2.25.15: CMBS Lenders Beginning to Differentiate Among Oil-Related Markets

We recently closed and continue to actively work on new CMBS conduit hospitality loans in Corpus Christi, Texas. Hotel owners are puzzled by all the concern about the potential decline in room demand as owners simply are not seeing it. January and February 2015 were both up in terms of revenue over the comparable 2014 periods. Nearly all project the first quarter of 2015 will be an improvement over 2014.

Why is there no effect?

One Corpus Christi hotel owner put it this way: “At this point there is only limited data to support a thesis that crude oil extraction, commonly referred to as “exploration and production,” will be see a disproportionate downward trend in hotel room sales in contrast to transportation, refining and refined product storage. Oddly, the low price of oil may create an increase in the consumption of gasoline in the United States, straining refining capacity. According to the most recent Refinery Utilization and Capacity report released on January 29, 2015, refineries are running at 92% of capacity in Corpus Christi, with the Texas Gulf Coast operating at 94.4%. These levels are near the peaks experienced in 2006, before the financial crisis, and suggest that expansions and other projects to at least marginally increase production will be pursued. In addition, dollars will be spent to ensure refineries stay on line as it has also been reported that refining profitability is up. So I see no impact and possibly a positive impact from lower oil prices on my hotel business.”

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This entry was posted in CMBS, CMBS Conduit Loans, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , , . Bookmark the permalink.

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