Hospitality Investors Trust, Inc. – Court Confirms Hotel REIT’s Prepackaged Plan with Brookfield Taking 100% of Emerged Equity in Exchange for Prepetition Preferred Equity and DIP Claims

June 23, 2021 – The Court hearing the Hospitality Investors Trust cases issued an order confirming the Debtors’ Prepackaged Plan [Docket No. 126]. On June 14, 2021, the Debtors filed an Amended Plan and a related blackline [Docket Nos. 109 and 110, respectively] further to which Plan sponsor Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC will own 100% of the Debtors' equity upon emergence (this is exchange for preferred equity and DIP financing claims) and general unsecured creditors will receive a full recovery. Holders of the Debtors' common equity are to receive contingent value rights ("CVRs") which the Debtors concede are likely to have no value.

The Debtors' most recent 10-K notes as to the Debtor's common equity "an updated Estimated Per-Share NAV equal to $8.35 based on an estimated fair value of our assets less the estimated fair value of our liabilities, divided by 39,151,201 shares of our common stock outstanding on a fully diluted basis as of December 31, 2019….The 2020 NAV and the underlying estimates and assumptions are as of December 31, 2019, and have not been revised to reflect any potential negative impact on our company of the coronavirus pandemic, a Pre-Packaged Bankruptcy or any other transactions or events occurring subsequent to December 31, 2019….While our board of directors has approved the 2020 NAV, it has only done so for the sole purpose of allowing us to comply with applicable rules of FINRA for use on customer account statements. Our board of directors believes the 2020 NAV is significantly above the current value of a share of common stock [although no trading data provided in the 10-K]."

On May 19, 2021, Hospitality Investors Trust, Inc. and one affiliated Debtor (“Hospitality Investors Trust” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 21-10831. At filing, the Debtors, a publicly registered non-traded real estate investment trust (“REIT”), noted estimated assets between $1.0bn and $10.0bn ($1,701,867,000 as of March 31, 2021); and estimated liabilities between $1.0bn and $10.0bn ($1,360,423,000 as of March 31, 2021).

The Debtors, faced with a “liquidity crisis” that left them without sufficient cash to cover their obligations in the wake of COVID-19-related travel restrictions, filed Chapter 11 to implement a restructuring support agreement (the “RSA”) negotiated with preferred shareholder Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC ("Brookfield") with Brookfield serving as Plan sponsor. The Prepackaged Plan was also supported by the Debtors’ key contract counterparties, who entered into amendments, consent agreements and forbearance agreements and waivers of defaults.

Plan Overview

The Debtors' memorandum of law in support of (i) approval of the adequacy of the Disclosure Statement and (ii) confirmation of the Prepackaged Plan [Docket No. 115] notes, “The Debtors’ Plan implements a comprehensive, value-maximizing financial restructuring that will allow the Debtors to emerge from chapter 11 well-positioned to capitalize on their proposed reorganized and refinanced capital structure.

Pursuant to the Plan, among other things, the Debtors’ fulcrum security — the Existing Preferred Equity Interests held by Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC (the ‘Brookfield Investor’ or the ‘Plan Sponsor’) — will be extinguished, and the Plan Sponsor’s DIP Claims will be satisfied, in exchange for 100% of the New HIT Common Equity Interests. The Plan otherwise provides payment in full to the Debtors’ creditors, including all holders of General Unsecured Claims. Finally, the holders of the Existing HIT Common Equity Interests, who would otherwise be significantly out of the money absent the Plan, will each receive one CVR in respect of each share of the Allowed Existing HIT Common Equity Interests outstanding immediately prior to the Effective Date.

The Restructuring Transactions will provide the Company with the liquidity needed to survive the remainder of the pandemic and thereby the potential for future recovery to holders of the Existing HIT Common Interests who would otherwise recover nothing. The Debtors believe that the restructuring transactions proposed under the Plan provide the greatest possible recovery to all of their stakeholders.

The Debtors received no formal objections to the adequacy of information contained in the Disclosure Statement. The Debtors received four letter responses, filed as Docket Nos. 66, 106, 113 and 114, and certain other informal comments to the Plan (collectively, the ‘Respondents’). The Debtors have worked collaboratively with certain of the Respondents to insert mutually acceptable language in the Confirmation Order and/or the Plan, which includes certain modifications from the Joint Prepackaged Chapter 11 Plan of Hospitality Investors Trust, Inc., and Hospitality Investors Trust Operating Partnership, L.P. initially filed on the Petition Date [Docket No. 7] (the ‘Initial Plan’), or have otherwise reached resolutions with such parties. With respect to the letter comments, the Debtors believe that this memorandum appropriately addresses the concerns of such parties. Accordingly, aside from certain responding stockholders’ speculative claims, the Plan is brought forth on a consensual basis.

Confirmation of the Plan will enhance the Debtors’ financial viability, including by providing necessary additional capital through the proposed Exit Facility Agreement, while giving the Debtors the opportunity to revitalize their businesses under new ownership. Moreover, as described in great detail in the Declaration of Bruce A. Riggins in Support of Chapter 11 Filing and First Day Pleadings [Docket No. 3] (the ‘First Day Declaration’), the Company has reached certain amendments, consent agreements, and forbearance agreements and waivers of defaults (the ‘Third Party Restructuring Documents’) with the Company’s key contract counterparties, which are contingent upon the consummation of the Restructuring Transactions and the Plan.

The Third Party Restructuring Documents are integral to the long-term success of the Company. For instance, in addition to the loan modification agreements with the Non-Debtor Subsidiaries’ secured lenders, which provide critical financial and operational relief, the Company has also entered into amendments to certain of its hotel management agreements which, among other things, reduce the base management fees thereunder and provide certain expanded termination rights. The valuable concessions achieved through these Third Party Restructuring Documents are contingent on consummating the proposed restructuring in a timely manner. Additionally, but for the concessions obtained in the Third Party Restructuring Documents, the Plan Sponsor would not have supported the Plan, financially or through its vote, and the result would have been sales of the Non-Debtor Subsidiaries’ hotels on an immediate basis and the liquidation of the entire enterprise. Accordingly, the Plan represents a comprehensive restructuring of the Debtors’ entire enterprise.

The Plan undoubtedly is in the best interests of the Company and all of its stakeholders and serves the purposes of chapter 11 by providing for the continuation of the Company’s hospitality business on a solid financial basis, with minimal disruption to the Company’s hotels, their thousands of employees, vendors, lenders, franchisors, hotel management companies and customers. For these reasons and the reasons set forth below, the Plan should be confirmed.”

In a declaration filed in support of first day motions (the “Riggins Declaration”) [Docket No. 3], Bruce A Riggins, the Debtors’ Chief Financial Officer, provides: “The Plan contemplates the consummation of the Restructuring Transactions that, among other things, will

• (a) cancel the Debtors’ Existing Preferred Equity Interests,
• (b) issue 100% of new common equity interests in Reorganized HIT to the Plan Sponsor,
• (c) provide the Debtors with up to $65 million in debtor in possession financing to fund working capital needs and anticipated transaction fees and expenses and an exit facility effective upon the Effective Date (the ‘Exit Facility’) with a maximum revolving drawn principal amount of (i) $25 million, plus (ii) the DIP Facility Undrawn Amount to fund go-forward working capital needs, and
• (d) leave unimpaired and provide for payment in the ordinary course for all of the Company’s employees, vendors, lenders, franchisors, and hotel management companies.

Notably, the Plan is structured so that, of the Debtors’ many affiliated entities, only the Debtors are commencing these Chapter 11 Cases, which eliminates the uncertainty and expense associated with filing the operating Non-Debtor Subsidiaries.

The Restructuring Transactions are supported by: (a) Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC (the ‘Brookfield Investor’ or the ‘Plan Sponsor’), who holds all of the interests in the Existing Preferred Equity Interests, which is the fulcrum security in the Debtors’ capital structure; and (b) the Company’s key contract counterparties, who entered into amendments, consent agreements and forbearance agreements and waivers of defaults.”

Additionally, the Riggins Declaration states, “The Plan provides for the treatment of Claims against and Interests in the Debtors through, among other things: (a) reinstating or otherwise paying in full all Allowed General Unsecured Claims, (b) the issuance of the New HIT Common Equity Interests and New HITOP Interests to the Plan Sponsor; and (c) the issuance of contingent value rights (‘CVRs’) to holders of Existing HIT Common Equity Interests.

Specifically, the Plan contemplates the following:

• on the Effective Date, holders of Allowed Secured Claims shall receive, at the sole option of the Debtors with the consent of the Plan Sponsor, either (a) payment in full, in Cash, of the unpaid portion of its Allowed Secured Claim, (b) delivery of the Collateral securing such Allowed Secured Claim or (c) other treatment such that the Secured Claim shall be rendered Unimpaired pursuant to section 1124 of the Bankruptcy Code;
• holders of Allowed Unsecured Priority Claims shall receive payment in full in Cash or as otherwise provided in the Bankruptcy Code;
• holders of Allowed General Unsecured Claims shall, at the sole option of the Debtors with the consent of the Plan Sponsor (a) have its Allowed General Unsecured Claim reinstated and paid in full on the later to occur of the Effective Date or when such Allowed General Unsecured Claim becomes due in the ordinary course of the Debtors’ or Reorganized Debtors’ business operations or (b) have its Allowed General Unsecured Claim otherwise rendered Unimpaired pursuant to section 1124 of the Bankruptcy Code;
• Allowed Intercompany Claims shall be reinstated;
• on the Effective Date, Existing HIT Preferred Interests will be extinguished in exchange for each holder’s Pro Rata Share, together with the holders of DIP Claims (excluding, for the avoidance of doubt, any Claims in respect of the DIP Facility Undrawn Amount) and Existing HITOP Preferred Interests, of 100% of the New HIT Common Equity Interests issued on the Effective Date;
• on the Effective Date, (a) 98% of the Existing HITOP Preferred Interests will be extinguished in exchange for each holder’s Pro Rata Share, together with the holders of DIP Claims (excluding, for the avoidance of doubt, any Claims in respect of the DIP Facility Undrawn Amount) and Existing HIT Preferred Interests, of 100% of the New HIT Common Equity Interests issued on the Effective Date and (b) 2% of the Existing HITOP Preferred Interests in the Debtors will be canceled in exchange for each holder’s Pro Rata Share of 2% of New HITOP Interests; and
• Allowed Existing HIT Common Equity Interests shall be canceled, extinguished and discharged in exchange for each holder receiving one CVR in respect of each share of the Allowed Existing HIT Common Equity Interests outstanding immediately prior to the Effective Date and such holders shall be automatically deemed to have accepted the terms of the CVR Agreement and to be a party thereto, in each case in accordance with the terms of the CVR Agreement.”

The Disclosure Statement [Docket No. 8] adds: “the Plan (the ‘Restructuring Transactions’)…will eliminate the Debtors’ Existing Preferred Equity Interests and the related cash distribution obligations. The Restructuring Transactions will also provide the Debtors and Reorganized Debtors with $65 million in debtor in possession financing to fund working capital needs and the anticipated transaction fees and expenses, and a revolving $25 million credit facility upon the Effective Date to fund go-forward working capital needs. Critically, the Restructuring Transactions and the Plan will not impair any of the lenders, Franchisors or hotel management companies to the Company’s operating subsidiaries, none of which are Debtors in the Chapter 11 Cases, nor will the Company’s workforce, vendors or other unsecured creditors be impaired under the Plan….

A lynchpin of the Restructuring Transactions and the Plan is a $65 million debtor-in-possession financing facility provided on a secured basis to support critical working capital to the Company and a post-Effective Date revolving secured credit facility in an amount of $25 million (the ‘Exit Facility’). Each holder of a DIP Claim will receive, in exchange for its Claim, its Pro Rata Share, together with the holders of Existing Preferred Equity Interests, of 100% of the new equity interests of Reorganized HIT (the ‘New HIT Common Equity Interests’). Similarly, each holder of Existing Preferred Equity Interests shall receive, in exchange for its Interest, its Pro Rata Share, together with the holders of DIP Claims, of 100% of the New HIT Common Equity Interests. Additionally, 2% of Existing HITOP Preferred Interests shall be canceled, and the holder of such Existing HITOP Preferred Interests shall receive, in exchange for its Interests, its Pro Rata Share of 2% of New HITOP Interests.

Existing HIT Common Equity Interests will be discharged and cancelled on the Effective Date. Holders of Allowed Existing HIT Common Equity Interests will receive one contingent value right (a ‘CVR’ and, collectively, the ‘CVRs’) in respect of each share of the Allowed Existing HIT Common Equity Interests outstanding immediately prior to the Effective Date, which CVRs shall mature five years from the Effective Date (subject to a potential extension of two years at the sole discretion of Reorganized HIT’s board of directors) or earlier upon the occurrence of a Monetization Event (as defined in the CVR Agreement).

The Plan and Restructuring Transactions, therefore, implement a significant recapitalization of the Company, funding necessary working capital that will allow it to continue to operate its hotel business with the support of the Plan Sponsor.”

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, see also the Liquidation Analysis below):

• Class 1 (“Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 2 (“Unsecured Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 3 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 4 (“Intercompany Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
• Class 5A (“Existing HIT Preferred Interests”) is impaired and entitled to vote on the Plan. On the Effective Date, all outstanding shares, units, and interests (and rights, warrants, options or other interests to acquire shares and interests) of the Existing HIT Preferred Interests will be extinguished in exchange for each holder’s Pro Rata Share, together with the holders of DIP Claims (exclusive, for the avoidance of doubt, of Claims in respect of the DIP Facility Undrawn Amount) and Class 5B Interests, of 100% of the New HIT Common Equity Interests issued on the Effective Date.
• Class 5B (“Existing HITOP Preferred Interests”) is impaired and entitled to vote on the Plan. The estimated recovery is 11% – 62%. On the Effective Date, (x) 98% of the outstanding shares, units and interests (and rights, warrants, options or other interests to acquire shares and interests) of the Existing HITOP Preferred Interests will be transferred to HIT in exchange for each holder’s Pro Rata Share, together with the holders of DIP Claims (exclusive, for the avoidance of doubt, of Claims in respect of the DIP Facility Undrawn Amount) and Class 5A Interests, of 100% of the New HIT Common Equity Interests issued on the Effective Date and (y) 2% of the outstanding shares, units and interests (and rights, warrants, options or other interests to acquire shares and interests) of the Existing HITOP Preferred Interests will be canceled in exchange for each holder’s Pro Rata Share of 2% of New HITOP Interests.
• Class 6 (“Existing HIT Common Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. On the Effective Date, the Allowed Existing HIT Common Equity Interests shall be cancelled, extinguished and discharged in exchange for each holder receiving one CVR in respect  of each share of the Allowed Existing HIT Common Equity Interests outstanding immediately prior to the Effective Date and such holders shal be automatically deemed to have accepted the terms of the CVR Agreement… the value, if any, of the CVRs, which are speculative and may ultimately have no or minimal value.
• Class 7 (“Intercompany Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan.

Voting Results

On May 19, 2021, the Debtors’ claims agent notified the Court of the Plan voting results [Docket No. 9], which were as follows.

• Class 5A (“Existing HIT Preferred Interests”): 1 claim holder with 100% in amount, voted in favor of the Plan.
• Class 5B (“Existing HITOP Preferred Interests”): Claim holder, representing $30,896,054.61 100% in amount, voted in favor of the Plan.

Key Documents

The Disclosure Statement [Docket No. 8] attached the following documents:

• Exhibit A: Joint Prepackaged Chapter 11 Plan for Hospitality Investors Trust, Inc. and Hospitality Investors Trust Operating Partnership, L.P.
• Exhibit B: Organizational Chart
• Exhibit C: Liquidation Analysis

The Debtors filed Plan Supplements at Docket Nos. 68 and 121 which attached the following documents:

• Exhibit A: New Corporate Governance Documents
  • Exhibit A-1: Articles of Amendment and Restatement of Hospitality Investors Trust, Inc.
  • Exhibit A-2: Amended and Restated Agreement of Limited Partnership of Hospitality Investors Trust Operating Partnership, L.P. 
  • Exhibit A-3: Bylaws of Hospitality Investors Trust, Inc.
• Exhibit B: Exit Facility Credit Agreement [Docket No. 121]
  • Exhibit B-1: Blacklined Exit Facility Credit Agreement (changed pages only) [Docket No. 121] 
• Exhibit C: Schedule of Rejected Contracts and Leases
• Exhibit D:Identities of the Initial Directors and Officers of the Reorganized Debtors and Summary of Related Compensation

DIP Financing

On June 10, 2021, the Court hearing the Hospitality Investors Trust cases issued a final order authorizing the Debtors to (i) access the $35.0mn balance of a $65.0mn debtor-in-possession (“DIP”) financing facility and (ii) continue using cash collateral [Docket No. 97]. In a May 21 interim order, the Court had previously authorized the Debtors to access $30.0mn of the new money DIP financing (the “Interim Funding Amount”) [Docket No. 51 which attaches the May 25, 2021 DIP credit agreement at Exhibit A].

The DIP financing is being provided by prepetition lenders (and now Plan sponsor) Brookfield Strategic Real Estate Partners II Hospitality Reit II LLC (the “DIP Lender”) and the DIP Lender has agreed that at effectiveness its DIP claim will be converted “into its Pro Rata Share, together with the holders of Existing Preferred Equity Interests, of (x) 100% of the New HIT Common Equity Interests and (y) 2% of New HITOP Interests.” The DIP Lender has also agreed to provide the emerged Debtors with a $60.0mn revolving unsecured exit facility.

Exit Financing

On June 21, 2021 the Debtors filed an amended Plan Supplement [Docket No. 121], attaching an amended Exit Facility Credit Agreement and a related blackline The amended agreement upsizes the Exit Revolving Credit Facility from $55.0mn to $60.0mn.

Key Terms of Exit Facility:

• Borrowers: Hospitality Investors Trust, Inc. and Hospitality Investors Trust Operating Partnership, L.P.,
• Administrative and Collateral Agent: Brookfield Strategic Real Estate Partners II Hospitality Reit II
• Revolving Credit Facility: $60.0mn
• Interest Rate: 15% per annum
• Default Interest: 2.0% per annum in excess of the interest rate otherwise payable
• Scheduled Maturity: 2024

Events Leading to the Chapter 11 Filing

The Riggins Declaration detailed the events leading to Hospitality Investors Trusts’ Chapter 11 filing. The Riggins Declaration provides: “During 2019, as part of the Company’s investment strategy to continue to pursue the sale of non-core hotels and reallocate capital into other corporate purposes, including debt reduction, the Company commenced marketing for 45 Hotel Sales and closed on 43 such sales. Since then, the hospitality and travel sectors of the economy have been heavily impacted by the novel coronavirus pandemic, and the Debtors’ hotel properties have not been the exception.

In early March 2020, the Company started to experience the effects of the coronavirus pandemic on its business through softening of demand and revenue weakness across its portfolio triggered by direct guest cancellations at its hotels as well as cancellations of business and industry conventions and meetings in certain of its markets. These conditions significantly worsened over the course of the month and continued through 2020 and into the first and second quarters of 2021 as the level of overall travel has declined significantly due to concerns about the coronavirus pandemic and actions taken by governments, businesses and other organizations to contain the coronavirus that have included restrictions on travel and the operation of many businesses as well as event cancellations, capacity limits and social distancing measures.

The Company anticipates that demand from business travelers will remain impaired at least until there has been adequate production and widespread distribution of the recently developed coronavirus vaccines, broader lifting of travel restrictions by businesses and governments and wider re-establishment of consumer confidence in the safety of travel….

As a result of the historically low occupancy rates and lower pricing, the Company did not generate sufficient cash from its operations to cover its obligations and was required to utilize its cash on hand to fund non-hotel expenses such as interest on its debt obligations, payment of distributions on the Existing HITOP Preferred Interests and general and administrative expenses.During some months, the Company also utilized cash on hand to fund certain hotel operating expenses.

In response to the coronavirus pandemic, the Company has implemented various property-level cost reduction and other liquidity preservation measures. These measures have included determining to delay most of the PIPs required by the Franchisors that had been scheduled for 2020, as well as all projects scheduled for 2021, and determining not to make $4.2 million of capital reserve payments due to certain of the Company’s lenders during April and May 2020. In addition, the Company negotiated forbearance and loan amendment agreements with certain of its lenders, which included maturity date extensions for two loans that came due during 2020. The Company also worked closely with its third-party property managers to respond to these developments and to implement various property-level cost reduction and other liquidity preservation measures which have included temporary hotel staff reductions and temporary suspension of certain services.

Since the onset of the pandemic, the Company has implemented various corporate overhead savings initiatives, including permanent and temporary reduction in employee headcount, reduction in the 2020 incentive compensation pool and temporary elimination of certain employee benefit programs. Notwithstanding these measures, the Company has not been able to successfully stem the liquidity crisis caused by the novel coronavirus, and, as a result of the forbearance and loan modification agreements the Company has entered into with respect to its indebtedness, as well as the periodic debt yield and debt service coverage tests the Company remains subject to under its indebtedness, the Company does not expect that excess cash flows, if any, generated by its properties will be available to the Company for any other purpose for the foreseeable future.

The Debtors’ cash on hand decreased from $70.3 million at the start of 2020 to $14.6 million by the end of the year and to $8.7 million by the end of the first quarter of 2021. As of the Petition Date, the Debtors were left with only approximately $3.5 million in cash on hand.

Pursuit of Strategic Alternatives

During the third quarter of 2020, the Debtors determined that, as a result of the impact of the coronavirus pandemic on the Company’s business, absent additional liquidity from a source other than property operations or additional modifications to the terms of its debt obligations, the Company would no longer have sufficient cash on hand to continue to pay its current obligations during the first half of 2021. Having made the determination that additional liquidity was needed, the Debtors pursued all available avenues to secure such additional liquidity. Certain potential sources of additional liquidity such as proceeds from refinancings and asset sales were not available to the Company in any material amount due to the impact of the coronavirus pandemic.

Although the Company was successful in negotiating favorable forbearance and loan amendment agreements with its lenders, additional liquidity is still required for the Company to meet its upcoming obligations in the first half of 2021. In the second quarter of 2020, the Debtors entered into discussions with its largest investor — the Brookfield Investor — regarding a recapitalization of the Company. With the Brookfield Investor holding Brookfield Approval Rights, including regarding potential refinancing transactions, equity issuances and further debt issuances, it is my understanding that the Special Conflicts Committee determined, in an exercise of its reasonable business judgment, that a recapitalization with the Plan Sponsor provided the greatest likelihood of securing much-needed capital infusions at a magnitude significant enough to address the Company’s expected liquidity shortfall.

In connection with these negotiations, the Debtors engaged restructuring counsel and a financial advisor to analyze their business plan, evaluate all strategic and liquidity alternatives and negotiate a transaction with the Plan Sponsor and/or any other investors that would allow the Debtors to address their working capital needs for 2021. The proposed Restructuring Transactions, which the Debtors have determined is the most value-maximizing transaction available to them, is the result of months of intense, arm’s-length negotiations between the Debtors and the Plan Sponsor.”

Prepetition Indebtedness

As of the Petition date, the Debtors do not have any outstanding funded debt, but have approximately $1.3 billion in unsecured obligations, most of which comprises contingent unsecured claims on account of the Debtors’ guaranties of the secured debt of the Non-Debtor Subsidiaries.

Unsecured Guaranty Claims To fund the acquisition and operation of the Company’s hotels, the NonDebtor Subsidiaries have incurred mortgage and mezzanine indebtedness secured by the Non-Debtor Subsidiaries’ hotel properties and, in the case of mezzanine indebtedness, the ownership interest in certain Non-Debtor Subsidiaries. The mortgage and mezzanine loans are non-recourse obligations, with exceptions for certain environmental indemnities and with respect to certain so-called “bad boy” events which if they occur liability is either fully recourse or recourse to the extent of losses incurred by the lender. The recourse obligations under the Non-Debtor Subsidiaries’ mortgage and mezzanine loans are supported by guarantees from the Debtors (the “Guaranty Claims”). The Guaranty Claims are contingent General Unsecured Claims that will be unimpaired under the Plan.

(a) Pool I Loans. On May 1, 2019, the Company refinanced existing mortgage and mezzanine indebtedness with new mortgage and senior and junior mezzanine indebtedness of $1.04 billion secured by 92 of the Company’s hotel properties (collectively, the “Pool I Loans”). As of the Solicitation date, (i) the Pool I mortgage loan had approximately $707.8 million in principal amount outstanding, (ii) the Pool I senior mezzanine loan had approximately $81.35 million in principal amount outstanding, and (ii) the Pool I junior mezzanine loan had approximately $56.95 million in principal amount outstanding.

(b) Pool II Mortgage Loan. In October 2015, the Company refinanced existing mortgage indebtedness secured by 21 of the Company’s hotel properties (the “Pool II Mortgage Loan”). As of the Solicitation Date, the Pool II Mortgage Loan had approximately $232 million in principal amount outstanding. The Pool II Mortgage Loan carries a fixed annual interest rate of 4.96% per annum. The Pool II Mortgage Loan is secured by liens on 21 of the Company’s hotel properties.

(c) Term Loan. On April 27, 2017, the Company entered into that certain Second Amended and Restated Term Loan Agreement (as amended, the “Term Loan”) in the aggregate principal amount of $310 million, secured by 28 of the Company’s hotel properties. As of the Solicitation Date, the Term Loan has approximately $227.6 million in principal amount outstanding.

(d) HGI Joint Venture One of the Company’s Non-Debtor Subsidiaries owns a 56.5% joint venture interest in a Hilton Garden Inn located in Blacksburg, Virginia, and the hotel is subject to a mortgage loan (the “HGI JV Loan”). As of the Solicitation Date, the HGI JV Loan has approximately $9.9 million in principal amount outstanding.

Other General Unsecured Claims. In addition to their contingent, unsecured obligations outstanding under the Guaranty Claims, the Debtors owe (a) approximately $698,120 in rent obligations owed to the Debtors’ landlords and (b) approximately $151,000 in unpaid trade and other ordinary course obligations, in each case, as of the Petition date.

Prepetition Significant Shareholders

Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC holds 30,858,434.61 (100%) of the Debtors' Class C Preferred Units and 100% of the Debtors' Redeemable Preferred Units

Liquidation Analysis (see Exhibit C of Disclosure Statement [Docket No. 8] for notes)

About the Debtors

According to the Debtors: “Hospitality Investors Trust, Inc. (“HIT REIT”) is a publicly registered non-traded real estate investment trust (“REIT”) which owns a diversified portfolio of strategically-located hotel properties throughout the United States within the select service and full-service markets of the hospitality sector.”

The Disclosure Statement adds: “As of the date of Solicitation (the ‘Solicitation Date’), the Company owns or has an interest in a total of 100 hotels with a total of 12,421 guest rooms located across 29 states. The Company has primarily acquired lodging properties in the upscale select-service, upscale extended stay and upper midscale select-service chain scale segments in secondary markets with strong demand generators, such as state capitals, major universities and hospitals, as well as corporate, leisure, and retail attractions. 

All of the Company’s hotels are operated under a franchise or license agreement with a national brand owned by one of Hilton Worldwide, Inc., Marriott International, Inc., and Hyatt Hotels Corporation, or one of their respective subsidiaries or affiliates (collectively, the ‘Franchisors’). The Company wholly owns 98 of its hotels, and two hotels are partially-owned through joint ventures with unaffiliated third-parties. The Company’s hotel portfolio was acquired through a series of seven portfolio purchases during the period from March 2014 to April 2017, which ranged in size from 116 hotels with a purchase price of $1.8 billion to two hotels with a purchase price of $48.6 million. Across 2019 and 2020, the Company sold a total of 43 hotels (the ‘Hotel Sales’).”

Prepetition Significant Shareholders (see also corporate structure chart immediately below)

The following table details ownership of Debtor Hospitality Investors Trust Operating Partnership, L.P. 

Sitting above the operating entity is Debtor Hospitality Investors' Trust, Inc. in respect of which the Debtors' petition notes the following as to 10% or above equity positions:

Hospitality Investors' Trust, Inc. most recent proxy statement (April 2020) provides the following with the footnotes adding insight as to Brookfiled's aggregate position:

Corporate Structure Chart

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