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BANKER & TRADESMAN - S. Boston Marriott Heads To Auction Block

March 22, 2010

 
The Courtyard by Marriott in South Boston is set to hit the auction block, after the hotel's Brockton-based managers defaulted on a $16.2 million mortgage.

The six-story, 164-room hotel sits adjacent to the Southeast Expressway, near Dorchester's South Bay shopping center. The auction, scheduled for April 13, is being conducted by JJ Manning Auctioneers. According to an auction listing, the property also includes an unfinished 6,300-square-foot restaurant with a full liquor license.

The hotel was built in 2004, with a $14 million construction loan from National Republic Bank. Brockton-based Jiten Hotel Management took out the $16.2 million mortgage with Merrill Lynch Capital in 2005. Jiten operates 16 hotels in Massachusetts, New Hampshire, Rhode Island, New York and Georgia.

General Electric Capital acquired most of Merrill Lynch Capital in early 2008. GE is the party foreclosing on the property.

"It's a maturity default, not a monetary default," said Nayan Patel, Jiten Hotel Management's CEO. "GE wanted to get paid down a huge amount to extend the loan, so we told them to go to hell." Patel added that his firm is continuing to negotiate an extension with GE.

The property is also encumbered with roughly $120,000 in unpaid municipal taxes.

Nationwide, hotel revenues have declined by roughly 20 percent since 2008, according to the ratings agency Fitch Ratings. Property values have tumbled by as much as 50 percent from their 2007 peak.

Fitch, which rates commercial mortgage-backed securities, said last week that hotels were leading all other commercial property types in defaults. Fitch predicted that looming maturities could push the default rate among hotels it rates as high as 30 percent by 2012.