Are Lenders Getting Ready to Sell Troubled Lodging Assets?

VIENNA, VA-Back in January, RevPAR International launched its L3 Services platform to aid lenders, lawyers and loan servicers deal with troubled hotel assets. In recent months, Richard E. Pastorino, principal of the local advisory firm, has a seen a “meaningful” upswing in assignments, mostly related to the debt side. “It is an indication to us, based on the nature of the work we were doing, that [lenders have] decided to move forward and start to clean up what they had been putting off for some time.” In other words, after months of sitting on the sidelines, lenders may be gearing up to resolve–in some fashion–the troubled hotel assets they have on their books.

The assignments range from providing independent guidance to parties in a dispute, putting a value on a particular property or mapping out varying options for the holder of the asset or debt. Because of confidentiality agreements, Pastorino is reluctant to go into too much detail about the firm’s clients. But he does say he has heard from special servicers, who are required to get periodic valuations. “If they have foreclosed and are going to market,” he notes, “they may be looking for a sense of where the asset is going to trade. Internally, they need to figure out whether they are going to sell or hold.”

Bill Linehan, managing director, marketing and new business development at Hodges Ward Elliott in Atlanta, reports that his firm has witnessed an “onslaught” of requests for opinions of value so clients can weigh their options. “The reality,” he states, “is that lenders and borrowers need to recognize that if there is lost equity, then the lenders need to restructure the capital stack. In addition to that, there is an onslaught of equity being raised for the sole purpose of going after these notes and assets. So there is an abundance of investment interest, but there is a reluctance by sellers [to sell]. Nonetheless it will happen.”