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California Hotel Foreclosures Quadrupled in 2009
January 08, 2010

Hotel foreclosures in California more than quadrupled last year as business travelers and vacationers cut spending and commercial real estate values plunged, forcing owners into default, according to a survey released today.

There were 62 foreclosures on hotels in the state last year, compared with 15 in 2008, Irvine, California-based Atlas Hospitality Group said in a statement. Properties in default jumped almost six-fold to 307, said Atlas, which specializes in selling hotels. The survey only covered California.

Lodging owners are struggling to make debt payments after adding rooms and properties from 2004 to 2007, when financing was easy to come by because banks bundled the loans into mortgage-backed securities and sold them to investors.

“In California and nationwide, a lot of owners are dipping into their own pockets to fund the negative cash flow, and they are running out of money,” Alan Reay, president of Atlas Hospitality, said in a telephone interview. “Hotels are being foreclosed on and reselling at very low, low prices. A lot of people question if they should keep paying. As bad as the numbers look right now, it’s going to get a lot worse.”

About 1,200 loans totaling $28.2 billion and backed by 1,800 U.S. hotels were included on a performance watch-list by Realpoint LLC as of the end of December. The list includes loans in default or at risk of default, according to the Horsham, Pennsylvania-based credit-rating company.

Source :- http://www.businessweek.com