San Diego foreclosure listings have been including a rising number of hotels, based on data from Atlas Hospitality Group, a seller of hotels in California.
In just 8 months, defaulting San Diego hotels has quadrupled in number as the number of owners failing to pay their loans soared in number.
In January, there were only two hotel foreclosures in the San Diego area. In September, there were 4 hotels which went into foreclosure. They were Pacific Coast Inn, Mount Woodson Hotel in Ramona, El Camino Motel and Harbor House in Little Italy.
Over the past months, the hotels that have gone into foreclosure were all the San Diego branches of Extended Stay America, several Home Studio hotels and some units of Mission Plaza Suites.
Across California, a total of 260 hotels have been pushed into default as of September and 47 have been foreclosed.
One of the more prominent San Diego hotels which recently defaulted was the W Hotel, operated by Sunstone Hotel Investors. Sunstone walked out of its loan balance of $65 million. Sunstone has been losing huge amounts of money on the property and could not generate enough sales to pay the loan. Sunstone purchased W Hotel in 2006 for $96 million.
According to Alan Reay, executive of Atlas Hospitality, higher-end resorts and hotels are suffering more than the regular hotels because consumers have been looking for hotel bargains. He expects more hotels to enter San Diego foreclosure listings in the coming months.
One major factor that has stepped up the pace of hotel foreclosures is the increased number of hotel rooms available in San Diego. According to Atlas, 3,400 hotel rooms were added to the hotel room total in the area since 2007. This includes the 1,190 hotel rooms added when San Diego Hilton opened last December to support the city’s convention center.
Hotel owners and operators are saying that the decline in hotel customers and the purchase of cheaper hotels have been pushing downward hotel prices, cutting hotel revenues and forcing more distressed hotels into foreclosure.
According to San Diego hotelier Robert Rauch, investors buying cheap hotels can sharply reduce prices, killing the businesses of owners who bought their properties at full price.
Sunstone is one investor looking for bargain-priced San Diego hotels. It already launched a 20-million-stock public offering to raise funds for the purchase of hotels.
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