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Distress Checks In

More troubled hotels could be headed for workouts as owners and lenders come to terms with the new realities of the marketplace.

By Maria Wood | Updated on April 02, 2009

SCHAUMBURG, IL-In 2008, locally based Hostmark Hospitality Group oversaw seven lodging properties that were involved in a foreclosure, receivership or bankruptcy. The company’s executive vice president of development, Jerome F. Cataldo, says that while such assignments had previously been slow to materialize, he expects the pace to pick up as 2009 progresses.

“Lenders are still reluctant to go down that path,” he says. “For the initial properties that we’ve seen in distress, the lenders have been willing to work out some extensions before they make a monumental decision. We are starting to see now, however, the first signs of that changing a bit. We’ve spent a lot of time in the past four months staying very close to lenders and special servicers and people that we have relationships with to monitor that. We are hearing that the trickle is starting, and there is a lot to come.”

Indeed, out of all the property classes, hotels are poised to endure the most pronounced distress in 2009. “I think you’ll see an explosion in hotel defaults,” says Bill Hoffman, president and founder of Trigild Inc. of San Diego, which specializes in handling non-performing commercial loans. “It will start to accelerate quickly over the next couple of months.”

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