Archive for February, 2010

As the financial crisis continues to grind along many hotel and motel owners are seeking relief by obtaining hotel loan modifications. Hotel loan modifications are a specialized area of the larger commercial loan modification industry.

Almost every type of small business has been hurt over the past few years by what is now being called “The Great Recession”, however, one segment of the small business economy that has seen its fair share of pain has been those people who own small or medium sized hotels and motels. Many of these owners are now seeking hotel loan modifications. As the unemployment rate has reached as high as 20% in some major economic areas such as Detroit and 10% average for the nation as a whole many hotel owners have seen their occupancies drop by as much as 80% in some areas. This is understandable considering the fact that a lot fewer families have the excess capital available to spend on vacations or travel. Business travel has all but dried up as a result of the economic downturn. Many hotel and motel owners have found that they can no longer afford to keep making their full mortgage payments and many others have decided to stop paying their mortgages all together.

According the many real estate analysts commercial real estate prices have declined by 40% on average. In some areas of the country this number has reached as high as 60% and we have even reviewed specific hotels and motels that have lost as much as 80% of their 2007 values. Almost every hotel or motel owner who purchased their property in the past 5 to 7 years now finds themselves owing more on their property than what it is worth and in the middle of the worst recession that the U.S. has ever seen.

Solutions for hotel owners are not easy to come by. It is now almost impossible to find financing for hotel and motel properties as most commercial lending institutions have either stopped lending entirely or changed their underwriting guidelines so drastically as to exclude all but the best deals from being financed. To make matters even worse, the Congressional Oversight Panel released their February report entitled “Commercial Real Estate Losses and the Risk to Financial Stability” where they predict that over 500 billion dollars of commercial balloon notes will be coming between now and 2011. Meanwhile, there are no banks sitting on the sidelines to refinance these properties.

The current economic times leave few options for hotel and motel owners who are in financial distress. The most recent hotel owner client of Commercial Capital Advisors, LLC is an nationally flagged chain hotel in Orlando, Florida. They purchased their property in 2007 for 4.25 million dollars. The most recent appraisal for the property came in at 1.5 million dollars. This represents a loss of over 2 million dollars in equity in just a three year period of time.

For many hotel and motel owners facing a similar situation, the best option they have is a hotel loan modification. In many cases a successful hotel or motel loan modification will be able to lower interest rates, give an extended period of forbearance, extend the balloon date for the note and occasionally reduce the balance of the mortgage.

For more information please visit: Hotel Loan Modification

Commercial Loan Modification