This week, CRED iQ reviewed real-time valuations for 5 REO lodging assets that we expect to be sold in November. Each of these assets previously secured commercial mortgage loans that defaulted and transferred to special servicing. Following the foreclosure of each of these properties, the final step of workout is a sale or liquidation. Distressed hotels have been a popular target for distressed investors so far in 2021 after many properties were not able to overcome demand disruptions in 2020 and the coinciding shortfalls in net cash flow.
The CRED iQ valuations factor in a base-case (Most Likely), a downside (significant loss of tenants), and dark scenarios (100% vacant). For full access to the valuation reports including the Downside and Dark scenarios as well as full CMBS loan reporting, with detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
Sheraton Denver West
242 keys, Full-Service Hotel, Lakewood, CO
This REO property, which has outstanding debt of $11.6 million, has been with the special servicer since August 2020. The title transferred to CWCapital, as special servicer, from LHA Real Estate, LLC in May 2021 following a foreclosure sale. The property was severely impacted by the pandemic and monthly occupancy dropped below 10% for a period in late-2020. An auction sale of the property is expected during the month of November.
The Sheraton Denver West is a 12-story full-service hotel that operates as a Sheraton. The hotel has been known as a popular destination for conferences and features over 16,000 sf of meeting space. In 2019, the hotel generated about 36% of its revenue from food & beverage or events/conferences. Hotel operations were unable to recover given the slow rebound of business travel and conference circuits. Average occupancy for the hotel for the trailing 12 months ended August 2021 was 34%, whereas the hotel typically operated at about 60% occupancy pre-pandemic. The property was appraised for $21.5 million ($88,843/room) in May 2021, which was a 9% decline from a September 2020 appraisal but a 13% increase compared to the July 2013 appraisal from origination. For the full valuation report and property-level details, click here.
| Property Name | Sheraton Denver West |
| Address | 360 Union Boulevard Lakewood, CO 80228 |
| Outstanding Balance | $11,594,828 |
| Most Recent Appraisal | $21,500,000 ($88,843/room) |
| Most Recent Appraisal Date | 5/1/2021 |
Holiday Inn Fort Worth North-Fossil Creek
126 keys, Full-Service Hotel, Fort Worth, TX
This lodging property has outstanding debt of $11.5 million and has been with special servicing since February 2018. Unlike most of today’s distressed hotels, this property’s initial transfer to the special servicer was not pandemic-related and operational issues with the property go back several years. Cash flow issues with the hotel can be traced back to 2018 when the former owner had difficulty with operating expense growth and funding a required property improvement plan (PIP). The hotel went into receivership in January 2019 and title to the property was acquired in March 2021.
Holiday Inn Fort Worth North-Fossil Creek is a 4-story full-service hotel that operates through a franchise agreement with IHG that expires in October 2025. IHG had previously issued a franchise termination notice in early 2019 for failure to pay franchise fees and delays in a required PIP. The latest servicer commentary indicates the roof had been leaking and needed replacement, which was completed by the receiver. GF Hospitality is responsible for hotel management. We expect the hotel to be put up for sale in November.
The property was most recently appraised for $7.2 million, equal to $57,143/room, in July 2021. The most recent appraisal represented a 24% increase compared to a November 2020 appraisal but a 17% decrease compared to a May 2020 appraisal. Potential investors may also want to take note of a new IHG-branded hotel that came online in May 2021, located 3 miles north of the Holiday Inn. The avid hotel Fort Worth – Fossil Creek is a relatively newer flag under IHG’s Essentials brand portfolio, competing in a similar segmentation to Holiday Inn. For the full valuation report and property-level details, click here.
| Property Name | Holiday Inn Fort Worth North – Fossil Creek |
| Address | 4635 Gemini Place Fort Worth, TX 76106 |
| Outstanding Balance | $11,503,410 |
| Most Recent Appraisal | $7,200,000 ($57,143/room) |
| Most Recent Appraisal Date | 7/1/2021 |
Holiday Inn Corpus Christi Airport
237 keys, Full-Service Hotel, Corpus Christi, TX
This full-service hotel has outstanding debt totaling $8.7 million and has been with the special servicer since May 2020. Initially, the former borrower had requested forbearance for temporary COVID relief; however, a superseding request was made by the end of 2020 to hand the keys over to the lender. CWCapital, as special servicer, acquired title to the hotel on March 2, 2021 and appears to have put the property up for auction in November.
The hotel operates as a Holiday Inn through a franchise agreement with IHG that expires on October 16, 2023. The property is located in close proximity to the Corpus Christi International Airport and has historically benefited from substantial conference revenue with approximately 11,000 sf of meeting space. The hotel had average occupancy of 27.5% for the trailing 12 months ended August 2021, whereas the property generally operated at approximately 50% occupancy prior to the pandemic.
The property was appraised for $8.8 million, equal to $37,131/room, in May 2021, which represented a 16% decline compared to a September 2020 appraisal and a 65% decline compared to a June 2015 appraisal from origination. For the purpose of pricing discovery, CRED iQ’s Property Comp tool identified a comparable hotel – Holiday Inn Express & Suites Rockport – that was sold in October 2021. The sales agreement indicated a sales price that was approximately 63% higher than a June 2020 appraisal value for the same property. For the full valuation report and property-level details, click here.
| Property Name | Holiday Inn Corpus Christi Airport |
| Address | 5549 Leopard Street Corpus Christi, TX 78408 |
| Outstanding Balance | $8,651,012 |
| Most Recent Appraisal | $8,800,000 ($37,131/room) |
| Most Recent Appraisal Date | 5/1/2021 |
Fairfield Inn & Suites – Toledo
84 keys, Limited-Service Hotel, Toledo, OH
This limited-service hotel has outstanding debt of $7.2 million. The property transferred to special servicer earlier this year in March 2021 and the property became REO through consensual foreclosure that was completed on July 28, 2021. Workout for the distressed asset continues to move quickly with a scheduled auction sale in November.
The hotel operates as a Fairfield Inn & Suites through a franchise agreement with Marriott that expires in April 2028. Financial performance at the hotel was adversely impacted in 2020 by the pandemic; however, the loan wasn’t added to the servicer’s watchlist until February 2021, shortly before its transfer to special servicing. The loan was most recently appraised at a value of $7.7 million, equal to $91,667/room, which represents a 29% decline from the appraised value at origination in March 2017. For the full valuation report and property-level details, click here.
| Property Name | Fairfield Inn & Suites – Toledo |
| Address | 5685 Benore Road Toledo, OH 43612 |
| Outstanding Balance | $7,237,650 |
| Most Recent Appraisal | $7,700,000 ($91,667/room) |
| Most Recent Appraisal Date | 4/12/2021 |
Holiday Inn Express Alliance
70 keys, Limited-Service Hotel, Alliance, OH
This REO hotel has been with the special servicer since April 2020. Despite the transfer coinciding with the onset of the pandemic, the property had exhibited volatile net cash for several years prior to 2020. Volatility in occupancy and net cash flow was related, in part, to the region’s reliance on energy exploration of the Utica Shale formation under eastern Ohio. Title to the asset was acquired on April 1, 2021 and the property appears to be up for sale via auction in November.
The hotel operates as a Holiday Inn Express & Suites through a franchise agreement with IHG. Average occupancy for the hotel was 52% for the trailing 12 months ended August 2021, which was within range of pre-pandemic performance. The property was appraised for $2.7 million ($38,714/room) in February 2021, which represented a 58% decline compared to the appraised value at origination in December 2012. For the full valuation report and property-level details, click here.
| Property Name | Holiday Inn Express Alliance |
| Address | 2341 West State Street Alliance, OH 44601 |
| Outstanding Balance | $2,905,501 |
| Most Recent Appraisal | $2,710,000 ($38,714/room) |
| Most Recent Appraisal Date | 2/2/2021 |
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. For full access to our loan database and valuation platform, sign up for a free trial below:
