Sunstone Hotel Investors Inc., a San Clemente-based real estate investment trust, will default on the June mortgage payment for its swanky W Hotel San Diego property and turn over the 258-room downtown hotel to lenders, after failing to lower interest payments.
The hotel has been hurt by "significant and continuing deterioration in demand for luxury lodging" as well as the opening of luxury boutique hotels nearby, Sunstone officials say in their Sunday announcement carried by the Associated Press.
Sunstone--which bought the W in June 2006 for $96 million from developers including Starwood Hotels, Gatehouse Capital and Multi-Employer Development Partners--now believes the hotel is worth much less than the $65 million balance on its mortgage. At the end of last year, the hotel posted an occupancy of 69 percent, and the AP pegged the debt-per-room at $250,000. So it was apparently cheaper for Sunstone to simply walk away.
"As of March 31, the company owned 43 hotels in the upper-upscale segment operated under brands including Marriott, Hilton, Hyatt, Fairmont and Starwood," reports the AP. "It has been restructuring its credit facility and soliciting bids for new mortgage debt on several of its hotels."
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Things are tough all over.