Filing Alert: American Hospitality Properties REIT Chapter 11

Update (October 5, 2026): A comprehensive case summary is now available for the Chapter 11 bankruptcy filing of American Hospitality Properties REIT, Inc.

American Hospitality Properties REIT, Inc. and its debtor affiliates⁽¹⁾, a Dallas, TX-based real estate investment trust formed to invest in premium branded hotels, filed for Chapter 11 protection on Oct. 4 in the U.S. Bankruptcy Court for the Northern District of Texas.

The company attributes the filing to years of alleged mismanagement and self-dealing by former external manager Phoenix American Hospitality, LLC (PAH) and its founder and CEO, William Lee "Perch" Nelson. On June 4, 2026, the SEC brought an enforcement action against PAH and Nelson. The SEC alleged they raised approximately $86 million from more than 2,000 retail investors between March 2022 and July 2024 through untrue statements about the REITs' hotel holdings, profitability and distributions of up to 12%. The next day, a federal district court in Dallas entered final judgments against both, which they consented to without admitting the allegations. Following Nelson's departure on May 20, 2026, new management took over. A forensic audit by FTI later uncovered an unrecorded issuance of approximately $4.5 million of REIT I common stock in August 2025 to a Nelson-controlled entity. The company says the affiliated hotel manager, PAH Management, LLC, did not pay franchise fees it owed. As a result, Marriott issued Notices of Default in September 2026 to four franchisees for approximately $1.55 million in total, and it may suspend reservation-system access or terminate the franchise agreements as early as Oct. 31, 2026. The company also faces a pending summary judgment motion by ground lessor Spirit Realty seeking not less than $4.33 million under a ground lease and REIT I's guaranty, as well as shareholder litigation based on the SEC action. REIT I has not filed required SEC disclosures or completed audits since year-end 2021, nor has REIT II since year-end 2023, and the company faces potential cross-defaults under its first-priority mortgage facilities.

The debtors filed without committed financing. They intend to spend the first two weeks of the cases obtaining DIP financing or identifying cash collateral to fund operations and support a restructuring. They have engaged LD Realty Capital as non-exclusive DIP arranger, and they warn that failing to obtain financing may force conversion to Chapter 7. The debtors are also seeking an emergency order enforcing or extending the automatic stay for 30 days to cover six non-debtor affiliates. These include the Fort Wayne borrowers under a $15.8 million Société Générale loan. REIT I holds the economic interests in those borrowers, and it is jointly and severally liable for certain loan obligations under a recourse guaranty, exposure that the loan's cross-default and springing recourse provisions could expand. The debtors say they aim to use the cases to stabilize governance and operations, restore franchisor confidence, address the ground lease dispute with Spirit, and address the shareholder litigation comprehensively.

American Hospitality Properties REIT, Inc. reports $0 to $50 thousand in assets and $1 million to $10 million in liabilities⁽²⁾. The filing indicates that there will be funds available for distribution to unsecured creditors. The case number is 26-80071.

⁽¹⁾ For a complete list of debtor entities, see the Chapter 11 Debtors table.
⁽²⁾ Although the lead case lists minimal liabilities, certain jointly administered affiliates report liabilities of $50 million to $100 million.

Chapter 11 Debtors

Top Unsecured Claims

Key Parties

Counsel:

• Bradley R. Foxman
  Vinson & Elkins LLP
  Email: bfoxman@velaw.com

Financial Advisor / CRO:

• FTI Consulting, Inc. (Alan Tantleff)

Non-exclusive Financing Arranger:

• LD Realty Capital, LLC

Bondoro Insights is continuing to monitor this case and will provide further coverage as appropriate.

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