Highland Pool and KEYS Pool loans, we have entered into forbearance and other agreements with varying terms and conditions that conditionally waive or defer payment defaults for loans with a total outstanding principal balance of approximately $2.6 billion out of approximately $3.7 billion in property level debt outstanding as of September 30, 2020. See note 15 for discussion of the loan modification agreement with Lismore Capital LLC.
As of September 30, 2020 the Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges. No gain or loss was recognized during the three and nine months ended September 30, 2020 as the carrying amount of the original loans was not greater than the undiscounted cash flows of the modified loans. Additionally, as a result of the troubled debt restructurings all accrued default interest and late charges were capitalized into the applicable loan balances and will be amortized over the remaining term of the loan using the effective interest method. The amount of default interest and late charges capitalized into the loan balance was $40.7 million. The amount of the capitalized principal that was amortized during the three and nine months ended September 30, 2020 was $4.8 million.
On May 12, 2020, the lender who held the mortgage note secured by the Embassy Suites New York Manhattan Times Square ($108.8 million mortgage loan and $36.2 million in mezzanine loans) sent the Company an acceleration notice which accelerated all payments due under the applicable loan documents. To remedy the acceleration notice, on August 19. 2020 the Company sold the Embassy Suites New York Manhattan Times Square for approximately $143.9 million of consideration, which consisted of $35.1 million in cash and $108.8 million in the form of the assumption of the mortgage loan. The sale resulted in a loss of approximately $40.4 million for the three and nine months ended September 30, 2020, which was included in “gain (loss) on sale of assets and hotel properties” in the consolidated statements of operations. Upon the loan assumption by the buyer, accrued interest was forgiven by the lender and the $35.1 million of proceeds were used to extinguish the $36.2 million of mezzanine loans, which resulted in a gain of $4.3 million which was included in “gain (loss) on extinguishment of debt” in the consolidated statement of operations.
On June 22, 2020, the lender for the W Hotel in Minneapolis, Minnesota ($45.8 million mortgage loan and a $5.8 million mezzanine loan) sent the Company a notice of UCC sale, which provided that the respective lender would sell the subsidiaries of the Company that own the respective hotel in a public auction. On September 15, 2020, the Company completed a consensual assignment of 100% of the equity interests in the owner of the W Hotel, which resulted in a gain on extinguishment of debt of approximately $1.1 million for the three and nine months ended September 30, 2020, which was included in “gain (loss) on extinguishment of debt” in the consolidated statements of operations.
On July 9, 2020, the mortgage, senior mezzanine and junior mezzanine loans with an aggregate principal balance of $144.2 million, secured by the Rockbridge Portfolio, matured and the Company failed to repay the loans on such maturity date. On August 19, 2020, the Company completed a consensual assignment of the entities that own the Rockbridge Portfolio in lieu of a UCC sale, which resulted in a gain on extinguishment of debt of approximately $65.2 million for the three and nine months ended September 30, 2020, which was included in “gain (loss) on extinguishment of debt” in the consolidated statement of operations.
On July 23, 2020, the lender for MS C1 ($56.0 million mortgage loan and an $8.0 million mezzanine loan) sent the Company a notice of UCC sale, which provided that the respective lender would sell the subsidiaries of the Company that own the respective
hotels in a public auction. On September 21, 2020, the mezzanine lender for MS C1 conducted a UCC-foreclosure of its collateral consisting of 100% of the equity interests in the owners of the Courtyard Louisville, Courtyard Ft. Lauderdale and Residence Inn Buena Vista hotels, which resulted in a gain on extinguishment of debt of approximately $19.7 million for the three and nine months ended September 30, 2020, which was included in “gain (loss) on extinguishment of debt” in the consolidated statements of operations.
On August 3, 2020, we amended our $35.2 million mortgage loan, secured by the Sheraton Ann Arbor hotel, which extended the maturity to July 2022. In conjunction with the amended terms, we repaid $1.0 million in principal, with another $1.0 million principal reduction due January 2021. The amended mortgage loan is interest only and bears interest at a rate of LIBOR + 3.95%, and has a LIBOR floor of 0.25%. This loan has a one-year extension option, subject to satisfaction of certain conditions.
During the three and nine months ended September 30, 2020 and 2019, we recognized net premium amortization as presented in the table below (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Line Item
 
2020
 
2019
 
2020
 
2019
Interest expense and amortization of premium and loan costs
 
$
57

 
$
56

 
$
170

 
$
176


The amortization of the net premium is computed using a method that approximates the effective interest method, which is included in “interest expense and amortization of premiums and loan costs” in the consolidated statements of operations.
We are required to maintain certain financial ratios under various debt and related agreements. If we violate covenants in any debt or related agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of Ashford Trust or Ashford Trust OP, our operating partnership, and the liabilities of such subsidiaries do not constitute the obligations of Ashford Trust or Ashford Trust OP.