SAN FRANCISCO | Projects: Under Construction, Approved, and Proposed

[BTinSF]

Hotel Default a Gamble
Another luxury hotel in San Francisco has run afoul of its lenders.

New York developer Millennium Partners LLC, which owns the 277-room Four Seasons San Francisco hotel, didn't make payments in May and June on the hotel's $90 million securitized mortgage in a bid to compel the loan's special servicer to rework its terms. Millennium, which mortgaged the hotel in 2007, confirmed in a statement on Monday that it withheld the payments.

"In order to commence discussions with the debt holders of the Four Seasons Hotel in San Francisco, Millennium Partners has strategically withheld payment of debt service," the statement reads. "Conversations on restructuring the debt have begun, and Millennium Partners is hopeful that they will result in a positive outcome."

The Four Seasons delinquency comes on the heels of lender Barclays Capital in May putting the 390-room Stanford Court hotel in San Francisco into receivership because of a default of the hotel's $90 million mortgage. Stanford Court operates under Marriott International Inc.'s Renaissance brand.

Many hotels aren't generating enough cash flow in this recession to make interest payments on their mortgages. To wit, the delinquency rate on securitized mortgages with hotels pledged as collateral was 4.3% in June, up from 0.5% a year earlier, according to Trepp LLC. At the Four Seasons San Francisco, the problem was declining cash flow and slumping value, according to Realpoint LLC, a credit-rating agency. Realpoint estimates that the hotel's value, appraised at $135 million upon the origination of its mortgage in 2007, has declined to $80 million this year, well below its mortgage balance.

Source: http://online.wsj.com/article/SB124701571481009315.html#mod=todays_us_money_and_investing

So what I'm wondering is whether this effects people who own condos in the building and, if so, how. At the very least, I'd suspect if the hotel is in trouble the hotel services that are supposed to be available to condo owners might get a little ragged. I'm finling this under "Further perils of combining commercial and residential uses in the same building".