Another Hartford area hotel has fallen into financial disarray.
The former Sheraton Hotel in East Hartford, which sits just across the Connecticut River from downtown Hartford at 100 East River Dr., is facing foreclosure. Its owners have failed to make payments for more than a year on a $15 million mortgage, according to Trepp LLC, a New York-based research firm that tracks commercial mortgage-backed securities.
The property, which lost its Sheraton flag in 2011 and now operates as an independent entity called Hartford Plaza Hotel, is well underwater, meaning its owners, a limited partnership group named PEHI, owe more on the mortgage than the property is worth.
The 215-room hotel was recently valued at $4 million, while the debt owed on the property is $15 million, according to Trepp. In 2007, the hotel was valued at $20.2 million.
The hotel is not generating enough income to cover the debt, according to Trepp.
In recent weeks, a new management team, Florida-based Driftwood Hospitality Management, was hired to take over running the day-to-day operations of the hotel.
Alex Francis, the hotel's general manager, confirmed that the new management team started work in late February, but he declined to comment on the hotel's financial state.
According to Trepp, the owners of the property have failed to make mortgage payments since at least April 2011, and the holders of the property's securitized mortgage are pursuing a dual track foreclosure and note sale.
PEHI Limited Partnership bought the property in 1999 for $6.3 million, city records show.
The Hartford Plaza Hotel is the fourth significant hotel in or near downtown Hartford to face financial difficulties in recent years.
In 2010, the owners of the former Crowne Plaza hotel just north of downtown Hartford filed for bankruptcy, and subsequently lost that property to foreclosure. The hotel now has a Ramada flag and was recently taken over by a new ownership group called Magilink, which has promised to make significant renovations to the property.
The 124-room Goodwin Hotel, owned by Northland Investment Corp., closed its doors in 2008 after suffering millions of dollars in losses.
The Hilton Hotel in downtown Hartford had to be bailed out by the city in 2010, after nearly being forced to close its doors. The Hartford city council provided that hotel, owned by The Waterford Group, with tax breaks and helped it secure a $7 million loan from the federal Department of Housing and Urban Development to stay afloat.
Suzanne Hopgood, president of the Hopgood Group, a hotel and restaurant consulting firm in Hartford, said many foreclosures involving hotels in recent years have been a result of financing issues.
Properties that took on too much debt before the economic downturn in 2008, are now finding that they owe more on their mortgage than their property is currently worth.
Lower occupancy rates and an overall poor real estate market have forced many commercial values to plummet in recent years, especially in or near downtown Hartford.
Even so, Hopgood said the hospitality industry in Greater Hartford is showing signs of recovery.
Two of her Hartford clients, which include a hotel and restaurant, reported 8 to 9 percent growth in 2011, and are continuing to see positive indicators so far this year, Hopgood said.
Both corporate travel and convention business are starting to pick up after falling off dramatically since 2008, she added.
The numbers appear to back claim that up.
According to Smith Travel Research, Hartford hotels were 55 percent full during the first two months of this year, compared to 54.3 percent full during the same time period last year. In 2009, during the depths of the downturn, Hartford hotels were only 47 percent full during January and February.
Meanwhile, occupancy rates for all of 2011 for Hartford hotels stood at 58.9 percent, compared 47.7 percent in 2010, Smith Travel Research data shows.
"Things are definitely improving," said Michael Van Parys, president of the Greater Hartford Convention & Visitors Bureau. "Business has been coming back in the last year."
Parys said the Connecticut Convention Center has had a "consistent flow of groups," in the last 12 months, and business has been more active than the previous two years.
Another positive sign, Parys says, is that some hotels have been doing renovations, including the Hilton and Hartford Marriot hotels, which is a sign they are optimistic about the future since they are willing to invest capital.
PKF Hospitality Research has forecast occupancy rates for Greater Hartford to reach 60.1 percent this year, while revenue per available room, or RevPAR, is expected to climb to $59.75, compared to $56.67 in 2011. RevPAR is a key industry metric created by combining the average daily rate, the number of available rooms and the occupancy rate.
Meanwhile, the average daily rate for Greater Hartford hotels is expected to climb to $99.47 this year, compared to $96.12 in 2011.
"I think it's a very positive outlook," Parys said.