It seems like deja vu when hotel receiverships or foreclosures were thought to be the step many lenders would take when loans came due in 2009. Well, it is soon to be 2012 with many hotel loans maturing from refinancing done five years ago. However, and like “extend and pretend” that appeared to dominate the loan cycle three years ago, workouts are still on the minds of lenders and their special servicers. According to this Bloomberg story just published, hotel lenders are expected to avoid foreclosures in favor of working out the loan instead. Says one prominent hotel special servicer, who is involved with distressed hotel loans and looking to avoid hotel receiverships or foreclosures: “Having some type of extension on an existing loan already in place, rather than a foreclosure or REO situation, is more likely in hospitality than in other commercial sectors,” Stacey Berger, executive vice president at Midland Loan Services Inc., said in October. REO refers to real estate owned by lenders following a foreclosure.” Still, whether this option is favorable or even an option with smaller, community banks remains to be seen. The sheer volume of loans coming due and losses to be mitigated, according to this related article on hotel foreclosures, may necessitate the appointment of a hotel receiver and subsequent sale. Are you a bank, lender or special servicer with hotel loans coming due in 2012? What strategy, such as a workout, court appointed receiver, auction, etc. do you expect to deploy to deal with hotel defaults next year? Where hotel receiverships or foreclosures are part of that plan, do you expect to hold the asset as an REO or attempt a sale of the hotel while the receiver is in place? Please share your comments with our readers.
