Two Thousand Oaks Marriott hotels in default on a $25 million construction loan and facing foreclosure are just the latest indication that the region’s hotels have been hit hard by a decline in tourism and a sour commercial real estate market.
The neighboring hotels on Newbury Road — a Marriott TownePlace Suites and a Courtyard by Marriott — are owned and operated by Ocean Park Hotels, a San Luis Obispo-based firm. The lender, Nationwide Life Insurance Co., is seeking to foreclose and put the hotels into receivership, according to a suit filed this month in Ventura County Superior Court.
But the Thousand Oaks properties aren’t alone. As the Business Times reported last week, the Country Inn & Suites in Port Hueneme also faces foreclosure on more than $53 million in debt and is changing hands.
To the north, King Ventures, which owns a string of properties throughout California including the Inn at Morro Bay and the Apple Farm in San Luis Obispo, stands to lose several properties to foreclosure after defaulting on a $9 million loan.
And David Weyrich, a prolific San Luis Obispo County developer, has struggled to keep The Carlton hotel in Atascadero afloat after losing several of his wineries and hotels — including the Villa Toscana, a luxury bed-and-breakfast in Paso Robles — in foreclosure auctions.
Michael Barnard, founder of a Santa Barbara-based hotel investment firm, said hotel foreclosures and ownership changes will become more common as fallout from the real estate market continues. “Sooner rather than later, lenders are going to be taking more and more hotels back,” he said.
A 25-year veteran of the hotel industry, Barnard recently co-founded Blu Hotel Investors, a hotel development and acquisition firm. The company looks to snap up troubled properties throughout the Tri-Counties and turn them around. “The opportunity is going to be there for some acquisitions in the next 12 to 24 months,” he said.
Barnard, most recently an executive with Pacifica Hotel Co., spent five years with Marriott Corp. working on finance and feasibility.
“There is a lot of hotel supply and competition in that Thousand Oaks corridor,” he said of the Marriott defaults there.
And like other hotels on the rocks, they were built when real estate was hot. “Many of those kinds of projects were built peak-of-the-market or refinanced peak-of-the-market,” Barnard said. “They didn’t get up to speed and didn’t get to where they needed to go before the crash.”
The two Thousand Oaks Marriott hotels obtained their construction loan, originally for $23.8 million, in 2004. The principal amount was later increased to $25.3 million, and improvements were made to the two properties over the years, the lender said in court documents. Alleging Ocean Park failed to make payments on the loan, Nationwide is now asking that the court allow it to foreclose and place the properties in receivership with a trustee, who would oversee the hotels until a buyer is found.
The hotel firm, however, said in court documents that placing the hotels in receivership would negatively affect their operation. “The appointment of a receiver will have a disruptive effect on hotel operations, particularly on personnel morale of the front line employees, and consequently on the generation of revenues,” Terry Westrope, vice president of Ocean Park Hotels, said in court filings.
A spokeswoman for Nationwide declined to comment. An Ocean Park attorney failed to return requests for comment.
But the tale of the Thousand Oaks hotels doesn’t seem too different from what hotels the region and the nation over have experienced: The double whammy of the real estate market crash and a tourism drop.
“The travel industry has been hit very, very hard,” Janet Sederquist, president and chief executive officer of the Oxnard Convention & Visitor’s Bureau, told the Business Times in a previous interview. “Hotels started seeing a slow uptick in February,” she said, but occupancy rates are still averaging around 60 percent, up from about 50 percent in the winter months.
Kathy Janega-Dykes, president and CEO of the Santa Barbara Conference & Visitors Bureau, said area hotels are seeing signs of a turnaround but remain cautious. “Travelers continue to be very price-conscious and on the lookout for values,” she said.
Barnard said the hotel market has bottomed out, but the fallout will continue, with defaults and foreclosures through the end of next year. “Well-positioned investors are going to see this as an upside opportunity to make some acquisitions,” he said.