Hospitality Investors Trust, Inc. (SGX:Q1P) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
| Entry into a Material Definitive Agreement. |
The descriptions of the HIT REIT 87-Pack Loans and the HIT REIT
Term Loan set forth in Item 2.03 of this Current Report on Form
8-K are incorporated by reference into this Item 1.01 in their
entirety.
| Item 2.01. |
Completion of Acquisition or Disposition of Assets. |
On April 27, 2017, Hospitality Investors Trust, Inc. (the
Company), through its operating partnership, Hospitality
Investors Trust Operating Partnership, L.P. (the OP), completed
the acquisition of seven hotels (the Hotels) from affiliates of
Summit Hotel OP, LP, the operating partnership of Summit Hotel
Properties, Inc. (collectively, Summit), for an aggregate
purchase price of $66.8 million. The acquisition occurred to a
reinstatement agreement dated as of February 11, 2016 (as
amended, the Reinstatement Agreement) which reinstated a
previously terminated purchase and sale agreement between Summit
and the Company with respect to the Hotels and three other hotels
for an aggregate purchase price of $89.1 million. Under the
Reinstatement Agreement, Summit has the right to market and
ultimately sell any or all of the hotels to be purchased to a
bona fide third party purchaser without the Companys consent at
any time prior to the completion of its acquisition. In June
2016, Summit informed the Company that two of the ten hotels had
been sold, thereby reducing the Second Summit Portfolio to eight
hotels for an aggregate purchase price of $77.2 million.
The closing date of the acquisition of the remaining hotel to be
purchased under the Reinstatement Agreement is October 24, 2017.
Summit informed the Company that this hotel is subject to a
pending purchase and sale agreement with a bona fide third-party
purchaser.
The purchase price was funded with (i) $26.9 million of the
proceeds from the sale in March 2017 of convertible preferred
units in the OP under a Securities Purchase, Voting and
Standstill Agreement the Company and the OP entered into with
Brookfield Strategic Real Estate Partners II Hospitality REIT II
LLC, (ii) $33.4 million in net proceeds from the HIT REIT Term
Loan and (iii) $6.5 million previously paid by the Company, to
the Reinstatement Agreement, as an earnest money deposit.
The following table lists information about the Hotels.
| Hotel | Location | Number of Rooms | ||
| Residence Inn by Marriott | Jackson, MS | |||
| Courtyard by Marriott | Germantown, TN | |||
| Courtyard by Marriott | Jackson, MS | |||
| Fairfield Inn Suites by Marriott | Germantown, TN | |||
| Residence Inn by Marriott | Germantown, TN | |||
| Staybridge Suites | Ridgeland, MS | |||
| Homewood Suites | Ridgeland, MS |
| Item 2.03. |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
HIT REIT 87-Pack Loans
On April 28, 2017, the Company and the OP through certain
wholly-owned subsidiaries of the OP (collectively referred to as
the 87-Pack Borrower), as borrowers, entered into a mortgage loan
agreement (the HIT REIT 87-Pack Mortgage Loan) and a mezzanine
loan agreement (the HIT REIT 87-Pack Mezzanine Loan and,
collectively with the HIT REIT 87-Pack Mortgage Loan, the HIT
REIT 87-Pack Loans) with Deutsche Bank AG, New York Branch (DB),
Citigroup Global Markets Realty Corp. (Citi), and JPMorgan Chase
Bank, National Association (JPM), as lenders (collectively
referred to as the 87-Pack Lender) with an aggregate principal
balance of $915.0 million. The principal amount of the HIT REIT
87-Pack Mortgage Loan is $805.0 million and the HIT REIT 87-Pack
Mortgage Loan is secured by 87 of the Companys hotel properties,
all of which served as collateral for the Companys existing
mortgage indebtedness (each, a 87-Pack Collateral Property). The
principal amount of the HIT REIT 87-Pack Mezzanine Loan is $110.0
million and the HIT REIT 87-Pack Mezzanine Loan is secured by the
ownership interest in the entities which own the 87-Pack
Collateral Properties and the related operating lessees.
At the closing of the HIT REIT 87-Pack Loans, the net proceeds
after accrued interest and closing costs were used to repay the
$895.4 million principal amount then outstanding under the
Companys existing mortgage and mezzanine indebtedness and pay
$1.0 million into the Reserve Funds (as defined below).
The HIT REIT 87-Pack Loans mature on May 1, 2019, subject to
three (one-year) extension rights which, if all three extension
rights are exercised, would result in an outside maturity date of
May 1, 2022. Loans issued under the HIT REIT 87-Pack Loans are
fully prepayable with certain prepayment fees applicable on or
prior to November 1, 2018 (the Par Prepayment Date), provided,
however, that the first 20% of each loan issued as part of the
HIT REIT 87-Pack Loans is prepayable at par. Following the Par
Prepayment Date, each loan made under the HIT REIT 87-Pack Loans
may be prepaid without payment of any prepayment fee or any other
fee or penalty. Prepayments under the HIT REIT 87-Pack Mortgage
Loan are generally conditioned on a pro-rata prepayment being
made under the HIT REIT 87-Pack Mezzanine Loan.
The HIT REIT 87-Pack Mortgage Loan requires monthly interest
payments at a variable rate equal to one-month LIBOR plus
2.55583850%, and the HIT REIT 87-Pack Mezzanine Loan requires
monthly interest payments at a variable rate equal to one-month
LIBOR plus 6.50%. to an interest rate cap agreement, the LIBOR
portions of the interest rates due under the HIT REIT 87-Pack
Loans are effectively capped at the greater of (a) 4.0% and (b) a
rate that would result in a debt service coverage ratio specified
in the loan documents.
In connection with a sale or disposition to a third party of an
individual 87-Pack Collateral Property, such 87-Pack Collateral
Property may be released from the HIT REIT 87-Pack Loans, subject
to certain conditions and limitations, by prepayment of a portion
of the HIT REIT 87-Pack Loans. The prepayment amount under the
87-Pack Mortgage Loan will equal 105% of the allocated amount
under the HIT REIT 87-Pack Mortgage Loan for such 87-Pack
Collateral Property if the outstanding principal balance equals
or exceeds $603,750,000 following the application of the release
of the 87-Pack Collateral Property and 110% of the allocated
amount under the HIT REIT 87-Pack Mortgage Loan for such 87-Pack
Collateral Property if the outstanding principal balance is less
than $603,750,000 following the application of the release of the
87-Pack Collateral Property. The prepayment amount under the
87-Pack Mezzanine Loan will equal 105% of the allocated amount
under the HIT REIT 87-Pack Mezzanine Loan for such 87-Pack
Collateral Property if the outstanding principal balance equals
or exceeds $82,500,000 following the application of the release
of the 87-Pack Collateral Property and 110% of the allocated
amount under the HIT REIT 87-Pack Mezzanine Loan for such 87-Pack
Collateral Property if the outstanding principal balance is less
than $82,500,000 following the application of the release of the
87-Pack Collateral Property. A greater payment may be required
under one or both of the HIT REIT 87-Pack Loans in order to
satisfy a debt yield test applicable in connection with the
release of a 87-Pack Collateral Property.
At closing, the 87-Pack Borrower deposited $30.0 million to fund
a reserve (the 87-Pack PIP Reserve) in order to fund expenditures
for work required to be performed under property improvement
plans (PIPs) required by franchisors of the 87-Pack Collateral
Properties. The 87-Pack PIP Reserve was funded with a portion of
the proceeds of the HIT REIT Term Loan. The HIT REIT 87-Pack
Loans also provides for certain additional amounts to be
deposited in reserve accounts (collectively with the 87-Pack PIP
Reserve, the Reserve Funds).
The HIT REIT 87-Pack Loans (i) are non-recourse except for
certain environmental indemnities and certain so-called bad boy
events and (ii) are fully recourse (subject in certain cases to a
specified cap) upon the occurrence of certain other bad boy
events. The Company, the OP and the 87-Pack Borrower, as
indemnitors, entered into two Environmental Indemnity Agreements,
dated as of April 28, 2017, one in respect of the HIT REIT
87-Pack Mortgage Loan and one in respect of the HIT REIT 87-Pack
Mezzanine Loan, in favor of the 87-Pack Lender, as indemnitee
(the Environmental Indemnities) with respect to these
environmental indemnities. The Company and the OP also executed
two Guaranty of Recourse Obligations, dated as of April 28, 2017,
one in respect of the HIT REIT 87-Pack Mortgage Loan and one in
respect of the HIT REIT 87-Pack Mezzanine Loan, to and for the
benefit of the 87-Pack Lender (the Guaranties) to which the
Company and the OP guaranteed their recourse obligations to the
87-Pack Lender.
For the term of the HIT REIT 87-Pack Loans, the Company and the
OP are required to maintain, on a consolidated basis, a net worth
of $250.0 million (excluding accumulated depreciation and
amortization).
The 87-Pack Lender has the right to (i) bifurcate the HIT REIT
87-Pack Mortgage Loan into (a) one or more participations,
component or other notes, such as B-Notes or (b) up to one
additional mezzanine loan secured by a pledge of direct and
indirect ownership interests in the 87-Pack Borrower and (ii)
reallocate the outstanding principal amount and interest rate of
the HIT REIT 87-Pack Mortgage Loan among the foregoing, provided
in each case that the economic and other terms of the HIT REIT
87-Pack Mortgage Loan will not be modified in any manner that is
adverse to the 87-Pack Borrower, the Company or the OP or their
affiliates, other than to a de minimis extent.
There are no relationships between the Company, the OP and the
87-Pack Borrower, on the one hand, and DB, Citi, and JPM, on the
other hand, except that DB is a lender under the Existing Term
Loan (as defined below) and affiliates of DB have made other
mortgage loans to the Company and the Companys affiliates.
HIT REIT Term Loan
On April 27, 2017, the Company and the OP, as guarantors, and
certain wholly-owned subsidiaries of the OP (each a Term Loan
Borrower and collectively the Term Loan Borrowers), as borrowers,
entered into a Second Amended and Restated Term Loan Agreement
(the HIT REIT Term Loan) with Citigroup Global Markets Inc.
(CGMI), DB and JPM (collectively, the Term Loan Lenders), as
lenders, and Citibank, N.A., as administrative agent and as
collateral agent, with CGMI and Deutsche Bank Securities Inc.
(DBSI, and together with CGMI, the Arrangers), as joint lead
arrangers and joint book running manager, for a term loan in
aggregate principal amount of $310.0 million. The HIT REIT Term
Loan is collateralized by 28 of the Companys hotel properties,
including the Hotels (each, a Term Loan Collateral Property).
At the closing of the HIT REIT Term Loan, the net proceeds after
accrued interest and closing costs were used (i) to repay the
$235.5 million principal amount then outstanding under the
Amended and Restated Term Loan Agreement dated October 15, 2015
among the Company, the OP and certain wholly-owned subsidiaries
of the OP with DB, as administrative agent, and DBSI, as lead
arranger and book-running manager, to which 20 of the Term Loan
Collateral Properties served as collateral (the Existing Term
Loan); (ii) to fund $33.4 million of the purchase price of the
Hotels; (iii) to deposit $30.0 million to fund the 87-Pack PIP
Reserve; and (iv) to pay in full the contingent consideration
payable to Barcel Crestline Corporation as part of an acquisition
of hotels by the Company during March 2014 of $4.6 million.
The HIT REIT Term Loan matures on May 1, 2019, subject to three
(one-year) extension rights which, if all three extension rights
are exercised, would result in an outside maturity date of May 1,
2022. The HIT REIT Term Loan is prepayable in whole or in part at
any time, subject to payment of (a) LIBOR breakage, if any, and
(b) except for the first $99,073,180 paydown of the loan balance,
certain fees applicable prior to May 1, 2018.
The HIT REIT Term Loan requires monthly interest payments at a
variable rate of one-month LIBOR plus 3.00%. to an interest rate
cap agreement, the LIBOR portions of the interest rates due under
the HIT REIT Term Loan is capped at 4.00% during the initial
term, a rate based on a debt service coverage ratio during any
extension term.
In connection with a sale or disposition to a third party of an
individual Term Loan Collateral Property, such Term Loan
Collateral Property may be released from the HIT REIT Term Loan,
subject to certain conditions, by prepayment of a portion of the
HIT REIT Term Loan in an amount equal to 105% of the allocated
amount under the HIT REIT Term Loan for such Term Loan Collateral
Property up to the first $77,500,000 of the amount outstanding
under the HIT REIT Term Loan prepaid and, thereafter, 110% of the
allocated amount under the HIT REIT Term Loan for such Term Loan
Collateral Property. A greater payment may be required in order
to satisfy a debt yield test applicable in connection with the
release of a Term Loan Collateral Property.
The HIT REIT Term Loan also provides for certain amounts to be
deposited into reserve accounts, including with respect to all
costs associated with the PIPs required to any franchise
agreement related to any Term Loan Collateral Property.
The HIT REIT Term Loan (i) is non-recourse except for certain
environmental indemnities and certain so-called bad boy events
and (ii) is fully recourse (subject in certain cases to a
specified cap) upon the occurrence of certain other bad boy
events.
For the term of the HIT REIT Term Loan, the Company, the OP and
the Term Loan Borrowers are required to maintain, on a
consolidated basis, a net worth of $250.0 million (excluding
accumulated depreciation and amortization).
The Arrangers have the right to bifurcate the HIT REIT Term Loan
into senior and junior tranches, provided the aggregate economic
terms will be no less favorable to the Term Loan Borrowers.
There are no relationships between the Company, the OP and the
Term Loan Borrowers, on the one hand, and CGMI, DB, JPM and DBSI,
on the other hand, except that DB and DBSI are lenders under the
Existing Term Loan and affiliates of DB have made other mortgage
loans to the Company and the Companys affiliates.
Other
The descriptions of the HIT REIT 87-Pack Loans, HIT REIT Term
Loan, Guaranties and Environmental Indemnities in this Current
Report on Form 8-K are summaries and are qualified in their
entirety by the complete terms of the HIT REIT 87-Pack Loans, HIT
REIT Term Loan, Guaranties and Environmental Indemnities. Copies
of the HIT REIT 87-Pack Loans, HIT REIT Term Loan, Guaranties and
Environmental Indemnities are attached as exhibits 10.1, 10.2,
10.3, 10.4, 10.5, 10.6 and 10.7 to this Current Report on Form
8-K and incorporated by reference herein.
| Item 8.01. | Other Events. |
Press Release
On May 1, 2017, the Company issued a press release, a copy of
which is attached hereto as Exhibit 99.1 and incorporated by
reference herein.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| ExhibitNo. | Description | |
| 10.1 |
Mortgage Loan Agreement, dated as of April 28, 2017, by and among the Entities Listed on Schedule 1-A thereto, collectively, as borrower, and the Entities Listed on Schedule 1-B thereto, collectively, as operating lessee and Deutsche Bank AG, New York Branch, Citigroup Global Markets Realty Corp., and JPMorgan Chase Bank, National Association, collectively, as lender. |
|
| 10.2 |
Mezzanine Loan Agreement, dated as of April 28, 2017, by and among the Entities Listed on Schedule 1-A thereto, collectively, as borrower, and the Entities Listed on Schedule 1-B thereto, collectively, as operating lessee and Deutsche Bank AG, New York Branch, Citigroup Global Markets Realty Corp., and JPMorgan Chase Bank, National Association, collectively, as lender. |
| 10.3 |
Second Amended and Restated Term Loan Agreement, dated as of April 27, 2017, by and among the Borrowers Party thereto, as borrowers, Hospitality Investors Trust, Inc. and Hospitality Investors Trust Operating Partnership, L.P., as guarantors, the Initial Lenders named therein, as initial lenders, and Citibank, N.A., as administrative agent and as collateral agent, with Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., as joint lead arrangers and joint book running managers. |
|
| 10.4 |
Guaranty of Recourse Obligations by Hospitality Investors Trust Operating Partnership, LP and Hospitality Investors Trust, Inc. to and for the benefit of Deutsche Bank AG, New York Branch, Citigroup Global Markets Realty Corp. and JPMorgan Chase Bank, National Association, dated as of April 28, 2017. |
|
| 10.5 |
Guaranty of Recourse Obligations by Hospitality Investors Trust Operating Partnership, LP and Hospitality Investors Trust, Inc. to and for the benefit of Deutsche Bank AG, New York Branch, Citigroup Global Markets Realty Corp. and JPMorgan Chase Bank, National Association, dated as of April 28, 2017. |
|
| 10.6 |
Environmental Indemnity Agreement, dated as of April 28, 2017, on behalf of Hospitality Investors Trust, Inc., Hospitality Investors Trust Operating Partnership, L.P. and the Entities Listed on Schedule I, as indemnitors, in favor of Deutsche Bank AG, New York Branch, Citigroup Global Markets Realty Corp. and JPMorgan Chase Bank, National Association, as indemnitee. |
|
| 10.7 |
Environmental Indemnity Agreement, dated as of April 28, 2017, on behalf of Hospitality Investors Trust, Inc., Hospitality Investors Trust Operating Partnership, L.P. and the Entities Listed on Schedule I, as indemnitors, in favor of Deutsche Bank AG, New York Branch, Citigroup Global Markets Realty Corp. and JPMorgan Chase Bank, National Association, as indemnitee. |
|
| 99.1 | Press Release dated May 1, 2017. |
Hospitality Investors Trust, Inc. (SGX:Q1P) Recent Trading Information
Hospitality Investors Trust, Inc. (SGX:Q1P) closed its last trading session at with 1,272,000 shares trading hands.