CHICAGO - Bondholders who took control of the St. Louis convention center hotel complex earlier this year have hired a real estate consultant to explore the sale of the smaller of the two hotels as revenues continue to fall short of budgeted projections.
The trustee, UMB Bank NA, reported in a bondholder notice this week that Convention Center Hotels Acquisition Co. had retained Jones Lang LaSalle Americas Inc. in an exclusive 11-month contract to explore the sale.
The acquisition group was set up on behalf of bondholders after they took ownership of the hotels in February following the obligated group's default on interest payments tied to $98 million in bonds. It did not set a price and will consider offers but is not obligated to sell the facility.
The consultant is affiliated with Jones Lang LaSalle Hotels, which recently completed its contract to review the hotels' operations and come up with recommendations to benefit bondholders' interest. The possible sale of the 165-room Lennox Suites Tower was one of the recommendations.
The notice to bondholders also reported that DFC Group Inc. had been hired by the trustee to work with St. Louis and other governmental units "to achieve refinancing and other benefits for the hotels."
The firm's principal, Steven Stogel, has worked on and off in recent years to try to find equity investors to support a debt restructuring or investment in the hotels.
The hotels' operator, Marriott Corp., is proceeding with exterior repairs to the tower that suffered damage from high winds and storms in early June. The cost is covered by insurance, with the exception of a $25,000 deductible. The hotel complex is made up of the 918-room Renaissance Grand and the smaller Suites tower.
Bondholders took ownership of the facilities earlier this year after foreclosure proceedings. The proceedings followed a default in December on debt service payments on the $98 million 2000 issue by the hotel developer and lead member of the obligated group, Historic Restoration Inc.
The hotels posted a profit for the first half of the year but it is below budget expectations, and prospects for the remainder of the year are dim.
Hotel union employees agreed to suspensions in pension contributions and previously approved wage increases to save $200,000, but the trustee advised against that deal because the union wanted any future hotel owner to agree to recognize the collective bargaining agreement. UMB is asking the employees to agree to a clause that instead simply requests such recognition of any future owner.
Moody's Investors Service earlier this year downgraded the credit to Ca from Caa2, warning that it is unlikely bondholders can recoup their full investment even in an eventual sale of the facilities.
The St. Louis Industrial Development Authority issued the senior-lien revenue bonds in 2000 as part of a complicated financing scheme that included public funding to acquire and renovate the $266 million hotel complex that serves the city's convention center.
The uninsured bonds initially garnered a low investment-grade rating from Moody's but fell into junk-bond territory as revenues failed to meet original projections after the hotels opened in 2003.
