CHICAGO — The bondholder-owned St. Louis convention center hotel complex is back on the selling block with consultants lining up potential bidders in hopes of closing on a deal next year, the bond trustee reported in an investor notice.
Investors who hold $98 million of bonds took ownership of the complex in 2009 after a 2008 default.
UMB Bank & Trust NA put on hold last year a sale of the smaller of the two hotels that make up the complex because of poor real estate market values, opting to wait with the hope of recouping more for bondholders in a recovering market.
In its latest notice, UMB reported that its consultant, Jones Lang LaSalle Hotels, has contacted a number of potential buyers and signed confidentiality agreements to share information on the hotel.
“It is anticipated that a competitive bidding process will occur and that the hotel will be sold to the highest or best bidder,” the notice read. “It is also anticipated that a closing of such sale will occur at some time in 2012.”
Proceeds would eventually be distributed to holders of the $98 million issue sold in 2000 through the St. Louis Industrial Development Authority, though UMB cautioned that it was too early to estimate how much bondholders stand to recoup or when the funds would be distributed.
Bondholders took ownership of the 918-room Renaissance Grand Hotel and 165-room Suites that are operated by Marriott Corp. in 2009 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.
In an attempt to recoup some of their investment, since the hotels were still not generating sufficient revenue to cover debt service, bondholders began to consider selling the smaller Lennox Suites component of the $266 million downtown complex and the trustee hired Jones Lang to manage the marketing and possible sale.
UMB Bank put that sale on hold last year after reviewing the bids. Both hotels are now for sale.
Bondholders were told, “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.”
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 along with competition from other new or improved hotels has further hampered the complex’s performance. Moody’s Investors Service in 2009 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 authority sold the senior-lien bonds as part of a complicated financing that included public funding to acquire and renovate the hotels.
In a development that has bolstered the value of the hotel, the trustee also reported that the complex’s payments to the city in lieu of taxes between 2012 and 2022 will total about $23.8 million, down from $41.2 million under the original agreement.
The reduction was made possible by the city’s refinancing of a loan from the Department of Housing and Urban Development.