Standard & Poor's Ratings Services (S&P) has published a report on the state of the lodging sector within U.S. commercial real estate. The report, titled ‘With A Large Volume Year For Lodging Maturities Unfolding, Lenders Will Be Very Selective,’ finds the sector is at the beginnings of a recovery, although some problems may slow its progress.
According to S&P, almost $10 billion in lodging loan collateral scheduled to mature this year and another $8.5 billion is slated to come due in 2012. S&P adds that although the early stages of recovery in the lodging sector first took hold in the higher-priced segments last year, it is now spilling over to the mid-scale and economy segments, which will likely amplify the positive momentum already under way.
‘Based on our analysis, the 2011 and 2012 maturing lodging loans are predominately within the upper upscale and independent segments; they are also concentrated in several major markets’ says Larry Kay, credit analyst. ‘We believe that borrowers for the maturing lodging loan collateral will find refinancing very selective over the next two years, and the level of lender interest will vary by loan, market and chain segment.’
Of the lodging loans scheduled to mature in 2011 and 2012, 86% of the collateral balance comes from the 2006 and 2007 vintage years. Kay adds that maturing lodging loans from these vintages may be more susceptible to default or modification, as they were characterized by high leverage and underwriting that utilized pro-forma operating statements.
SOURCE: Standard & Poor's Ratings Services
