03 Nov Lender woe hits downtown DoubleTree hotel
The run-up of new hotels in downtown Cleveland has sapped the fortunes of the DoubleTree Hotel Downtown Cleveland, which has entered the first throes of lender woes.
Trepp Wire, a New York City-based provider of national mortgage loan information, reported that a $29 million securitized mortgage loan taken out in 2016 by hotel owner Cami Hotels Investments II LLC was placed in special servicing on Oct. 4. It was assigned to C-III Asset Management LLC, a unit of C-III Capital Management of New York City.
A Trepp loan document stated that the borrower’s current balance is $27 million on the loan named MSBAM 2016-C29, and it became delinquent in September. The loan does not mature until 2027.
Since C-III just received the loan, Trepp said no workout strategy had been developed by Monday, Oct. 21. If special servicers cannot find a way to resolve a problem loan, they often wind up assuming the loan and selling it. No foreclosure filing had been recorded by last Thursday, Oct. 31, according to Cuyahoga County court records.
The 379-room hotel’s occupancy as of the end of September had fallen to 59% from 63% at the end of 2018, according to the Trepp data. The hotel, which opened in 1973, was last renovated in 2016 but competes with much newer properties downtown, including four added in the last five years.
Laurel Keller, senior vice president of the Lodging, Hospitality and Gaming Unit of Newmark Knight Frank’s Cleveland office, declined to comment on the downtown DoubleTree specifically, but said room rental rates have been flat so far this year in the Cleveland market and may soften further with an expectation that the market will have fewer conventions next year.
Asked about the lender shipping the loan to special servicing after a short period of delinquency, Keller said lenders are more ready to pursue actions against hotel borrowers than other commercial real estate types due to the nature of the hotel business. Where industrial and office properties often have tenants leasing space for years or months, hotels typically have guests for only a few days or weeks.
Cami Hotel Investments II was formed by an affiliate of its management company, The THG Group of Edmonds, Wash. The firm’s general counsel, Bruce Meyer, did no return two phone calls and the company did not respond to an email by 6 p.m. last Thursday.