La Costa Resort May Avoid Foreclosure

[svelte]

In a move that may stave off foreclosure for the La Costa Resort and Spa, a private equity fund has purchased $380 million in debt on the property at a steep discount from the lender.

KSL Capital Partners, which invests in leisure properties, has acquired the loan for a sum in the low $100 million range, said Alan Reay of Atlas Hospitality Group, which tracks hotel industry transactions. A report in Commercial Real Estate Direct, an industry online news service, said the purchase price was estimated to be $120 million.

…

For lenders, it is extremely tough for them to foreclose on a resort hotel,” Reay said. “It’s just bad, bad public relations, and you affect the business because people don’t want to book meetings and weddings at a hotel that’s in foreclosure. So a lot of lenders, especially on resort hotels, are opting to sell the loan at a discount rather than go through a foreclosure.

“It just damages the future business, and if you’re the lender and you’re going to own the hotel you’ll be damaging yourself.”

…

The discounted loan purchase is emblematic of what is increasingly happening in a struggling industry saddled with high debt and depressed values. Hotel broker Bob Kaplan said he recently brokered a sale of the Wyndham Orange County, which sold for half its original purchase price and for $10 million less than the $31 million mortgage, which the owner had defaulted on. The owner, he said, showed up at the courthouse steps seeking to repurchase the debt at a discount.

“The (La Costa) lender’s motivation is they made a business decision that it’s only worth $120 million, so let’s get out of Dodge and go on with business,” said Bob Kaplan of PKF Consulting. “It’s just an economic decision. I think the stigma of being in foreclosure is a small factor. They’ve done the analysis to determine that was their best choice to get out and minimize their losses.”

http://www.signonsandiego.com/news/2010/feb/18/la-costa-resort-debt-sold-at-big-loss/

[Anonymous]

I think more severely underwater homeowners need to consider this sort of strategic default.

It’s not a freaking morality play, it’s just business.

Stop throwing good money after bad.

[Anonymous]

I think more severely underwater homeowners need to consider this sort of strategic default.

It’s not a freaking morality play, it’s just business.

Stop throwing good money after bad.

[Anonymous]

I think more severely underwater homeowners need to consider this sort of strategic default.

It’s not a freaking morality play, it’s just business.

Stop throwing good money after bad.

[Anonymous]

I think more severely underwater homeowners need to consider this sort of strategic default.

It’s not a freaking morality play, it’s just business.

Stop throwing good money after bad.

[Anonymous]

I think more severely underwater homeowners need to consider this sort of strategic default.

It’s not a freaking morality play, it’s just business.

Stop throwing good money after bad.

[svelte]

Agreed.

And maybe a few more underwater homeowners (at least those who have $$ stashed somewhere) should go to the auction and buy back their property at two-thirds the price, as Wyndham Orange County did. Apparently it is legal.

[svelte]

Agreed.

And maybe a few more underwater homeowners (at least those who have $$ stashed somewhere) should go to the auction and buy back their property at two-thirds the price, as Wyndham Orange County did. Apparently it is legal.

[svelte]

Agreed.

And maybe a few more underwater homeowners (at least those who have $$ stashed somewhere) should go to the auction and buy back their property at two-thirds the price, as Wyndham Orange County did. Apparently it is legal.

[svelte]

Agreed.

And maybe a few more underwater homeowners (at least those who have $$ stashed somewhere) should go to the auction and buy back their property at two-thirds the price, as Wyndham Orange County did. Apparently it is legal.

[svelte]

Agreed.

And maybe a few more underwater homeowners (at least those who have $$ stashed somewhere) should go to the auction and buy back their property at two-thirds the price, as Wyndham Orange County did. Apparently it is legal.

[Author]

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