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Distressed Hotel Loans in San Diego and Riverside Counties Fall Slightly in First Quarter;
Overall California Still Leads Nation in Troubled Hotel Loans

By Pat Maio, North County Times, Escondido, Calif.McClatchy-Tribune Regional News

May 04, 2011--SAN DIEGO -- The level of distressed hotel loans in San Diego and Riverside counties fell slightly in the first quarter ended March 31, fueled by improving revenue and overnight stays, according to a hotel sales survey issued by Irvine-based Atlas Hospitality Group Inc.

"Things are definitely getting better. We are off of the bottom," said Alan X. Reay, president of Atlas Hospitality, and author of the survey.

"We are starting to see, in North County, new development going on," he said. "It's really surprising how quickly things have turned around. Pockets are still struggling, like the Inland Empire and Coachella Valley."

The statewide story was different. The survey found that the number of foreclosed hotels in California jumped 87 percent from the first quarter a year ago, while the total number of affected rooms jumped 102 percent.

Foreclosures in San Diego and Riverside counties, however, totaled $219 million, down from $255 million at the end of 2010.

Still, defaults and other troubled loans were listed in excess of $1.5 billion, Reay said. San Diego County saw $163 million in foreclosed hotel loans in the quarter, while Riverside County had $56 million.

Defaults occur when borrowers stop making loan payments. They are generally the first step in a legal process that precedes a foreclosure, which happens when the lender repossesses the property.

In addition to the defaults and foreclosures, Reay also estimates that hundreds of additional hotels in California are on a watch list of properties that could slip into default with lenders, or even worse, be foreclosed on.

Many of these troubled hotel loans, or those that make up a shadow inventory, could end up in default or foreclosure, or be bought by speculators looking to buy them from banks wanting to shed them, Reay said.

The total number of distressed hotel loans is expected to rise through the summer, after which defaults will begin to level off. Foreclosures are expected to increase at least through the end of the year, he said.

"A lot of (new) borrowers have started to pay down and bring loans current," said Reay of some investors who have bought troubled loans to help owners avoid the foreclosure process.

There were two small foreclosed hotels reported in North San Diego County during the first quarter, and none in Southwest Riverside County.

Overall, California continues to lead the nation in troubled hotel loans, according to Reay.

In the first quarter, 498 California hotels were in default or were foreclosed -- up from 465 at the end of 2010.

Among the hotel default figures, Los Angeles County had 40, followed by San Bernardino County with 33, Riverside County with 29 and San Diego County with 27 -- slightly fewer than the 31 seen at the end of 2010.

Defaults fell 12.9 percent in the first quarter from the same year-ago period, and accounted for 3,613 rooms in San Diego County, down from 4,681 rooms at the end of 2010, and 5,040 in the same year-ago period.

Riverside County's 29 hotels in default are even with the amount at the end of 2010, but up from 23 in the same year-ago period, and accounted for 2,423 rooms in the first quarter. That figure was up from 2,260 rooms a year ago, but down 78 rooms from the end of 2010.

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


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Copyright (c) 2011, North County Times, Escondido, Calif.

Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit

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