Jan. 25, 2011--The number of California hotels in foreclosure more than doubled in 2010 to 138 properties, according to a new real estate report.

The quarterly survey by Atlas Hospitality Group in Irvine blames the increase from 62 foreclosures in 2009 on the effects of the recession on hotel owners who took out expansion and renovation loans during better economic times.

The foreclosure numbers increased 16% in the last three months of the year, compared with the previous three months, according to the report.

The overall number of hotels in default statewide increased only 6.5% and would have been higher except that an investment group reached a deal in October to purchase the Extended Stay America chain out of bankruptcy The company operates 109 properties in California.

Atlas predicted that the number of hotels in default and foreclosure will continue to rise through the first half of this year as more loans become due. But the hotel industry should begin to recover later in the year as the economy improves, according to the Atlas report.

The largest hotel in the state to be foreclosed on in 2010 was the 512-room San Jose Holiday Inn, near the Norman Y. Mineta San Jose International Airport.

San Bernardino County led the state in the number of foreclosed hotels with 17, followed by San Diego County with 16 hotels, according to the report. In Los Angeles County, 12 hotels were in foreclosure last year, including the 469-room Los Angeles Marriott Downtown.

The Marriott, at 3rd and Figueroa streets, was purchased out of foreclosure in March by a Chinese real estate development company for nearly $62 million, down from $109 million when the hotel last sold in 2007, according to real estate records.

Most of the foreclosed hotels were independently owned and many had been struggling for many years, said hotel broker Alan Reay of Atlas Hospitality Group.

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