The survey reports that transactions representing $173 million in volume took place since September 2009. During the first three quarters of 2009, 15 transactions took place that represented a volume of $182 million. The reason for the higher volume, the survey notes, is because of the closing of two build-to-suits contracted in 2007.
"In the fourth quarter of 2009, we started seeing signs that lenders are getting serious about dealing with their distressed hotel positions," says Scott Stephens, a HREC partner, in a press release about the survey. He goes on to suggest that the larger assets are still seeing maturity extensions, however, "as you move down the quality scale, lenders are becoming more willing to sell their mortgages at a discount, engage in short sales and to sell hotels that they own through foreclosure."
Paul Sexton, vice president with HREC's Orlando office, added that lenders faced with the decision of funding operating shortfalls versus selling out their positions are, more often than not, deciding on the latter. "The funding of operating shortfalls will become a huge issue this summer when revenues cycle down on a seasonal basis," Sexton said in the release.
This is not to suggest, however, that the remainder of 2010 is going to be smooth when it comes to hotel transactions. Valuation remains a challenge, for one thing. Furthermore, the report noted that some banks continue struggling with ongoing capitalization issues. The Federal Deposit Insurance Corp. noted that 14 Florida banks failed in 2009, with three-quarters of the state's banks losing money. The report also suggests that underlying collateral on some hotel loans has exceeded its "economically useful life."
Read more about this report and other market indicators here.
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