CHM Forecasts Growth in Demand for Hotel Asset Managers

Hotel asset managers are emerging as the new breed of experienced hotel receivers, according to Capital Hotel Management (CHM), a hotel asset management and investment advisory firm based in Beverly, Massachusetts. As the lending community looks for qualified receivers, the company said it expects to see an exponential leap in demand for hotel asset management services.

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""The lending community has reached the stage where they no longer can delay foreclosure issues,"" said Chad Crandell, president of CHM. ""We certainly will see more foreclosures in 2010 than any year since the Resolution Trust Corporation days of the early 1990s.""

Crandell said CHM has taken on more receivership assignments in the fourth quarter of 2009 than it has in the past decade, and this is just the beginning of a trend the company anticipates will last beyond 2010. For hotels consistent with CHM's historical asset management portfolio, the company said it is well prepared to meet the workout needs for lenders.

Ken Wilson, CEO of CHM, said the fact that there are an increasing number of hotel receivers in today's market is both good news and bad news for lenders. While it is good to have options, too many makes it difficult to identify a truly qualified hotel advisor amidst a wide-range of disciplines touting services to attract the lending community.

However, Wilson said, ""We are encouraged by the response CHM has received from the lending community, suggesting that lenders are weighing their options carefully and understand the value of a qualified,

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independent asset management firm and the transferability of skills and services asset managers bring to the receivership role.""

The number of distressed hotel assets is growing, many with foreclosure eminent, and an increasing number of hotel lenders will be transitioning to a much more active ownership role within an extremely stressed environment, CHM said. There is currently a notable lack of available financing, and performance is projected to continue its decline in 2010. CHM said this could likely push the transaction window well into 2011 or 2012.

The pressing decision for lenders foreclosing on properties today will be to sell short or commit to a potentially longer hold period, CHM explained. In either case, though, special servicers and lending groups are increasingly enlisting the expertise of hotel-specific experts, of which hotel asset managers are top of the list.

""It is not surprising that we are seeing an uptick in demand for asset management services for all property types but particularly within the mixed-use segment,"" Crandell said. ""These assets are extremely complex and involve many stakeholders that need to be managed in addition to the core hotel operation. From a hotel asset management perspective, this is exactly what we do and have been doing for over a decade.""

Currently, CHM said it is actively engaged in providing lenders services both pre- and post-foreclosure, including asset managing a mixed-use luxury destination resort property and a mixed-use luxury urban hotel, and it is also serving as the court-appointed receiver and lender advisor for several branded city-center properties. Given the complex nature of the distressed assets that are surfacing, the company anticipates many more partnerships with the lending community.

While some industry experts are projecting continued declines, others are expecting signs of a recovery late in the year. As a result, the outlook for 2010 is cloudy. In any case, CHM says it will be a long road ahead for lenders taking back hotels, but there is help. As the modern day receiver, hotel asset managers are well-equipped to advise lenders as many of the core principals of asset management apply regardless of the ownership, the company said. The focus should be to minimize risk, stabilize the asset, and implement strategies to optimize asset value.