In This Game, Paper Beats Brick

During good economic times, hotel investors focused largely on the best deals available for existing properties and potential sites. Now that the current recession is official, they are increasingly looking at the paper supporting the sector.

Hotel specialists are responding to the trend toward debt opportunities tied to distressed properties by expanding their services to handle distressed assets. Besides working with lenders and other financial institutions in evaluating assets, they are working with investors who are interested in acquiring loans on hotels that may be on the brink of foreclosure.

“As the market has shifted over the past 12 months, a lot of the investors we deal with are interested less in hard assets and more in hotel notes and mortgages,” Geoff Davis, president of HREC Investment Advisors in New York City, tells GlobeSt.com. Those investors seek stronger yields and safety from the capital stack of performing assets, while also looking at loan-to-own prospects from those properties facing default, he says.