The Resolution Trust Corp. this week is expected to announce its largest auction of hotels and hotel loans, knowledgeable sources said.
RTC officials declined to confirm the auction, but the sources said the announcement may come today. A Clarion hotel in New Orleans with a book value of $46 million was said to be the biggest property in the $329 million portfolio, which includes 68 hotels in 17 states.
Gloom Lifting
Success of the sale would provide further evidence of a rebound in the hotel sector, once of the most beleaguered areas of the commercial real estate market.
The Hotel and Motel Brokers of America - accounting for about a quarter of all hotel sales nationwide - reported last week that properties sold by its members totaled 170 properties in 1991, up from 99 in 1990. Last year was the best year for the brokers since 1986, when they sold 207 hotels.
Separately, a report released by Arthur Andersen & Co. last week indicated that the net annual loss per hotel room, at $1,107, was less than half the level of the previous year.
The hotel auction is also being watched by real estate professionals. The RTC, credited with "inventing the wheel" on many types of asset sales, will seek to sell some properties before they have actually been foreclosed.
If successful, this would shorten what has proven to be a three-year period between recognition and sales of problem properties.
Assets Throughout U.S.
The RTC, with Secured Capital Corp. of Los Angeles acting as financial adviser, has packaged $28 million of performing loans, $223 million of nonperforming loans, and $78 million of hotels for sale.
It marks the fourth bulk sale of RTC hotel assets. If successful it would leave the agency with about 40 hotels, 25% of its original portfolio.
About 37% of the assets in the package are in the Northeast, 34% in the Southeast, and the balance in California, Arizona, Nevada, Minnesota, Ohio, and Texas. Investors may bid on the entire package or on any of six portions of it.
While providing a generally upbeat outlook, the hotel and motel brokers' report found that lenders in the oil patch began to unload foreclosed hotels at a decent clip only last year.
Patrick H. Ford, who wrote the report, said sales in New England, where the recession took hold around 1989, might pick up this year.
Outlook Varies by Region
The report also provides an ominous view of how long real estate headaches might linger for banks in the Northeast and California - where banks are at an earlier stage in resolving problem credits.
"In the Southwest, that pig is largely through the python," said a spokesman for the brokers group. "In New England, it's half to two-thirds of the way through. And in California it's still up in the neck."
Of the 179 properties sold by the brokers last year, 51 sales occurred in the South Central states, the most in any region.
In contrast, the group sold only eight hotels in the New England and Middle Atlantic states, where many more properties were tied up in court.
One positive sign for banks is that the sales by lenders, as opposed to sales by the property owners, accounted for much of the gain. "Forty-five per cent of the transactions were lender-owned," Mr. Ford said. "Among hotels greater than 75 rooms in size, 70% were lender-owned."
The report details financing and sales terms for hotels by region, by state, and by hotel chain for the past six years.
It is limited to deals closed by the group's members, who tend to handle transactions on smaller, roadside hotels rather than resorts or convention centers.
In New England and the Middle Atlantic states combined, sales have totaled 10 or fewer every year since 1987 and bounced back to eight sales last year - from only one in 1990. Five of the eight were sold by lenders.
In the South Central region, the 51 sales were an improvement from 22 in 1990 and as few as seven in 1988, the report showed. Thirty-eight were sold by lenders last year in that region.
Hotel sales in the Mountain/Pacific region have been relatively stable for five years, although sales dipped to 17 in 1990 before rising to 35 last year. Only 14 of the 35 were sold by lenders.
Prices Sag
Nationally, the sale price per room dropped, to $18,400 from $21,539 the previous year and as much as $23,630 in 1988. Bank properties commanded only $14,628 per room.
However, Mr. Ford noted, "We're still many miles away from hotels returning to profitability."
He said hotel recessions tend to start six months earlier than recessions in the economy at large and continue for about six months after the economy recovers. That's because businesses tend to cut back early on travel spending and resume only with caution, he said.
It is uncertain how many more hotels remain in the problem loan category and how many will be seized and recycled by banks.
And David Berins, director of Arthur Andersen's hospitality sector, director, noted that hotel room occupancy reached an all-time low last year.
