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Hotels Owners Walk Out on Mortgages
By Kevin Spak
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Posted Aug 15, 09 11:00 AM CDT
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(Newser)
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Homeowners aren’t the only ones walking away from their underwater mortgages. With the hotel market at its lowest point since the early '90s, many owners, who owe more on their money-losing properties than they’re worth, are simply walking away, the Wall Street Journal reports. Many say they have no choice; their loans were diced up into commercial mortgage-backed securities, or CMBS, making them impossible to restructure.
Unlike malls or office buildings, which are stabilized by their tenants' long-term leases, hotels can empty out overnight and, thanks to the recession, often have. That’s sent the delinquency rate soaring to 4.75% for CMBS-laden hotels, and one debt-rating agency predicts that’ll jump to 10-15% by year’s end. Making matters worse, many hotel owners leveraged their properties to go on buying sprees before the bubble burst, leaving them overextended and deeply in debt.