With one-third of all Orange County hotel rooms going empty, the average room rate fell 13 percent last year – that's an average of $19.53 a night, according to the lodging experts at PKF Consulting.
In 2008, 28 percent of O.C. hotel rooms went empty, blogger Jonathan Lansner reported.
The last time local hotel rates were this cheap was in 2005.
Rates also fell for the entire year, the first time since 2002 that has occurred. That was also the last time this many local hotel rooms went unsold.
The biggest rate cuts in 2009 were around Newport Beach, falling 19 percent. The most vacant rooms could be found in South County (40 percent empty!).
All told, countywide revenue per available room (or RevPAR) -- a key hotel cash-flow measure tracking rates and occupancy -- was down 19 percent for 2009.
By region, none of the seven slices of the county PKF tracks had year-over-year room rate gains or occupancy gains or "RevPAR" increases.
Atlas Hospitality previously reported that last year's setbacks for the Orange County hotel industry include two hotels hit with foreclosures – the St. Regis in Dana Point and the Wyndham in Costa Mesa – and 14 others going into default.
Maguire sells O.C. towers at half off
Los Angeles office landlord Maguire Properties has sold the Griffin Towers in south Santa Ana for $90 million -- less than half the building's estimated $204 million value when the company acquired it three years ago, according to a report by The Wall Street Journal.
The article said that the property is being purchased by a joint venture of between the New York private-equity firm Angelo, Gordon & Co. and Lincoln Property Co.
The deal to sell the two 14-story towers is just the latest fallout from Maguire's 2007 purchase of a $2.9 billion portfolio that included 30 buildings at 21 Orange County sites.
Last June, Maguire took a $73 million loss on an Irvine property slated to be headquarters for one defunct mortgage lender and a $40 million loss on a three-building complex in Orange that was another defunct lender's headquarters. In August, Maguire announced it would give one Los Angeles property and six in Orange County back to its lenders because rental income wasn't paying the mortgages.
At the time Maguire acquired Griffin Towers, experts told the Register its estimated value was $203,781,000. Located in Santa Ana's South Coast Metro district on Hutton Centre Drive, the property consists of nearly 544,000 square feet of "Class A" office space.
"The history of the Griffin Towers deal shines light on the top-of-the-market acquisition that Mr. Maguire made back in 2007," the Journal article said.
"Orange County got slammed by soaring vacancies in the wake of the subprime crisis as many mortgage companies went dark, sending rents down and vacancies soaring in the region."
Commercial bubble threatens recovery, panel says
The bursting real estate bubble could threaten the fragile banking system's recovery, the Congressional Oversight Panel chaired by Harvard Law School professor Elizabeth Warren warned recently.
"Over the next few years, a wave of commercial real estate loan failures could threaten America's already-weakened financial system," the report said.
The report states that about $1.4 trillion in commercial real estate loans will mature between 2010 and 2014.
Nearly half of those loans are "underwater," meaning that the borrower owes more than the property is worth. Commercial property values have fallen more than 40 percent since the beginning of 2007, the report said. Increased vacancy rates and falling rents "have exerted a powerful downward pressure on the value of commercial properties.
The report said that vacancy rates now range from 8 percent for apartments to 18 percent for office buildings. Rents have declined 40 percent for office space and 33 percent for retail space.
The largest commercial real estate loan losses are projected for 2011 and beyond, the report said. Losses at banks alone could range as high as $200 billion to $300 billion.
The panel identified a number of possible interventions to contain the problem until the commercial markets recover:
Warren warned against government inaction.
"When commercial properties fail, the result is a downward spiral of economic contraction; job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities," she said.
