Distressed hotel investment

[Ryan Henderson]

Hi,

I am unfamiliar with the hotel world, but I see a potential opportunity at the moment within this market. Would anyone know where to find a syndicator or fund for this type of investment?

[Shiv Patel]

So we own hotels. I can talk more in detail if you'd like, but I can give you what I am seeing in the market. The reality is that there will be some distressed hotels coming to market, but nowhere near the level that people think. There was probably more distress in 2008/2009 in the hotel space than now, even though occupancy is much lower in Covid compared to GFC. The reason is that the banks and the govt know that this crisis is nobody's fault. Due to this, many hotels are seeing significant forbearance on their mortgages. Lenders are giving anywhere from 6 months to 18 months of full deferment. We have hotels that were under forbearance and one will be going interest only. This really helps us out cash flow wise. Also the initial PPP money really did help keep cash flow stable. Now this is not to say that the industry won't see foreclosures. There will be foreclosures from CMBS lenders, but these don't comprise a significant portion of the overall market. The majority of the properties that will get hurt are going to be your 500+ room large hotels in urban centers. However, the smaller limited service ones have weathered the storm quite well. This is area where we focus on. Most hotel owners know once there is consumer confidence with a vaccine, there is going to be a massive surge of travel so even owners with distressed assets are trying to keep them alive because unlike the GFC in 2008, there seems to be a more clear end to this recession.