CHICAGO — Six potential buyers were invited to participate in a second round of bidding that could lead to the sale of the smaller of two downtown St. Louis convention center hotels owned by bondholders.
Bondholders took ownership of the Renaissance Grand Hotel and Suites earlier this year after foreclosure proceedings. The proceedings followed a default last 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.
In an attempt to recoup some of their investment, since the hotels are still failing to generate sufficient revenue to cover debt service, bondholders have been 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.
The bondholders' consultant, Jones Lang LaSalle Hotels, reported in a bondholders' notice last week that it received 11 bids by a Dec. 9 deadline. The consultants said they were pleased with the depth of bidders and quality of bids, and that "due to the competitive nature of the bids, it was determined that a second round of bidding be conducted," the notice posted by trustee UMB Bank NA read.
Six groups were invited to participate in the second round. Though the notice does not identify the second-round bidders, it describes one as being a national hotel brand, two being private-equity funds with experience in the hospitality industry, and three as being hotel owner-operators with experience managing major brands.
The bidding deadline is expected to be set sometime during the week of Jan. 18. Jones Lang is expected soon after the deadline to make a recommendation to bondholders on the potential sale.
The latest bondholder update also included information on the St. Louis Board of Aldermen's approval on Dec. 11 of legislation that could boost the hotels' financial viability and provide some relief from an upcoming tax-related payment owed to the city.
Under the bill, the hotels would become part of a community improvement district and a transportation development district. It would allow them to tack an additional fee onto room rates, generating an estimated $600,000 annually. The legislation also allows the hotels to make installment payments on the $3.35 million payment in lieu of taxes owed the city at the end of the year and another $3.35 million at the end of 2010. It would allow the hotels to make payments through Oct. 31, 2011.
The hotels are under pressure to come up with more cash to manage operations through the winter. Occupancy for the year through Sept. 11 at the Grand declined to 52.3 % from 66.6 % last year while room rates declined to $120.26 from $123.24, resulting in a loss of $171,051, compared to a profit of $3.1 million a year ago. It traditionally has seen significant operating losses between December and March.
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 earlier this 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 that serves the city's convention center.