October 12, 2010 --SAN DIEGO -- San Diego County led California in the number of hotels foreclosed in the third quarter with 13, followed by Riverside County with a dozen, according to a quarterly survey of distressed hotels in the state.

In California, the 2010 survey for the three-month period ended Sept. 30 showed 529 hotels in default or foreclosure, a 10.7 percent increase from the quarter ended June 30, and a 71.2 percent increase over the third quarter ended a year ago.

The survey was conducted by Irvine-based Atlas Hospitality, a brokerage that specializes in the sale of hotels.

Los Angeles and San Bernardino counties followed San Diego and Riverside in the number of distressed hotels with 11 hotels each that were in default or foreclosure.

Los Angeles County led the state in the number of defaulted hotels with 52, followed by San Diego County with 41 and San Bernardino with 37.

"In the third quarter, we started to at least see an increase in the number of foreclosed hotels re-selling to new buyers," said Alan X. Reay, president of Atlas Hospitality, in a statement. "We believe this is a trend that is going to continue through the fourth quarter and accelerate into 2011."

Foreclosed hotel sales activity has picked up because buyer price expectations have strengthened, along with lenders realizing the difficulties in running an operating business like a hotel, and wanting to sell versus hold, according to Reay.

He also said there is a "huge shadow" inventory of distressed deals that are yet to hit the default market. "We estimate that this is as high as 1,000 hotels, in addition to the 529 in default or foreclosed," he said.

Call staff writer Pat Maio at 760-740-3527.

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