{"id":997,"date":"2021-08-26T13:49:24","date_gmt":"2021-08-26T13:49:24","guid":{"rendered":"https:\/\/www.cred-iq.com\/blog\/?p=997"},"modified":"2021-08-26T13:49:24","modified_gmt":"2021-08-26T13:49:24","slug":"top-markets-for-distressed-hotel-opportunities","status":"publish","type":"post","link":"https:\/\/cred-iq.com\/blog\/2021\/08\/26\/top-markets-for-distressed-hotel-opportunities\/","title":{"rendered":"Top Markets for Distressed Hotel Opportunities"},"content":{"rendered":"\n

This week, CRED iQ<\/a> leveraged our data platform to analyze 5 primary lodging markets with the highest volume of distressed loans secured by hotels. Within each market, we highlighted opportunities where the potential for pricing dislocation may be present. These are loans that have transferred to special servicing but have not received an updated appraisal or BOV in the past 12 months. Updated valuations for these properties are likely dislocated from appraisal values at origination and may be lower, in many cases, given past deterioration in financial performance. CRED iQ valuations factor in a base-case (Most Likely), a downside (significant disruption of occupancy), and dark scenarios (permanent or temporary operational shutdown). For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here<\/a>.<\/p>\n\n\n\n

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In our August 2021 CRED DQ Report<\/a>, we highlighted delinquent and specially serviced loans by MSA and Property Type. With hotel as the worst performing property type, we focused on 5 of the Top 50 MSAs that had the highest amount of distressed debt by outstanding loan balance. New York, Chicago, Los Angeles, Houston, and Portland were the leading markets for distressed hotel debt. Three of the markets, New York, Chicago and LA, each had over $1 billion in distressed debt. Although Houston and Portland rounded out the list of 5 markets, both MSAs are Top 3 in highest percentage of delinquent and specially serviced loans. We take a closer look at each market below.<\/p>\n\n\n\n

New York<\/strong><\/p>\n\n\n\n

The New York-Northern New Jersey-Long Island, NY-NJ-PA MSA has approximately $1.87 billion in distressed CMBS debt secured by lodging properties, accounting for just about half of all outstanding debt in the market by outstanding balance. New York, and Manhattan especially, has experienced deep and longstanding effects from the pandemic and ongoing headwinds from the Delta variant have continued to preclude a predictable and timely recovery. A recent example of asset repricing is Royalton Park Avenue (fka Gansevoort Park Avenue)<\/a>, which was featured in the July 14, 2021 WAR Report<\/a>. The mortgage loan secured by the hotel has since been modified and an updated June 2021 appraisal of $98.2 million represented a 65% decline in value since origination in 2012. Below is a snapshot of some other distressed lodging loans that may also be due for updated valuations:<\/p>\n\n\n\n

Property Name<\/th>Address<\/th>Outstanding Balance
(millions)<\/th>		DQ Status<\/th>CRED iQ Base-Case Value
(millions)<\/span><\/th>		Most Recent Appraisal
(millions)<\/th>		Most Recent
Appraisal Date<\/th><\/tr><\/thead>
The Standard Highline NYC<\/strong><\/td>848 Washington St
New York, NY 10014<\/sub><\/td>		$170.0<\/td>90+ Days<\/td>$151.0<\/span><\/strong><\/td>$241.0<\/td>9\/30\/2020<\/td><\/tr>
Hilton Garden Inn W 54th Street<\/strong><\/td>237 W 54th St
New York, NY 10019<\/sup><\/td>		$155.0<\/td>Current<\/td>$177.0<\/span><\/strong><\/td>$251.0<\/td>11\/24\/2014<\/td><\/tr>
Holiday Inn FiDi<\/strong><\/td>99 Washington St
New York, NY 10006<\/sup><\/td>		$87.0<\/td>121+ Days<\/td>$91.3<\/span><\/strong><\/td>$233.0<\/td>7\/26\/2018<\/td><\/tr>
Hilton Times Square*<\/strong><\/td>234 W 42nd St
New York, NY 10036<\/sup><\/td>		$75.6<\/td>REO<\/td>$50.9<\/span><\/strong><\/td>$246.0<\/td>10\/13\/2010<\/td><\/tr>
Hilton Long Island Huntington<\/strong><\/td>598 Broad Hollow Rd
Melville, NY 11747<\/sub><\/td>		$33.3<\/td>30+ Days<\/td>$40.1<\/span><\/strong><\/td>$52.3<\/td>5\/11\/2016<\/td><\/tr><\/tbody><\/table>
* The property comprises a leasehold interest in the 460-key hotel and operates pursuant to a ground lease that is due for a reset. The Base-Case Valuation assumes stabilized operations with an estimated increase in ground rent. However, an unfavorable outcome from the results of negotiations with the ground lessor could result in a nominal value or reversion of the property to the ground lessor.<\/em>

Source: CRED iQ<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

Chicago<\/strong><\/p>\n\n\n\n

The Chicago-Naperville-Joliet, IL-IN-WI MSA has approximately $1.1 billion in distressed CMBS debt secured by lodging properties, accounting for just under 50% of total outstanding debt in the market. The Chicago lodging market was hampered by oversupply issues pre-pandemic and the onset of COVID-19 exacerbated poor financial performance for a good portion of inventory. Below is a list of 5 specially serviced assets located in the Chicago MSA that have not yet reported updated appraisals. Three of the properties are located in Schaumburg, IL, indicating that the market\u2019s distress is not solely isolated to the CBD.<\/p>\n\n\n\n

Property Name<\/th>Address<\/th>Outstanding Balance
(millions)<\/th>		DQ Status<\/th>CRED iQ Base-Case Value
(millions)<\/span><\/th>		Most Recent Appraisal
(millions)<\/th>		Most Recent Appraisal Date<\/th><\/tr><\/thead>
Residence Inn Schaumburg<\/strong><\/td>1610 McConnor Pkwy
Schaumburg, IL 60173<\/sup><\/td>		$14.5<\/td>Current<\/td>$14.8<\/span><\/strong><\/td>$18.0<\/td>10\/1\/2017<\/td><\/tr>
Courtyard Schaumburg<\/strong><\/td>1311 American Ln
Schaumburg, IL 60173<\/sup><\/td>		$13.8<\/td>Current<\/td>$14.4<\/span><\/strong><\/td>$17.2<\/td>10\/1\/2017<\/td><\/tr>
Springhill Suites Schaumburg<\/strong><\/td>1550 McConnor Pkwy
Schaumburg, IL 60172<\/sup><\/td>		$9.6<\/td>Current<\/td>$9.2<\/span><\/strong><\/td>$11.9<\/td>10\/1\/2017<\/td><\/tr>
Best Western O’Hare<\/strong><\/td>10300 W Higgins Rd
Rosemont, IL 60018<\/sub><\/td>		$8.9<\/td>121+ Days<\/td>$8.2<\/span><\/strong><\/td>$8.7<\/td>9\/11\/2020<\/td><\/tr>
Holiday Inn – Chicago<\/strong><\/td>2424 W Sullivan Rd
Aurora, IL 60506<\/sub><\/td>		$5.3<\/td>121+ Days<\/td>$4.0<\/span><\/strong><\/td>$3.3<\/td>8\/27\/2020<\/td><\/tr><\/tbody><\/table>
Source: CRED iQ<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

Los Angeles<\/strong><\/p>\n\n\n\n

The Los Angeles-Long Beach-Santa Ana, CA MSA has approximately $1.05 billion in distressed lodging CMBS debt; however, this accounts for only about 25% of total outstanding debt in the market, which is the lowest percentage of the 5 markets that are featured. There are 5 distressed assets presented below that have transferred to special servicing but have not yet reported updated appraisals. Despite the relatively high balance of distressed debt in the market, Los Angeles has been one of the more active markets where commercial real estate investors have been finding opportunities. Several notable lodging assets have been sold so far in 2021, including the two properties located in Orange, CA in the list below. Both of the mortgage loans were assumed in conjunction with the sales.<\/p>\n\n\n\n

Property Name<\/th>Address<\/th>Outstanding Balance
(millions)<\/th>		DQ Status<\/th>CRED iQ Base-Case Value
(millions)<\/span><\/strong><\/th>		Most Recent Appraisal (millions)<\/th>Most Recent Appraisal Date<\/th><\/tr><\/thead>
Courtyard Los Angeles Sherman Oaks<\/strong><\/strong><\/td>15433 Ventura Blvd
Sherman Oaks, CA 91403<\/sup><\/td>		$54.5<\/td>121+ Days<\/td>$51.1<\/span><\/strong><\/td>$48.7<\/td>8\/8\/2020<\/td><\/tr>
DoubleTree Anaheim – Orange County<\/strong><\/td>100 The City Drive S
Orange, CA 92868<\/sub><\/td>		$45.1<\/td>121+ Days<\/td>$68.6<\/span><\/strong><\/td>$64.1<\/td>8\/20\/2020<\/td><\/tr>
Embassy Suites – Brea<\/strong><\/td>900 E Birch St
Brea, CA 92821<\/sub><\/td>		$37.4<\/td>121+ Days<\/td>$53.2<\/strong><\/span><\/td>$53.0<\/td>11\/17\/2020<\/td><\/tr>
Portofino Inn & Suites – Anaheim CA<\/strong><\/td>1831 S Harbor Blvd
Anaheim, CA 92802<\/sub><\/td>		$36.8<\/td>REO<\/td>$30.1<\/strong><\/span><\/td>$34.5<\/td>4\/25\/2018<\/td><\/tr>
Embassy Suites Anaheim Orange<\/strong><\/td>400 N State College Blvd
Orange, CA 92868<\/sub><\/td>		$33.0<\/td>Current<\/td>$48.5<\/strong><\/span><\/td>$58.7<\/td>4\/1\/2018<\/td><\/tr><\/tbody><\/table>
Source: CRED iQ<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

Houston<\/strong><\/p>\n\n\n\n

The Houston-Sugar Land-Baytown, TX MSA has approximately $715.9 million in distressed lodging CMBS debt, accounting for nearly 60% of total outstanding lodging debt in the market. Similar to Chicago, a portion of Houston\u2019s distressed lodging inventory was in existence pre-pandemic. In contrast, many submarkets in Houston, such as Westchase and the Energy Corridor, were impacted by volatility in the oil and gas industries and ongoing operational repercussions have lingered. A snapshot of distressed lodging properties in the Houston market is shown below.<\/p>\n\n\n\n

Property Name<\/th>Address<\/th>Outstanding Balance
(millions)<\/th>		DQ Status<\/th>CRED iQ Base-Case Value
<\/strong>(millions)<\/span><\/th>		Most Recent Appraisal
(millions)<\/th>		Most Recent Appraisal Date<\/th><\/tr><\/thead>
Hilton Houston Westchase<\/strong><\/td>9999 Westheimer Road
Houston, TX 77042<\/sup><\/td>		$42.1<\/td>Maturity Default<\/td>$17.8<\/span><\/strong><\/td>$22.2<\/td>5\/20\/2020<\/td><\/tr>
Marriott Galleria<\/strong><\/td>1750 W Loop S
Houston, TX 77027<\/sup><\/td>		$29.8<\/td>REO<\/td>$21.1<\/span><\/strong><\/td>$21.0<\/td>9\/17\/2020<\/td><\/tr>
Hilton Garden Inn Houston<\/strong><\/td>7979 Willow Chase Blvd
Houston, TX 77070<\/sup><\/td>		$18.4<\/td>REO<\/td>$8.9<\/span><\/strong><\/td>$12.5<\/td>9\/10\/2020<\/td><\/tr>
Courtyard Galveston<\/strong><\/td>9550 Seawall Blvd
Galveston, TX 77554<\/sup><\/td>		$7.3<\/td>REO<\/td>$9.2<\/span><\/strong><\/td>$7.9<\/td>9\/18\/2020<\/td><\/tr>
Holiday Inn Houston SW Sugar Land<\/strong><\/td>11160 Southwest Fwy
Houston, TX 77031<\/sup><\/td>		$7.3<\/td>121+ Days<\/td>$5.0<\/span><\/strong><\/td>$9.5<\/td>7\/23\/2020<\/td><\/tr><\/tbody><\/table>
Source: CRED iQ<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

Portland<\/strong><\/p>\n\n\n\n

The Portland-Vancouver-Beaverton, OR-WA MSA has approximately $537.1 million in distressed CMBS debt secured by hotels. Portland had the second highest rate of lodging distress among CRED iQ\u2019s Top 50 markets, with 61% of loans secured by hotels that are either specially serviced or delinquent. There are 3 assets, listed below, located in the Portland MSA that are distressed but have not received updated appraisals for about a year.<\/p>\n\n\n\n


Property Name<\/th>		Address<\/th>Outstanding Balance
(millions)<\/th>		DQ Status<\/th>CRED iQ Base-Case Value
(millions)<\/strong><\/span><\/th>		Most Recent Appraisal
(millions)<\/th>		Most Recent Appraisal Date<\/th><\/tr><\/thead>
Embassy Suites – Hillsboro<\/strong><\/td>20001 NW Tanasbourne Dr
Hillsboro, OR 97124<\/sub><\/td>		$30.1<\/td>Current<\/td>$21.2<\/strong><\/span><\/td>$33.0<\/td>9\/18\/2020<\/td><\/tr>
Hotel deLuxe<\/strong><\/td>729 SW 15th Avenue
Portland, OR 97205<\/sub><\/td>		$29.2<\/td>121+ Days<\/td>$28.3<\/span><\/strong><\/td>$33.0<\/td>9\/1\/2020<\/td><\/tr>
Comfort Inn and Suites – McMinnville<\/strong><\/td>2520 SE Stratus Ave
McMinnville, OR 97128<\/sub><\/td>		$4.1<\/td>Current<\/td>$6.7<\/strong><\/span><\/td>$7.7<\/td>7\/28\/2020<\/td><\/tr><\/tbody><\/table>
Source: CRED iQ<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

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:<\/p>\n\n\n\n

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FREE TRIAL<\/a><\/div>\n<\/div>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This week, CRED iQ leveraged our data platform to analyze 5 primary lodging markets with the highest volume of distressed loans secured by hotels. Within each market, we highlighted opportunities where the potential for pricing dislocation may be present. These are loans that have transferred to special servicing but have not received an updated appraisal […]<\/p>\n","protected":false},"author":4,"featured_media":1044,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","footnotes":""},"categories":[9,11],"tags":[5,7,103,78,10],"class_list":{"0":"post-997","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-research","8":"category-valuation-updates","9":"tag-commercial-real-estate-data","10":"tag-distressed-properties","11":"tag-hotel-data","12":"tag-lodging","13":"tag-valuation"},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/posts\/997","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/comments?post=997"}],"version-history":[{"count":0,"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/posts\/997\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/media\/1044"}],"wp:attachment":[{"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/media?parent=997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/categories?post=997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cred-iq.com\/blog\/wp-json\/wp\/v2\/tags?post=997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}