CHICAGO — The potential sale of the smaller of two hotels that make up the bondholder-owned St. Louis convention center complex is advancing with the field of possible buyers now narrowed down to two.
Final negotiations are expected to continue through mid-month after which the consultants managing the bidding process are expected to hold a conference call for bondholders to discuss their recommendation on the “highest and best bid,” according to a notice posted this week at http://conventionhotelbondholders.com/.
Bondholders took ownership of the Renaissance Grand Hotel and Suites last year after foreclosure proceedings. The proceedings followed a default in December 2008 on debt-service payments on the $98 million 2000 issue by the hotel developer and lead member of the obligated group, Historic Restoration Inc.
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 sale of the 165-room Lennox Suites piece of the complex that also includes the larger, 918-room Grand. The complex is managed by Marriott Corp.
Jones Lang LaSalle Hotels — hired by trustee UMB Bank NA to recommend operational improvements at the hotels and to manage the possible sale — first began marketing the hotel for sale last September. A total of 50 parties expressed an interest and 11 bidders eventually participated in a first round of bidding. Due to the competitive nature of the bids, a second round of bidding was held, with six groups invited to participate by the Jan. 20 deadline.
“As a result of the second round of bids, two bidders have emerged as the leading candidates. In order to further refine their bids, the bidders have requested a further, short due diligence period,” the notice read. “In addition, JLLH is in the process of conducting meetings in order to clarify and finalize all terms of the final bids that have been submitted.”
The potential buyers and possible terms and price of the transaction were not disclosed. A previous notice reported that the second-round bidders included a national hotel brand, two private-equity funds with experience in the hospitality industry, and three hotel owner-operators with experience managing major brands.
The latest notice reported that the hotels saw an operating profit before debt service of $190,897 last year compared to $3.9 million in 2008. “The operating profit was achieved after substantial expense reductions initiated by JLLH and Marriott,” it reads. Marriott expects an operating shortfall of $1.4 million in 2010 before debt service.
The hotel complex has struggled since its 2003 opening and little improvement appears on the horizon due to the downturn in tourism and competition from other nearby new or improved hotels. 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 revenue bonds in 2000 as part of a complicated financing scheme that included public funding to acquire and renovate the $266 million hotel complex.