Developer eyes new site for Moore County outlet shopping center

By Todd Leskanic Staff writer
Article from Fayobserver.com

SOUTHERN PINES – A California developer has picked a different site, near U.S. 1 and Midland Road, for a proposed retail outlet center with hotels and a golf course.

Bob Sonnenblick of Sonnenblick Development said he is no longer interested in a 114-acre property on Morganton Road that he had previously discussed.

His new focus for a 335,000-square-foot outlet center, three high-end hotels and a golf course is 550 acres near the Pine Needles Lodge & Golf Club. The same site was previously proposed for the controversial 800-home Pine Needles Village development, which the Southern Pines Town Council voted down in 2008.

“The U.S. 1 site has a huge amount of highway frontage and visibility and much better access than the other properties we looked at,” Sonnenblick said. “So we’re really thrilled to have finally landed in the right spot within the Pinehurst-Southern Pines marketplace.”

Sonnenblick said potential tenants also were uncomfortable with traffic issues at the Morganton Road site and feared that high infrastructure costs would drive up rents at the outlet center.

An outlet center would be the first of its kind in the Cape Fear region. The closest centers for outlet shoppers are in Smithfield, Charlotte, Burlington, the Triangle and Myrtle Beach, S.C.

No property has changed hands. The 550 acres are owned by the Bell family, who own Pine Needles and the Mid Pines Inn & Golf Club, which is across Midland Road.

Kelly Miller, president of the resorts, said the family has acquired a bulk of the property since the late 1980s.

“We knew we were going to develop this acreage somehow or other,” Miller said. “We had attempted to to do this with Pine Needles Village several years ago, so now we think it makes sense to master plan the entire tract and move forward.”

Sonnenblick said the outlet center would be built first. He said he plans to bring in four-star hotel brands for the 300-room hotels, and he described the golf course as “championship high-end.” Roughly 100 acres would be kept vacant for wetlands and include a horse trail, he said.

The goal is to have the outlet center open in time for the 2014 U.S. Open Championship and U.S. Women’s Open Championship.

Sonnenblick was in Moore County for three days last week and met with officials from Southern Pines and the county to discuss the proposal.

“We got very positive feedback,” he said. “The reason for that is we’re going to create in excess of 1,000 jobs and millions of dollars of sales and bed tax from a property that is now vacant.”

Staff writer Todd Leskanic can be reached at leskanict@fayobserver.com or 486-3511.

Feeding frenzy coming as banks dump distressed hotel loans

Europe’s banks are going to be forced into selling more distressed property loans in the coming year as borrowers default, a major Bloomberg real estate summit in New York was told this week.

“There’s going to be a feeding frenzy soon” for European loans, said Robert Blumenthal, a managing director at Deutsche Bank Securities Inc. “Someone’s going to have to take those loans out at a significant discount” and inject “huge amounts of equity” to recapitalise the assets.

European lenders have 151.4 billion euros ($204.8 billion) of commercial real estate loans in default, compared with $121 billion at U.S. banks, according to New York- based data provider Trepp LLC, and the hotel and resort sector is a major risk.

The first quarter of 2012 is going to be “grim” the conference heard, and because the CMBS market isn’t coming back fast enough to help borrowers refinance debt coming due, there will be a “huge increase” in U.S. hotel foreclosures next year, said Robert Sonnenblick, a hotel developer.

About $21.7 billion in CMBS (Commercial Backed Mortgage Securities) loans on 232 hotels are coming due in the next 12 months and need to be refinanced, according to Realpoint, a securities ratings firm now owned by Morningstar Inc. At best, a third of that will be refinanced, with many properties being taken over by lenders, Sonnenblick said.

Private-equity firms and real estate companies over the past six months have been staffing up in London in anticipation of bidding for distressed debt in Europe, said Glenn Rufrano, president and CEO of Cushman & Wakefield.

Huge increase in hotel foreclosures expected in 2012

Developer are increasingly talking about how the U.S. hotel world will see a “huge increase'” in foreclosures in 2012 as debts come due and financing remains hard to come by, Bloomberg reports.

A foreclosed hotel is one in which the owner is unable to make mortgage payments.

The lack of money means greater odds that guests will notice cost cutting or signs of a lack of investment, although hotel managers typically try to do the best they can to make sure guests won’t notice their property’s financial troubles.

“You’re going to see a huge increase of hotel foreclosures,” Robert Sonnenblick, chairman of Sonnenblick Development, said during the Bloomberg Commercial Real Estate Summit in New York.

According to another developer, boutique hotel pioneer Ian Schrager, the expected flood of hotel foreclosures is also ruining some plans to build new hotels. Here’s what he told Bloomberg:

“It’s very difficult to build when everybody’s anticipating there’s going to be a flood of existing assets at opportunity costs to buy,” said Schrager, who estimates he can build new hotels in New York City for as little as $400,000 per room.

High-end hotels in major U.S. cities such as New York, Boston and San Francisco have recovered more than other markets so far during the recovery, the piece notes.

In the past couple of years, we’ve seen a range of foreclosures especially at high-end and luxury properties including Starwood’s W Atlanta-Downtown and Capella Telluride hotel in Colorado’s ski country.

Debt maturities loom over hotels in 2012

05 January 2012
By Shawn A. Turner
Finance Editor
Shawn@HotelNewsNow.com

REPORT FROM THE U.S.—There’s a big bill coming due for the hotel sector in 2012. Billions of dollars of debt (comprised of commercial, mortgage-backed securities, credit facilities, bank and finance company loans and others) matures this year, much of it written during frothier days when underwriting terms were much less stringent than today. In CMBS, for one, there is US$9.1 billion of hotel CMBS debt maturing in 2012; much of it originated in 2007, according to Trepp LLC, a company that tracks the CMBS market. It’s not clear how much balance sheet debt will mature in 2012, though Mathew Comfort, executive VP of global real estate services firm Jones Lang LaSalle, puts that number at roughly twice the size of the CMBS market. Modifying loans

Bob Sonnenblick, principal of real-estate development firm Sonnenblick Development LLC, said all the debt coming due in 2012, particularly the CMBS debt, could prove a distraction to the industry as executives spend more time figuring out ways to refinance and less time focused on their own operations. “It takes your eyes off the ball,” he said. Sonnenblick said “there is no way” the lenders in the market will be able to refinance all the CMBS coming due. “At best you will see a third (of maturing CMBS) refinanced,” he said. Still, with the debt shadow looming over the industry, hotel companies are scrambling to refinance and restructure. For example, Ashford Hospitality

Trust in December restructured its US $203.4-million securitized mortgage loan that was to mature in December.

Ashford also is working to refinance future maturities, too. The Dallas based real-estate investment trust has US $167.2 million of debt coming due this year; the REIT is in the early stages of restructuring or refinancing the debt.

“We’ve tried to keep a balanced maturity schedule,” Ashford president Doug Kessler said. Joe Epstein, president and founder of First American Realty Associates, a Fairfield, New Jersey-based mortgage lending source for the hotel industry, said debt restructuring in 2012 will be done on a “deal-by-deal, case-by-case basis.”

“The type of lender and the reasonableness of the borrower’s request normally determines the outcome,” he said via email. CMBS outlook The CMBS market saw plenty of fits and starts during 2011, said Jon Winick, president of Chicago-based Clark Street Capital Management LLC, a full-service bank advisory, disposition and asset management firm.

“I think the real-estate market has been very much distracted by CMBS,” he said. “CMBS has been very erratic. It’s in, it’s out. It’s back, it’s not back.”

The stop-and-go nature of CMBS, however, might come to an end in 2012, according to Huxley Somerville, group managing director of Fitch Ratings’ U.S. CMBS group.

During a webinar last month, Somerville said it appears the CMBS market is stabilizing; Fitch noted a slight month-over-month increase in hotel CMBS late pays for November. The delinquency rate for the hotel sector edged up to 12.66% in November from 12.54% during August.

“It, along with multifamily (sector CMBS), is expected to perform the best” in 2012, Somerville said of hotel CMBS.

The biggest threat to AAA-rated CMBS in 2012, Somerville said, would be a loss of liquidity in the market lasting six to nine months. Such an event inevitably would lead to an increased rate of defaults and a decline in property values. Financing availability

Compounding the issue for hotel companies is the general lack of financing availability in the industry for the better part of the last 18 months. Kessler said Ashford’s mortgage loan restructuring was made all the more difficult by the inactive CMBS market that ruled the latter part of 2011. “It’s less available than it was six months ago,” Kessler said of debt. JLL’s Comfort said debt available though underwriting terms have tightened. Helping the U.S. market are foreign lenders who have jumped into the debt market.

Globally, the European market still is a year or two behind where U.S. lending is, Comfort said.

“Europe is obviously in a state of emergency and is trying to figure out the best way to salvage their currencies and economies,” he said. Winick said there should be some loosening of the credit markets in 2012, though.

“Hotel financing is going to get better,” Winick said. “It can only get better.”