CHICAGO - Consultants hired by bondholders who now own the St. Louis convention center hotel complex are exploring the sale of the smaller Suites Hotel building as the complex faces a gloomy forecast for the rest of the year.
The consultants, from Jones Lang LaSalle Hotels, updated bondholders in a teleconference call on first-quarter results and the hotels' prospects for the remainder of the year, according to a notice posted recently by trustee UMB NA on the site it maintains for holders of the $98 million of hotel convention center revenue bonds.
Jones Lang officials have taken a "preliminary look at separating and selling the Suites building," have held preliminary discussions with hotel operator Marriott Corp. on the subject, and plan to "investigate further" that option, according to the notice. The complex is made up of the 918-room Renaissance Grand and the smaller 165-room Suites across the street.
Jones Lang officials reported that the hotels outperformed budgeted expectations for the first quarter of the year, or third fiscal quarter, but that the prospects for the rest of the year are less positive. "The remainder of 2009 is not expected to be as favorable as the first quarter as a result of weak group bookings and low transient demand," the report warns.
Revenues will fall $10 million from budgeted levels in 2009. "Cost containment continues to be a primary objective at this time; however, it will be more difficult to find additional, future expense reductions," the notice read.
Hotel union employees agreed to suspensions in pension contributions and in 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.
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.
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. Jones Lang has been charged with coming up with operational and financial recommendations for the facilities that remain open.
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.
