Earlier this week Goldman Sachs Group did something a little unusual in today’s commercial real estate market – at least in the resort sector. The group paid 93 cents on the dollar for a $94 million loan tied to 105 hotels originally purchased in 2006 at the height of the real estate boom[1]. The move has many analysts saying that Goldman is banking of a full hotel sector recovery and predicting that more and more investors will move into the hotel space as increasing numbers of hotel owners continue “fighting to retain properties rather than acquiesce to foreclosure or forfeiture.” These investors are all banking that a recovery in hotel occupancies and rates will boost hotel values on a timeframe that will allow for refinancing or sale at a higher price – a serious indicator of investor confidence in the market. If Goldman Sachs had failed to purchase the loan other bidders could have bought the debt and used it to foreclose on the entire hotel portfolio within the month[2].
Are you excited about the hotel industry right now? Do you think this was a smart move by Goldman Sachs?
Thank you for reading the Bryan Ellis Real Estate Letter.
Your comments and questions are welcomed below.
[1] http://online.wsj.com/article/SB10001424052748704629104576190933497785162.html?mod=googlenews_wsj
[2] http://www.crainsnewyork.com/article/20110310/REAL_ESTATE/110319994
I hope they are right as I am about to launch a luxury vacation destination club.
It could be a good bet based on what is happening around the world. The Middle East is in a uproar, and other parts of the world have their own issues, so if the majority of that package is in the US, then people will do their vacationing domestically. We will have to wait and see what happens.
The $94 million loan @ 93% purchase price could be 50% or less LTV (of present value)on 105 hotels, and would make a great buy if loan defaults as hotel market recovers