More California Hotels Fall into Foreclosure

The amount of hotels in California that have been involved in actions of foreclosure or default has risen incredibly by 125% within just the past sixty days.

So far, 31 hotels have already been foreclosed and 175 properties of hotels are currently in default. Properties that have already been lost to foreclosure can mostly been found in the counties of Riverside, San Diego and San Bernardino.

With a total of almost 20%, the country of San Bernardino is currently the leading state when it comes to foreclosed hotels. This is followed up by the country of Riverside with 16% and San Diego with 13% of the overall market share.

Originally, actions on foreclosure were taken against hotels that were independent, the majority of which were merely boutique motels that existed in secondary markets. A huge run-up was only visible within the past sixty days. In fact, hoteliers are beginning to no longer see the light found at the very end of their tunnels and are beginning to truly give up completely.

Extended Stay Inc., which happens to be the largest owner of hotels that are long-term with almost seven hundred properties all across the United States of America, has recently filed for protection of bankruptcy – just a few weeks ago. It was actually purchased in 2007 by The Lightstone Group for $8 billion. The motel chain known as the Red Roof Inns is also currently in trouble, as well as the St. Regis Monarch Beach Resort that can be found at Dana Point.

In the earlier days of June, Sunstone Hotel Investors Inc. had disclosed its actual intent of forfeiting the W San Diego off to lenders following efforts of trying to reach a valid compromise on this particular hotel’s securitized mortgage failure of $65 million.

Sunstone, which is an investment trust of real estate, actually purchased the W for $96 million in 2006, right before the slump of the economy. It was the very first company that was publicly traded to make that bold move. It has reached the very peak of the mountain. No brand or market is immune to this particular downturn.

Although the properties of hotels that could be found under phases of default notices were never named, it was released that several of such involved transactions were loans that were securitized. The procedures that dealt with such distressed properties differed in such cases.

While the reviews of these distressed hotels were going on, Atlas stated that much more than 75% of the loans came from the years 2005 to 2007, during which more than 2,500 hotels in California were either refinanced or had gotten brand new financing in purchase loans.

The unexpected decline in such revenues of rooms, with California having lowered itself by around 22%, matched with the sudden jump within cap rates has ended in a huge value loss.

It is estimated that the values of property are 50-80% lower now compared to the peak of the market from the years 2006 to 2007. Declines such as those that are seen today have not been seen since the year 1931.

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