The judgment against GFII DVI Cardel Sawgrass, the owner of the Crowne Plaza, is $21.5 million, a figure based on an $18.6 million mortgage plus fees.

The Crowne Plaza brand is a good one, says Scott Smith, senior vice president at PKF Consulting in Atlanta. The foreclosure was probably a function of market conditions in the Sawgrass Mills area, he says, namely the addition of many new hotel rooms in 2007 and 2008, especially full service properties.

Rich Lillis, senior managing director at PKF Capital, based in Miami, says that while he doesn't have specific data on the Sawgrass area, which is in the city of Sunrise, his gut tells him that this market has been hit even harder than other Fort Lauderdale submarkets by the economic downturn. "There are too many hotel rooms," in the area, he says.

The Broward County suburbs west of Fort Lauderdale, don't draw as many visitors as the areas to the east, says Lillis, who is an advisor to Miami Beach-based LNR Partners, the special servicer which is handling the Crowne Plaza at Sawgrass Mills. Although the Sunrise area does have Sawgrass Mills, which draws a lot of visitors, as does the nearby BankAtlantic Center, a large entertainment and sports venue, and the many corporations with offices in the area, the hotel market in West Broward doesn't do as well as the eastern part of the county, where a greater proportion of visitors gravitate to be closer to the beach, the airport and downtown, he says.

Smith says that the problems in Broward County's hotel market aren't that different from the rest of the country. The crop of new hotel rooms, which has come on line over the last few years, has drastically impacted the occupancy and average daily room rates in the hotel market, which has produced a decline in RevPar (revenue per available room) since 2008 of 20% to 25%, on average, with some markets being down as much as 40%. With this much of a decline, he says, "an hotel owner can't pay his debt service, especially if he has high leverage."

About 30% to 40% of all hotel loans in the US today are technically in default, "which doesn't mean you can't work them out, but these hotels are not satisfying the debt coverage ratios," which were mandated by the loan documents, says Smith. "Even if the hotel owners are paying their mortgages, they need to have a debt coverage ratio of 1.5% to 1.7%, which they often don't have," he says.

Based on operating results from 6,000 properties in the US, says Smith, PKF has determined that the average decline in NOI from 2008 to 2010, has been 35% for all property types, the result of an approximately 16% decline in RevPar over the same period.

In the Fort Lauderdale area, the RevPar decline in 2009 was similar to that of the US at around 16%, says Lillis, which means that area hotels also had a decline in NOI of about 35%.