Bloomberg News

Ritz-Carlton Loan at Risk of Default as Business Travel Declines

January 27, 2012

Jan. 26 (Bloomberg) -- A $170.6 million loan backed by four Ritz-Carlton hotels in New York and Washington may be at risk of default as a drop in business travel to the luxury properties cut into their owners’ ability to pay the debt.

The loan was put on the watch list of master servicer Wells Fargo Bank Minnesota this month, Morningstar Inc. said.

“We consider this loan a moderate to high risk,” Horsham, Pennsylvania-based Morningstar’s structured credit ratings division said in a report. Reasons include the properties’ “inability to generate sufficient net cash flow, the weak outlook for the lodging sector and the forecasted decreases in revenue per available room,” Morningstar said.

While two of the properties had positive net cash flow as of June 30, the Ritz-Carlton Battery Park in Manhattan and the Ritz-Carlton in Washington’s Georgetown area had negative cash flow. The hotels were built or renovated from 2000 to 2003 for $820 million, or $673,235 per room, Morningstar said.

The borrowers include Millennium Partners, ERGO Versicherungsgruppe AG and Provinzial Rheinland Lebensversicherung AG, according to Morningstar. Marriott International Inc. owns the Ritz-Carlton brand.

Christoph Hartmann, a spokesman for Provinzial, and Alexandra Klemme, an Ergo spokeswoman, declined to comment. A message left on Millennium Partners’ voice mail wasn’t immediately returned.

--Editors: Christine Maurus, Daniel Taub

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net


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