California Hotel Foreclosure Activity Picks Up

Posted by Orb Staff on October 12, 2010 No Comments
Categories : Commercial Mortgage

Atlas Hospitality Group reports that 529 California hotels were in default or had been foreclosed by the end of the third quarter – a nearly 11% increase from the second quarter of the year and a 71.2% increase over the same quarter last year.

The number of foreclosed hotels grew from 100 in the second quarter to 119 in the third quarter and is up nearly 92% from the beginning of the year. Independent hotels make up three-quarters of the hotels in foreclosure.

Of the 119 hotel foreclosures, only 20 have been re-sold to new buyers, Atlas says. Although the re-sales represent less than 17% of the foreclosed inventory, the company notes that the figure is an improvement over the second quarter, when only 12% of foreclosed hotels had been sold.

Atlas attributes the growth in foreclosed hotel sales to two causes: lenders, realizing the operational difficulties involved in running hotels, are increasingly deciding to sell versus hold; and buyer price expectations have risen.

Atlas cautions that California's hotel market still has a huge shadow inventory of distressed properties that are operating under forbearance agreements. The firm estimates the shadow inventory to include as many as 1,000 hotels.

SOURCE: Atlas Hospitality Group

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