CHICAGO — The managers of the bondholder-owned St. Louis convention center hotel complex presented a more upbeat revenue forecast for the facilities in a financial update last week, according to a new investor notice.
Bondholders in a conference call last week were also updated on trustee UMB Bank NA’s decision, after reviewing bids for the smaller of the two hotels that make up the $266 million downtown complex, to put off a proposed sale.
Bondholders were told that “in light of improving values for hotel properties in general, the trustee had decided that it would not be in the best interests of the Series A holders to pursue a sale of the Lennox Suites as a separate property at this time,” said the notice at conventionhotelbondholders.com. “The trustee … remains open to the possibility of receiving one or more acceptable bids for the sale of the Lennox Suites at some time in the future.”
Bondholders took ownership of the 918-room Renaissance Grand Hotel and 165-room Suites that are operated by Marriott Corp. last year after foreclosure proceedings. The proceedings followed a default by the obligated group in December 2008 on debt-service payments for $98 million of bonds issued in 2000.
Robert Bray, general manager of the hotels, reported to bondholders that occupancy rates for the first two quarters — which were at 47.1% and 58.8%, respectively — fell short of a forecasted 59.6% in the first quarter but marked an improvement over the 47.9% seen in the second quarter. The rates also were higher than budgeted levels of 45.5% in the first quarter and 55.9% in the second. Marriott projects occupancy rates of 61.3% in the third quarter and 45% in the fourth.
Bookings for 2011 are ahead of last year’s pace by 8,223 nights, according to Bray. The average room rate this year is now projected to increase to $119.24, up from an original budget estimate of $113.39. The hotels are expected to generate revenues of $37.3 million this year, up from a budgeted estimate of $34.6 million with net operating loss of $262,000. The original budget estimate projected a $1.36 million loss.
In an attempt to recoup some of their investment, since the hotels are still failing to generate sufficient revenue to cover debt service, bondholders began exploring the possibility of selling the Lennox Suites last year. The trustee hired Jones Lang LaSalle Hotels to manage the marketing and possible sale, in addition to reviewing operations and recommending improvements to make the hotels more profitable.
A total of 50 parties expressed an interest and 11 bidders eventually participated in a first round of bidding. Six groups were invited to participate in a second round of bidding and officials later narrowed the field to two. The terms and price of the planned transaction were not disclosed.
The complex has struggled since its 2003 opening. The recession’s negative impact on tourism and competition from other new or improved hotels have further hampered the complex’s performance.
Moody’s Investors Service last year downgraded the hotel bonds to Ca from Caa2, warning 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 bonds in 2000 as part of a complicated financing that included public funding to acquire and renovate the hotels.