CHICAGO — A majority of St. Louis convention center hotel bondholders who took ownership of the properties four years ago struck a deal to sell the larger of the complex's two hotels for $26 million, though it hinges on the buyer striking new agreements with the hotel operator, city, and state.
Holders of $98 million of bonds took ownership of the hotel complex in downtown St. Louis in 2009 after foreclosure proceedings following the obligated group's default in 2008. Trustee UMB Bank NA hired Jones Lang LaSalle Americas Inc. and pursued a sale of the smaller of the two hotels but in 2010 pulled back because of poor real estate values.
The trustee resurrected sale efforts in 2011 and last year reported that more than 50 potential buyers had expressed an interest in buying the hotels. After reviewing the offers, the trustee and a majority of bondholders opted to pursue separate sales for the two hotels and entered into a letter of intent for each.
The trustee reported in a new notice that the company formed to act as owner of the hotels — Convention Center Hotel Acquisition Co. — has entered into a purchase and sale agreement with 800 Washington LLC — formed by investors to purchase the hotel. Potomac, Md.-based Haberhill LLC will act as the operating partner.
Assets to be sold include the land and buildings comprising the main hotel, certain space leases for shops on the ground floor, and the current balance of a trustee-held account used exclusively to pay for capital improvements at the main hotel. Other trust held accounts will be retained by the trustee for the benefit of the bondholders and no assets tied to the smaller of the hotels, known as the Suites, are included in the transaction.
"The closing is dependent upon a number of conditions .including, among other things, the ability of the buyer to enter into a new management agreement with Marriott, a new redevelopment agreement with the city of St. Louis, and a new parking garage lease with an instrumentality of the state of Missouri," the notice read. Marriott franchises the Renaissance brand that is on the main hotel.
The buyer will deposit $1.25 million into an escrow as part of the sale agreement. Bondholders would retain the funds if the buyer breaches the sale agreement and fails to close. The closing would be scheduled within 10 business days after all conditions are met and the trustee said that's not expected to occur until at least the latter half of December.
Unpaid trustee fees, legal fees, a Jones Lang broker fee, and other unpaid fees connected to the sale of the hotel would be paid from sale proceeds and some proceeds may be "temporarily withheld to assure payment of any future obligations," the notice reported.
"It is not possible at this time to give any assurances that a closing of the sale of the main hotel will occur or to give any estimate of any distribution that may be made to bondholders," the notice cautioned.
The trustee's letter of intent with a buyer for the smaller Suites hotel has expired but negotiations are ongoing. The trustee intends to open negotiations to other potential buyers if an agreement is not reached in the "very near term," the notice read.
The St. Louis Industrial Development Authority issued $98 million of senior lien revenue bonds in 2000 as part of a complicated financing that included public funding to acquire and renovate the hotels. The project carried a total price tag of $266 million. The hotels have struggled since opening in 2003. The recession's negative impact on tourism, along with competition from other new or improved hotels, has further hampered the complex's performance.
Bondholders took ownership of the 918-room Renaissance Grand Hotel and the 165-room Lennox Suites that are operated by Marriott Corp. in 2009 after the obligated group defaulted in December 2008 on debt service payments.
The bonds traded last month at 22 cents on the dollar, down from trades over the summer of 35 cents on the dollar.