Red Roof Inns reportedly defaults on four mortgages

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Red Roof Inns, the hotel chain acquired in a Citigroup-led buyout in 2007 for $1.3 billion, has defaulted on four of its mortgages that total $361.4 million, the credit rating company Realpoint has revealed.

Payments are 30 days delinquent on loans in the amounts of $181.75 million, $76.6 million, $67.6 million and $34.4 million, said Frank Innaurato, who is the managing director of the CMBS analytical services division of Realpoint.

Collateral on the mortgages includes 113 of the Red Roof locations.

As business and leisure travel has declined in the recession, hotel operators have struggled financially. According to Smith Travel Research, occupancy has fallen by 11 percent for the first five months of this year, as compared with the same period in 2008.

Realpoint’s Innaurato said: “While we are projecting defaults to rise through 2010, mostly from cash-flow struggles across property types, we expect to see more and more potential defaults in hotel collateral later this year and in 2010.”

He added, during a telephone interview: “While the focus has been on the luxury segment, it has been interesting to see that the mainstream hotel sector is also being affected.”

Red Roof, which was acquired from Accor two years ago, is transferring three of the property loans to a special servicer and will transfer the fourth next month, according to Innaurato.

Thanks to www.bloomberg.com for the above quotes, for more information on this article please visit their website.

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