A Boston hotel project failed to make an interest payment of $297,600 on March 1 to bondholders of Series 2002 Crosstown Center Project subordinate revenue bonds.
The Boston Industrial Development Finance Authority privately placed $35.6 million of tax-exempt senior revenue bonds and $7.7 million of tax-exempt subordinate bonds in 2002. They are uninsured term bonds that mature Sept. 1, 2035. BIDFA is a conduit issuer of the bonds.
The bond proceeds helped finance a 175-room Hampton Inn and Suites Hotel and a 650-space parking garage that opened in 2004 next to the Boston Medical Center. The hotel’s revenues have been underperforming, with 2009 revenue per available room rates falling 30% below expectations, according to a Moody’s Investors Service report on the credit, dated March 24, 2010.
“The hotel market is soft, everywhere in the U.S.” said Frank Tocci, deputy director for financial services for the Boston Redevelopment Authority, which oversees BIDFA.
Moody’s rates the senior bonds Caa3. The subordinate debt does not carry a rating. The bonds are secured by hotel and parking revenue and a morgtage on the facilities. The BRA owns the land.
Debt-service reserve funds and other funds have been covering interest payments on the debt. This is the first instance where investors have not received an interest payment on the bonds.
The borrowers are the developers of the hotel-garage project, Crosstown Developers LLC and CJ Crosstown LLC. The Corcoran Jennison Co. manages CJ Crosstown. Corcoran Jennison referred inquiries about the default to its bond trustee, Wells Fargo Bank NA.
Wells Fargo and the borrowers have been in negotiations toward a forbearance agreement since Oct. 15, according to a March 1 material event notice posted to the Municipal Securities Rulemaking Board’s EMMA website.
The developers met a $1.09 million March 1 interest payment on the senior bonds by tapping into reserve funds. After the March 1 payment, the credit now has $1.34 million remaining in its senior debt-service reserve fund and $114,038 left in the subordinate fund. The next interest payment is due Sept. 1.