Magazine article American Banker

Giant Auction of Hotels, Motels Expected from RTC

Magazine article American Banker

Giant Auction of Hotels, Motels Expected from RTC

Article excerpt

The Resolution Trust Corp. this week is expected to announce its largest auction of hotels and hotel loans, knowledgeable sources said.

RTC officials declined to confirm the auction, but the sources said the announcement may come today. A Clarion hotel in New Orleans with a book value of $46 million was said to be the biggest property in the $329 million portfolio, which includes 68 hotels in 17 states.

Gloom Lifting

Success of the sale would provide further evidence of a rebound in the hotel sector, once of the most beleaguered areas of the commercial real estate market.

The Hotel and Motel Brokers of America - accounting for about a quarter of all hotel sales nationwide - reported last week that properties sold by its members totaled 170 properties in 1991, up from 99 in 1990. Last year was the best year for the brokers since 1986, when they sold 207 hotels.

Separately, a report released by Arthur Andersen & Co. last week indicated that the net annual loss per hotel room, at $1,107, was less than half the level of the previous year.

The hotel auction is also being watched by real estate professionals. The RTC, credited with "inventing the wheel" on many types of asset sales, will seek to sell some properties before they have actually been foreclosed.

If successful, this would shorten what has proven to be a three-year period between recognition and sales of problem properties.

Assets Throughout U.S.

The RTC, with Secured Capital Corp. of Los Angeles acting as financial adviser, has packaged $28 million of performing loans, $223 million of nonperforming loans, and $78 million of hotels for sale.

It marks the fourth bulk sale of RTC hotel assets. If successful it would leave the agency with about 40 hotels, 25% of its original portfolio.

About 37% of the assets in the package are in the Northeast, 34% in the Southeast, and the balance in California, Arizona, Nevada, Minnesota, Ohio, and Texas. Investors may bid on the entire package or on any of six portions of it.

While providing a generally upbeat outlook, the hotel and motel brokers' report found that lenders in the oil patch began to unload foreclosed hotels at a decent clip only last year.

Patrick H. Ford, who wrote the report, said sales in New England, where the recession took hold around 1989, might pick up this year.

Outlook Varies by Region

The report also provides an ominous view of how long real estate headaches might linger for banks in the Northeast and California - where banks are at an earlier stage in resolving problem credits. …

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