Bay Area hotel loan problems escalate
PLEASANTON – A growing array of loan-related issues have started to surface for hotels in at least four Bay Area counties, an indication that the economic damage caused by coronavirus-related closures has yet to keep pace. Classes.
Five hotels in East Bay, South Bay and San Francisco – all considered by experts to be high-end accommodation establishments – are now suffering serious financial difficulties, according to several public revelations obtained by this news agency.
“I think this is just the beginning of the problems with hotels,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the accommodation market in California. “Business-driven market hotels are now suffering the brunt of the pandemic.”
The hardships that have engulfed the five Bay Area hotels have been revealed in default notices or revelations that hotel owners are willing to cede ownership of their properties to known specialist finance vehicle holders. in real estate circles like mortgage backed securities.
The latest crop of hotels in distress includes:
– Hyatt House Pleasant Hill, a 142-room hotel in Pleasant Hill
– Hyatt House Pleasanton, a 128-room lodge in Pleasanton
– Club Quarters Hotel, a 346-room hotel in San Francisco
– Hotel Avante, accommodation with 91 rooms in Mountain View
– Wild Palms Hotel, a 208-room hotel in Sunnyvale.
“These are definitely upscale hotels that would be expensive to replace,” Reay said. “These are not functionally obsolete 50-year-old hotels.”
The two Hyatt House hotels in Pleasanton and Pleasant Hill are part of a group of 22 hotels that have secured a financial package with a current loan balance of $ 204 million, according to a Standard and Poor’s analysis. Funding was granted to Shidler Group, owner of the hotels, in mid-2017.
The Hyatt House Pleasanton, which has an appraised value of $ 48.9 million, received $ 23 million in funding under the 2017 Fundraising Program. Hyatt House Pleasant Hill is valued at $ 36 million and has secured funding of $ 21 million in 2017.
In 2017, the two East Bay hotels were rated the best performing in their respective markets, according to Standard and Poor’s assessment.
Now payments on financing for Shidler-owned hotels have been over 90 days past due, according to New York-based Trepp, who tracks and analyzes real estate and financial trends.
The Club Quarters Hotel in San Francisco is part of a fundraising program issued in 2017 and the loan balance is $ 273.7 million, Trepp reported. This loan has been over 90 days past due.
“With the Hyatt House hotels in the East Bay and the Club Quarters in San Francisco and the other hotels in these portfolios, owners are looking to hand over hotel keys to lenders and away from them,” Reay said.
The owners of the Wild Palms Hotel in Sunnyvale and the Avante Hotel in Mountain View are behind on a $ 37 million loan to the two properties in 2014, according to public documents from Santa Clara County.
As of September, mortgage payments on the two South Bay hotels were 90 days past due, property records show. These hotels face foreclosure and foreclosure by Cantor Commercial Real Estate Lending, which provided the funding.
With business travel virtually non-existent amid the coronavirus and government-ordered closures, a growing number of hotel owners seem to think that it doesn’t make sense to continually pour money into a hotel with questionable prospects of generating profits in the foreseeable future.
“They wonder why should they keep paying the loan, paying utilities, insurance, maintenance, taxes, cutting checks for employees when the hotel is upside down,” he said. Reay said.
The problems extend far beyond the Bay Area and vacation destinations like Anaheim, whose theme parks are closed, according to Reay.
“We boarded hotels in Manhattan,” Reay said. “Some Manhattan hotels are losing $ 1 million a month.”
The current struggles of the hotel industry amid the coronavirus are the worst Reay has seen, including the dreary years of the Great Recession.
“Even after the 2008 accident, hotel owners weren’t closing the doors and walking away,” Reay said.