Tough love word. A real estate investor’s nightmare. Banks, also.
We’re in the middle of a game of musical chairs and the music is speeding up.
Remember two things:
- In general, hotel owners had loans on their assets. They were able to pay the debt from proceeds. But those proceeds are going and the owners are facing foreclosure or sale.
- Banks justify hotel loans by the hotel’s profit. Not only to pay the loan, but to have the correct DCR and YIELD that was part of the loan agreement. As hotels fall apart, the loan is unpaid. Eventually, the bank will have to write it off, get more equity to shore it up, or give more forbearance to the borrower.
In many cases, it’s too late.