Sunday, August 2, 2009

New Downtown Stockton Hotel to Close

The Lexington Hotel is set to close next week due to foreclosure proceedings after being open less than 20 months.

This is a shame, because it may be the nicest hotel in the Valley (not that the competition for that honor is real tough). They say the hotel is viable and I think that is credible. The problem is the condos. The top 3 floors of the 7 story structure are condos, not the hotel. Not a single condo was sold. Zip. And all the extra debt to build those luxury lofts is putting them under. They should have stopped building after 4 floors!

In a grand statement of how screwed up finance and real estate lending was a few years ago, designing the structure to be nearly 1/2 condos was key to financing. There was zero market for those condos even during the boom, but there was a tremendous appetite for lending to residential development.

I suppose it could be worse. In Fort Myers, FL (which now has higher foreclosure rates than Stockton), this 32 story condominium high-rise has only 1 tenant.

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