Another case of a real estate loan that faces the “rollover problem.” The borrower is able to make payments on the loan, but is unable to obtain refinancing before maturity.
By Sarah Krouse of Washington Business Journal:
The 437-room hotel is jointly owned by Felcor Lodging LP and Starwood Hotel & Resorts Worldwide Inc., of W brand hotel fame, and is quickly approaching its April 1 loan maturity date.
The $51.3 million loan has been paid down to $45.7 million and was current at the beginning of January, but given the state of economy, experts say Starwood and Felcor may have opted to transfer the loan to special servicer because they knew refinancing the loan this late would be a challenge.
When the loan was issued in 2005, its debt service coverage ratio was 1.46 and the hotel’s occupancy was 73 percent — a marked contrast to the hotel’s performance in the 12 months ending in June. During that period, the DSCR was 1.02 and occupancy at the property hovered at just 57 percent while the rest of the area hotel market saw 76.6 percent occupancy, according to a November Smith Travel Research Inc. report. A DSCR that is below 1 means negative cash flow.
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