CMBS bad loans not spiking court receiver, hotel receivership rise

In the recent October 2010 Lender News published by Atlas Hospitality, the delinquency of Commercial Mortgage Backed Securities (CMBS) loans rose again in August. Hotels are hurt the worst with the highest delinquency at 15.5%. However, it has not triggered any increased use of a court receiver and hotel receivership as an alternative remedy to other dispositions such as auctions, says this hospitality asset manager and hotel receiver. That assessment is based on recent activities and reports since what was published here back in the middle of August. Hotel Building Exterior It is important to note that Innkeepers USA Trust, which owns more than 70 hotels and filed for bankruptcy in July with over $1 Billion in debt, represents 75% of the newly CMBS delinquent loans. In the same report, the total value of distressed commercial real estate in the United States is about $187 Billion. In a separate report by Bloomberg BusinessWeek, the FDIC announced plans to auction $1.12 billion in loans, which includes commercial real estate like hotels. This action also suggests the use of auctions as its remedy to not wait and instead recover its losses and sell these troubled loans more quickly, than through other means such as using a court receiver in a hotel receivership. In a related story in National Real Estate Investor, the CMBS welcomed the landmark Arizona Supreme Court decision allowing the receiver to sell multi-family real estate assets, specifically 7 apartment complexes, without the special servicer having to foreclose on the properties. Single hotel assets and lodging portfolios are similarly affected because many were financed through loans rolled into commercial mortgage backed securities. This recent court decision could pave the way for more states to allow commercial real estate, especially hotels, in my view as a hospitality asset manager and hotel receiver, to be sold in lieu of auction or short sale. This would also provide a better blueprint and trigger an increase by bank special assets managers, the FDIC and CMBS special servicers to recover the value of their defaulted loans using a court receiver and a hotel receivership. This could not only bring more hotel real estate sale value, but significantly reduced costs and write-offs, instead of an auction or disposition post foreclosure.