Poorly performing hotels are an unfortunate casualty of the recession, which is causing an increase in the number of distressed sales. Here we examine the tools you need to employ to maximize investment in a distressed property.
In general, distressed real estate represents properties hurt by unusually high vacancy levels that cause a sharp and swift decline in a property’s rental income.1 According to a consensus at the Hunter Hotel Investment Conference in March of 2009, ten percent of all U.S. hotel debt will be delinquent before the recession ends. Currently, the percentage of delinquent loans is less than two percent. Thus, a buying spree for distressed hotel assets is expected to get underway late this year or early next, with everything leaning heavily toward a buyer’s market.
Where can a buyer find distressed properties? The best way is to speak with hotel brokers who track local hotels going into foreclosure. Banks that have a department to manage the REO property inventory can be an excellent resource as well. Local business journals may publish lists of distressed properties. Lastly, organizations such as the Association of Commercial Real Estate and groups active on LinkedIn and other professional networking sites allow members to advertise and stay on top of listings of distressed properties.
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