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Bank Foreclosed Listings in California Include Many Hotels

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By : John Cutts    99 or more times read
Bank foreclosed listings in California now include an increasing number of hotels as fewer and fewer vacationers and travelers stay in hotels, sharply cutting hotel revenues and causing hotel owners to miss their commercial loan payments.

Based on a survey conducted among hospitality sellers and research firms, the number of hotel foreclosures throughout California increased by more than 300 percent in the first three quarters of 2009.

Hotel foreclosures jumped up to 47 hotels, a staggering increase from 15 during the same period last year. The number of hotels in default increased by more than four times to 259 hotels, according to Irvine-based hotel broker Atlas Hospitality Group.

According to Realpoint, a rating firm that monitors the performance of commercial property mortgage-backed securities, falling occupancy rates and the lack of lenders willing to provide loan refinancing have been clobbering the finances of hotel developers and investors.

In urban areas, hotels are dependent on business, leisure and convention-related travelers, but the recession has sharply cut down the number of conventions and business events.

Currently, hotel development loans totaling $24.5 billion taken out by over 1,500 hotel investors are facing default. Many of these hotels are expected to enter bank foreclosed listings in the coming months.

Realpoint said that hotel owners substantially increased their commercial loans during the housing boom from 2004 through 2007.

During those years, loans were easy to get as securities backed by commercial real estate loans were in great demand. Around $83.4 billion in securities backed by hotel loans were sold during the boom years.

The highest number of hotel defaults in California occurred in the counties of Los Angeles and San Diego because of the higher number of hotel properties in the area.

Alan Reay, head of Atlas Hospitality, said that over 70 percent of distressed hotel loans in California were taken out from 2005 to 2007. Almost 2,500 of hotels were built with loans or refinanced during the 2005-2007 period, accounting for around 25 percent of all hotels in California.

In the first 8 months of 2009, hotel occupancy in the biggest hotel markets in the country dropped by 61 percent compared to 2008, based on data from Smith Travel Research.

Hotel occupancy in Los Angeles fell to 65 percent in August, pushing 28 hotels to delinquency, according to Atlas.

As of September, nine hotels were in bank foreclosed listings in Riverside, six hotels in San Bernardino and five hotels in Los Angeles.

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