Massive Hotel Notes Auction Will Help Answer Pricing Questions

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Let the bidding begin. On Monday, Jones Lang LaSalle and Real Estate Disposition combined to offer more than $420 million in primarily non-performing hotel notes and bank-owned real estate in a three-day auction event at auction.com.

More than 60 notes and four bank-owned properties are pooled for the auction from five separate special servicers and two regional banks, with notes on the block for a wide array of full- and select-service hotels, branded and unbranded. The average unpaid balance on the commercial loans is $6.4 million. The hotels are located in 25 states—10 in Florida, eight in California, seven in Georgia—and the higher outstanding loan balances (13 notes) are offered in a sealed bid format, with the rest in an eBay-style online auction with minimum bid starting points.

The sealed bid auction opens and closes today, while the online auction for the bulk of the notes closes Wednesday morning. While buyers and sellers anxiously await the results, the rest of the industry stands to gain plenty from the results. Any further clarity to pricing can only help ease the backlog of transactions and help speed up recovery.

Al Calhoun, a managing director of Jones Lang LaSalle Hotels' select service division, said if this pooled-auction approach works, it could become a “pressure valve” to help uncork the transaction market and a viable option for others to follow. At the least, the auction is further proof that some servicers and lenders are looking to move troubled notes and assets, something we haven't seen a lot of over the past two years.

Check out the auctions here, and peruse the different types of properties available. Check out the digital brochures for more specifics—it's like a catalog of hotel notes for sale. More information is obviously available to prequalified and interested buyers.

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