With the significant downturn in commercial property values, lenders are on the hook more and more for some very large loans to hotel and retail companies. Fitch Ratings has come out with a report stating that 64 properties with loans over $100 million are late and in trouble.
The hotel sector, which was recently heavily overbuilt, is a significant sore spot with both Red Roof Inn and Extended Stay properties entering special servicing. Special servicing means that there is a problem with the loans payment or terms and that the bank is working with the company before liquidating the loan.
The pressure on banks is going to ramp up again shortly I fear.
Recent defaults include two hotel portfolios: Red Roof Inn and Extended Stay. Since Fitch’s last update in April, $17.4 billion in Fitch-rated loans have entered special servicing, which does not include the Extended Stay Portfolio, which on its own totals more than $4 billion.
One troubling aspect discovered in the report is that four of the 10 largest delinquent loans have experienced appraisal reductions as a result of value declines, indicating that losses may be significant in their respective deals, said managing director Mary MacNeill. Of more than 2,000 specially serviced loans, 64 have balances are in excess of $100 million. via CPN Online.
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Interesting–I hadn't seen this info elsewhere. Makes sense though.
Are all these stories of loan portfolio problems an opportunity for some? Will some of the portfolios be gobbled up by the wise, cash loaded investor? Where is that investor? Time will tell.
Hmmmm wonder what affect this will have on tourism? Will less hotels, or even hotels in trouble skyrocket room rates?
I don't think it will bring the room rates in other hotels up. The tourism is in decline as well, and the hotels have to fight for their customers – with low rates.
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