Lender Takes Over Hotel to Avert Foreclosure

Posted on October 5, 2009
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The real estate scenario in the US is in the dumps. As unemployment peaks, people are faltering on mortgage payments. Hence, foreclosures have become common. Naturally, the value of these foreclosed homes has plunged. This has drawn the attention of many first-time investors who are buying the properties for a steal, revamping them and again selling them off to buyers, thereby making a neat profit. In this way, a property in many regions has changed hands.

Now a commercial property, a hotel to be precise, has got its fourth owner ever since. Recession has wreaked havoc in the US. The Fairmont Orchid Hawaii has been quietly taken over by its lender. Instead of foreclosing the property, the lender found it more profitable to take over the luxury hotel. This is an associate of the New York-based Barclays Capital. The 540-room luxury showpiece has been acquired from Westbrook Partners LLC. This is a real estate firm based in Boston. It had bought the sprawling 32-acre property on the oceanfront for a whopping $250 million four years ago.

Barclays Capital however, refused to comment on the deal. The company may keep the hotel till the real estate scenario shows a marked improvement. Of course, the day-to-day operation of the hotel has not been affected. This is being managed as part of a long-term deal by Fairmont Hotels & Resorts Inc. The transaction is important in the sense that it is a part of a growing phenomenon that is being witnessed in Hawaii – hotels being acquired by lenders to avert foreclosures. Ever since the Recession has hit the US, the tourism industry has taken a beating very badly. Investors who had once paid huge sums for hotels had been left bleeding ever since the downturn. The president of local tourism industry consultant Hospitality Advisors LLC, Joseph Toy, says that there will be more of such incidents in the near future. The hotel industry has suddenly become very active.
Toy also said that the downturn has depleted the reserves of even the investors with deep pockets. Now even the super rich investors are finding it difficult to keep the mortgage default free.

It may be noted that Westbrook had bought the Orchid four years ago. About 18 months down the line, it had registered the hotel for sale. Although many evinced interest, the hotel was not sold. The amount of $250 million that was paid by Westbrook was a record price.

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