The sale is the latest in a series of recent financial moves by Sunstone, which last week disclosed that it would walk away from a $65 million mortgage on its W Hotel in San Diego in what the San Clemente-based hotel REIT described as an "elective default." Also in recent days, Sunstone sold one of its hotels in Napa, CA for $36 million.
The two sales and the default reflect the dynamics of the Southern California and national hotel markets, in which defaults and foreclosures have been rising and industry experts are forecasting a dramatic decline in prices as a result of the recession and its impacts. A report on California hotel sales earlier this year by Atlas Hospitality, for example, noted that sales in California fell dramatically both in number of transactions and dollar volume last year, a trend that will continue this year.
Reay said at the time that the Atlas hotel sales outlook for 2009 was "very dismal" and that when sales do pick up in the second half of the year the market will be dominated by distressed assets. The sales survey followed a study on hotel development by Atlas, which identified 75 properties already in foreclosure and forecast a coming wave of foreclosures in California's hotel industry that will involve a dramatic repricing of assets.
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