Uptown’s sleek, high-end Westin has suffered in the downturn, with more than 40 percent of rooms empty last year and profits tumbling.  The hotel fell at least $1 million short of the money needed for payments on its $185 million loan.  The Westin, which has remained current on payments, is one of a growing number of Charlotte-area commercial properties on a roster of stressed loans, according to an Observer analysis of Bloomberg data.

Most of the red-flagged, or “watchlist,” properties are not behind on payments. However, they have seen rents fall, leases expire, occupancy drop, bankruptcy of a parent company or some other financial stress that raises concerns about the ability to continue paying. Some, like the Westin, are tapping other sources to make loan payments.  Other properties have seen more deterioration. Some are months behind on payments. A small but growing number are tottering near foreclosure, have been foreclosed on or face other action for nonpayment.

In 2008, Mecklenburg County tax officials were banking on strong appreciation in commercial property values to offset potential declines from the housing crisis.  But the nation was already in recession. The cancer of lax lending was eating away the value of homes and investments. Commercial construction held on longer than residential, in part because the projects take longer.   As the nation’s financial system imploded, jobs disappeared in Banktown. Jobless consumers and those worried about losing jobs stopped spending on everything from shoes to sushi to weekend getaways. In turn, businesses scaled back or closed, further depleting income generated by commercial properties.

In 2008, soon after taking its $185 million loan, the Westin was earning nearly three times what it needed to make its loan payments. Last year, those monthly payments rose to about $1.2 million. At the same time, earnings fell. The Westin generated about 90 cents for every dollar due, according to Observer analysis of Bloomberg data and original deal documents.  That means the building wasn’t supporting itself, so the owners had to pay the shortfall out of pocket.  “The Charlotte market has seen a drastic decline in business travel due to this being a major banking driven economy,” the servicer for the Westin loan wrote in notes last updated in May. “The competition to fill rooms has therefore been impacted by this decline.”   Click here for full report from Charlotte Observer….