US Special servicers see more troubles ahead for distressed hotels in America

UNITED STATES DISTRESSED HOTEL REPORT | CMBS (Commercial Mortgage-backed Security) – Special servicers have seen a lightening of the load with regard to hotel assets during recent months, but it might be the calm before the storm. With a flurry of loan maturities during the next three years, special servicers anticipate a hectic schedule. Until then, things have begun to slow, according to several special servicers participating in a panel discussion during last week’s 10th annual Fishing for Solutions conference at the Gaylord Texan Hotel & Convention Center.

Panel moderator Kevin Donahue, VP of special servicing at Midland Loan Services, said the pace of transfers has moderated and it seems better because 2009 was such an extraordinary year. Panel moderator Kevin Donahue, VP of special servicing at Midland Loan Services, said the pace of transfers has moderated and it seems better because 2009 was such an extraordinary year. (Credit: Chris Bryan/Prism Hotels & Resorts) “It has started to cool down, but we have seen an increase in special service transfers in the last 30 days, particularly in hotel assets,” said Curt Spaugh, senior VP of Helios AMC.

Spaugh said Helios AMC is seeing two to three transfers going out for each one coming in.  Michael O’Hanlon, senior VP of Berkadia Commercial Mortgage, said his company’s portfolio consists mostly of projects funded prior to 2004. “Our transfers have slowed down considerably in the last three months,” he said. “Due to the age of our pools we have a lot of maturity defaults. It’s going to continue at this pace for another year.” O’Hanlon said his company is seeing two assets leaving for every one that comes in during the past several months. Dan Olsen, senior VP of KeyBank Real Estate Capital, said his firm picked up about US$47 billion in distressed CMBS loans since 2007, and the bulk of that was priced with floating interest rates. A number of those floating rate deals are running out of extension possibilities.

“That floating-rate financing… if the financing doesn’t come in, we’re going to have a little bit of a problem with those final extension dates,” he said. “Once that extension option in the deal expires, all of that product is going to come into special servicers,” O’Hanlon said. “And there’s a lot of that out there.” Olsen said there is a potential solution to help hotel owners who are facing the end of extensions. “While you can’t extend a loan beyond that date, there’s nothing that says you can’t forbear,” he said. “We’re going to find a workaround, and right now we think forbearance is the workaround at this point.”  Click here for full report from Jeff Higley at Hotel News Now….