Interesting article related to hospitality industry.
The market in San Antonio had been surprisingly strong, but I have noticed in the last 6 months that prices have really dropped. The big problem with hotels in downtown San Antonio is that the hotel tax is over 16% and they charge about $20 a night for parking; so for every $100 you spend you could pay an extra $37
http://www.mysanantonio.com/business...reclosure.html
A lawsuit filed by a San Antonio hotel offered a window this week into the financial problems facing the hospitality industry here and across the country.
State District Judge Barbara Nellermoe ruled that La Villita Motor Inns, owner of the downtown Riverwalk Plaza Hotel, has 18 months to refinance a $6 million balloon payment the company defaulted on last year, saving the hotel from foreclosure.
In her ruling, Nellermoe said fees assessed by an asset management company that had sought the hotel's foreclosure were “unfair.”
Nellermoe acknowledged that by no fault of their own, business owners are foundering as a result of the ongoing recession.
“This has been the case from hell,” she said, from a courtroom overlooking the Riverwalk Plaza Hotel. “There's been hell to pay, that's for sure. But that will continue in this market.”
The case has been closely watched by hotel owners in San Antonio. Hundreds of millions of dollars in loans taken out by hotels across the United States will come due in the next three years, according to one.
If hotel owners can't refinance or get extensions, those hotels could face foreclosure as well, said Sherry Chaudhry, an owner of the Comfort Suites Alamo Riverwalk hotel. With business slow as a result of the recession, it will be hard for indebted hotel owners to pay off their loans, she said. Chaudhry was in the courtroom Friday when Nellermoe made her ruling, and said, “We're all waiting to find out if, when our loans come due, will the banks try to take our hotels.”
The future of these hotels will remain unclear until appellate courts make rulings in this and similar cases, Murphy said.
The case revolved around an $8.4 million loan taken out in September 2008 by Liaquat Pirani, president of the two companies that form the La Villita limited partnership. Pirani put the Riverwalk Plaza Hotel up as collateral.
The hotel is worth $16.7 million, according to court filings. The Bexar Appraisal District lists its appraisal value at $8.25 million.
Pirani made every payment until September of last year, when he defaulted on a $6 million balloon payment, and could not find another lender to help him make the payment, he and his attorneys said in court. Pirani said he continued to make payments, but when he sought the original lender to ask for an extension, he learned his debt had been sold and packaged as a mortgage-backed security.
Orix Capital Markets, a real estate, finance and asset management company representing the security's interest, in March demanded full payment of the loan from Pirani, according to court documents. When that didn't happen, Orix sought foreclosure.
Pirani and La Villita sued Orix and other parties with an interest in the debt, seeking relief from foreclosure and indemnity from other parties that might demand payment on the debt.
In closing arguments Friday, Pirani's attorney Mark Murphy said when his client tried to ask for an extension from his lender and make an offer to settle the debt, Pirani was stymied by Orix, which tacked on hundreds of dollars in default fees and late fees and sought foreclosure rather than settle the loan.
Orix's attorneys countered that Pirani had violated the terms of the loan and the company was in its rights to seek foreclosure.
Nellermoe granted La Villita indemnity and awarded them attorneys fees as well as granting them relief from foreclosure and wiping the default fees and late fees.