The latest quarterly distress report from brokerage and consulting firm Atlas Hospitality Group finds many California hotels still suffering debt hangovers stemming from the Great Recession, even though overall hotel business has been on the upswing for much of the past year.
In the first quarter, San Diego County saw the number of properties in some stage of loan default drop 20 percent from the same period a year ago, going from 34 to 27. However, hotels that had been foreclosed on by their lenders rose from six a year ago to 17 at the end of the latest quarter.
San Diego County was second among California counties to San Bernardino County’s 18 foreclosed properties. Statewide, hotels in default were up 7 percent from a year ago, to 350; and foreclosed properties were up 7.2 percent, to 148.
Despite the fact that California is enjoying increasing revenues per available room in nearly every market, Atlas President Alan Reay noted that the hotel industry continues to experience high levels of loan distress, especially in the secondary and tertiary markets.
That is due largely to the high levels of debt that many hotels are carrying. Irvine-based Atlas is predicting that hotel defaults and foreclosures will continue to increase through the first half 2011.
After that, defaults will start to level off, but foreclosures will continue to increase at least through the end of 2011, Atlas forecasts.
According to Smith Travel Research Inc., San Diego area hotels in the first quarter saw occupancy rise 4.5 percent from a year ago, while the average room rate increased 6.9 percent. Revenue per available room rose 11.7 percent, and total revenue for the market topped $416 million, for a 12.3 percent boost.
• • •
Apartments at Civita Get Financing: Developers have secured $59.5 million in loans for Circa 37, a 306-unit apartment complex planned as the first phase of Sudberry Properties’ Civita mixed-used development in San Diego’s Mission Valley.
According to the San Diego office of brokerage and capital services firm Holliday Fenoglio Fowler LP, which arranged the financing, the project will get a three-year, $47 million construction loan through Wells Fargo Real Estate Group Inc. Also, a $12.5 million mezzanine loan was secured through a life insurance company.
San Diego-based Sudberry’s development division is building a 230-acre urban infill community, formerly known as Quarry Falls, in several phases proposed to include up to 4,780 residential units, 480,000 square feet of retail, and 420,000 square feet of office space.
Also planned are a civic center, amphitheater, recreation center, parks and open space. Civita is west of Interstate 805 at Mission Center Road.
Circa 37 is named for 1937, the year when a former rock quarry at the site was first mined. Developers said the apartment complex, with first move-ins expected in April 2012, will have 11 buildings with 306 apartments ranging from one to three bedrooms, averaging 948 square feet.
• • •
Homebuilder Opens Local Office: New Urban West Inc., a Santa Monica-based builder that’s developed several San Diego County housing communities over the past two decades, announced April 28 that it has opened a San Diego office in Sorrento Valley.
Jason Han, a partner in the company who also was recently named president of its San Diego and Orange County Division, said San Diego’s economy is “getting its legs more firmly” than most major California metro areas as the economy slowly recovers. Han said the builder sees the local market’s job gains and a growing contingent of young skilled professionals increasing the for-sale and rental housing demand.
He said New Urban West is currently completing the 80-home Rancho Vistamonte community in Escondido, and “actively seeking” properties to acquire, including urban in-fill and suburban sites.
The builder’s move comes as local housing construction continues to pick up steam, though not at pre-recession levels. According to the latest data from the Construction Industry Research Board, builders took out a total of $297.6 million worth of permits countywide for new single- and multifamily projects in 2011’s first quarter.
Send commercial real estate and development news of general local interest to Lou Hirsh via e-mail at email@example.com. He can be reached at 858-277-8904.