CHICAGO — The potential sale of the smaller of two facilities that make up the bondholder-owned St. Louis convention center hotel complex is on hold following a review of pending bids and in light of the generally improving economic conditions, according to a bondholder notice published last week.
A conference call for investors is scheduled for July 15 to discuss the hotels’ recent operating performance and projected results, according to the notice posted by the bond trustee UMB Bank NA at
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 bond 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 possibility of selling the 165-room Lennox Suites piece of the complex, which also includes the larger, 918-room Grand.
The complex is managed by Marriott Corp. 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.
Jones Lang 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. Officials later narrowed the field to two.
“After reviewing the bids, and in light of generally improving economic conditions, the trustee has decided that it would not be in the best interests” to pursue a sale, the notice read. “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, and will notify the Series A holders if an appropriate bid is received.”
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.
A notice earlier this year 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 Jones Lang and Marriott. Marriott had reported earlier this year that it expects an operating shortfall of $1.4 million in 2010 before debt service.
The hotels closed out the first quarter of 2010 with a 47% occupancy rate, up from a projected level of 45.5% but down from last year’s first-quarter rate of 49.5%, according to the latest results posted on the website.
The hotels generated $7.6 million in revenue, up from a budgeted level of $7.1 million and last year’s level of $7.6 million. After expenses, they saw a net loss in profit of nearly $900,000, a figure on par with last year and lower than the projected amount of negative $1.1 million.
The hotel complex has struggled since its 2003 opening. The recession’s negative impact on tourism and competition from other nearby 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 revenue bonds in 2000 as part of a complicated financing scheme that included public funding to acquire and renovate the $266 million hotel complex.
