- Starwood Capital is negotiating a loan modification on a $577M CMBS loan tied to 63 hotels across 21 states.
- The portfolio’s value has dropped more than 50% from its original $956M appraisal in 2017.
- Average occupancy fell to 67% in 2023, with net cash flow down 42% from 2019.
- Starwood plans to sell off assets to improve debt service coverage and access renovation reserves.
- The hotel sector recovery is expected to continue into 2026, according to CBRE.
Starwood Capital Group is taking steps to restructure a $577.3M CMBS loan tied to a 63-hotel portfolio as performance continues to lag, per Bisnow.
The portfolio—comprising over 6.3K rooms across 21 states—was transferred to special servicing last month after persistent cash flow challenges.
Proactive Workout
A spokesperson for Barry Sternlicht’s firm confirmed that Starwood has signed a term sheet with special servicer LNR Securities Holdings, a subsidiary of Starwood Property Trust (STWD), to modify the loan.
Although the debt doesn’t mature until June 2027, the firm aims to proactively release or sell select assets to improve coverage ratios and unlock reserve funds for renovations.
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Sinking Valuations, Occupancy Rates
The portfolio was originally appraised at $956M in 2017, but its value has since plunged by more than 50%, according to S&P Global.
The firm’s analysts noted that performance has stagnated, with average occupancy sliding from 73% in 2022 to 67% in 2023. Net cash flow has fallen even more steeply—from $63.6M in 2019 to just $37.2M at the end of 2023.
The loan, which carries a 4.5% annual interest rate, was carved up into more than a dozen CMBS trusts. The properties include a mix of limited-service and extended-stay hotels under brands like Marriott (MAR), Hilton (HLT), InterContinental (IHG), Choice Hotels (CHH), Radisson, and Larkspur.
Strategic Shifts, Asset Sales
Starwood is eyeing a targeted asset sale strategy to help rebalance the portfolio. The largest property concentrations are in California and Texas, including assets like Larkspur Landing in South San Francisco and Sacramento, Candlewood Suites in Texarkana, and the Holiday Inn Arlington Northeast near Globe Life Field.
The firm blamed ongoing underperformance on weakness in West Coast tech markets and rising operating expenses, which have impacted the broader select-service segment. Still, Starwood says it is seeing “positive recent trends” and expects momentum to build over the next two years.
To boost top-line performance, the firm is also rolling out new management strategies, marketing incentives, and tech upgrades—alongside capital improvements—to support recovery.
Sector Outlook Improving
Starwood’s move comes as the broader hotel industry is showing signs of a gradual rebound. CBRE projects revenue per available room (RevPAR) will rise 2% in 2025 and accelerate to 2.6% in 2026, driven by gains in international, business, and group travel.
With the portfolio’s debt still several years from maturity, Starwood appears focused on stabilizing its assets now—before conditions worsen or opportunities to restructure dry up.
