A dispute is brewing between a prominent Real Estate Investment Trust (REIT) and one of its lenders.
A letter sent on behalf of Toronto-based Brookfield Asset Management to the board of directors of Ashford Hospitality Trust, Inc. over Easter weekend, alleges Ashford made fraudulent transfers.
“The accusations in Brookfield’s letter are ridiculous, without merit and come at a time when our hotel properties are struggling from the sudden and massive reduction in travel,” Ashford Trust’s Chairman of the Board Monty J. Bennett said in a press release.
Ashford has requested forbearance from all of its lenders, including Brookfield Asset Management which it owes more than $98 million, due to the COVID-19 crisis.
“It is unfortunate that Brookfield has hired lawyers and sent a threatening letter to our board, and to our board members personally,” Bennett said in a press release. “Ashford did not pay last Thursday’s debt service installment. By the next day, on Good Friday, Brookfield’s outside counsel had sent us the threatening letter making all kinds of threats and demands of us by noon on Monday, the day after Easter, during a worldwide pandemic that has devastated the hotel industry."
Brookfield alleges Ashford transferred some $15.3 million dollars prior to the due date of a missed loan payment.
“The timeline and circumstances surrounding the transfer of these Funds to the Controlling Parent leave no doubt that the transfer was an actual fraudulent conveyance, made with the intent to hinder, defraud or delay the Lender and its rights and remedies under the Loan Agreements,” wrote Brookfield attorneys to Ashford board of directors on April 11, 2020.
The letter, which came from New York City-based law firm Cleary Gottlieb Steen & Hamilton LLP, provided a noon deadline on Monday, April 13 for Ashford to return funds they allege Ashford wrongfully transferred and to confirm in writing the funds are not going to be used to pay dividends or are necessary for the declaration of dividends.
Ashford’s portfolio consists of a bevy of hotels, such as Crowne Plaza, Embassy Suites and Courtyard Marriott, many of whom have closed due to COVID-19 government shut down orders or are experiencing operating cash flow shortfalls.
Bennett said Ashford is doing what it needs to do to stay afloat during unprecedented times.
"Our strategic actions in response to the crisis have been focused on protecting our hotels, ensuring the safety of our associates, and having a path to return our hotels to profitability," Bennett said. "A significant number of hotels have been forced to close as a result of government stay-at-home orders or other government edicts. Hotels that remain open are mostly operating in the low-single digit occupancy range and suffering operating cash flow shortfalls."
Brookfield Asset Management did not immediately respond to calls requesting comment from the Toronto Business Daily.
“Several of our properties are working proactively to support the communities we serve by providing a place of refuge for first responders, healthcare workers, and others needing shelter,” Bennett said. “It’s unfortunate that during this unprecedented crisis throughout our nation involving a National Emergency and pandemic when hundreds of thousands of Americans have been infected by -- and many thousands of Americans have died from -- the novel coronavirus (COVID-19), Brookfield would move so quickly to threaten our hotel operations.”