Canyon Ranch Spa Owner Skips Mortgage Payments With Resorts Shut
(Bloomberg) -- Canyon Ranch bills itself as a place where guests can get away from the stress of modern life. These days, that includes a global pandemic that shuttered luxury resorts and has the owner seeking mortgage relief.
Canyon Ranch, which operates resorts in Arizona and Massachusetts, skipped roughly $363,000 monthly mortgage payments in April and May, according to loan data collected by Bloomberg. The company, part of John Goff’s Crescent Real Estate empire, has about $150 million in debt on the two spas, which have been closed because of the coronavirus.
“There’s been a friendly and productive collaboration between Canyon Ranch and lenders about payment terms,” a spokesman for Crescent said. “Canyon Ranch is looking forward to fully reopening and getting back to business as usual soon.”
Goff co-founded Fort Worth-based Crescent with investor Richard Rainwater, who died in 2015. The company has $3.5 billion in assets under management and Canyon Ranch is one of the jewels.
The original property in Tucson is famous for its detoxifying herbal treatments. Guests can hike desert canyons, get a stone massage or relax in rooms that typically start at $1,000 a night.
A week at the spa might sound appealing at the end of a months-long quarantine. But with tourists wary of air travel and close contacts, filling resorts remains a problem. The average occupancy rate at U.S. luxury properties was 23% for the week ending May 23, according to STR. That compares with 47% for economy hotels, whose roadside locations make them more accessible.
Low occupancy and shuttered hotels have pushed owners to seek deferred payments and restructured loans. About 19% of hotel loans packaged into commercial mortgage-backed securities were more than 30 days late in May, up from 1.6% in December, according to data from Trepp, a market research firm.
Goff isn’t alone in skipping debt payments on high-end lodging properties. Braemar Hotels & Resorts Inc., which owns 13 hotels, didn’t make principal or interest payments on nearly all of its loans beginning April 1, according to a statement earlier this month.
Braemar, whose properties include the Ritz-Carlton St. Thomas in the U.S. Virgin Islands and the Hilton La Jolla Torrey Pines in California, “is actively working with all of our lenders and servicers on mutually agreeable forbearance agreements and waivers and expects to announce the results of those discussions in the coming weeks,” Chief Executive Officer Richard Stockton said in a text message.
Loan negotiations can resemble a game of chicken during periods of low occupancy, because even shuttered resorts and hotels cost money to own as taxes and insurance bills mount.
Many lenders have granted forbearance in the short-term while watching to see how travel demand recovers. While some lenders may eventually seek to foreclose, others will prefer to help owners hang on until demand rebounds.
“It depends on whether the lender would rather own the property and fund the operating shortfall or if they’d rather not get mortgage payments for a few months,” said Michael Bellisario, an analyst at Robert W. Baird & Co.
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