Sunstone Hotel Investors intends to forfeit the 258-room W San Diego to its lenders after its efforts to reach a compromise on the luxury hotel's $65m securitised mortgage failed.
Sunstone, a real-estate investment trust that owns 43 hotels, bought the W for $96m in 2006 from a group led by developer Gatehouse Capital Corp. Since then, the slumping performance of the W San Diego and the broader hotel market has made supporting that mortgage a challenge for Sunstone.
Foreclosures and forfeitures of hotels are becoming commonplace in this recession, though a public REIT turning over a high-profile, luxury property still is rare. Default rates on securitized mortgages backed by hotels have risen sharply as travellers have cut back, occupancies and revenues have tanked and, subsequently, hotel owners have run into difficulty making their debt payments. To wit, 3.16% of securitised mortgages backed by hotels now are delinquent on payments as compared to just 0.44% at this time last year, according to Trepp LLC.
Wall Street Journal