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Absolutely possible...makes perfect sense.
What did you pay when you got in this?
The preferred stock issues could be dealt with in a two-step approach upon closing of the sale transaction in your scenario.
The company could announce payment of all accumulated, undeclared preferred stock dividends in cash and redemption of preferred shares in either cash or new ARC Hospitality preferred shares.
Public shareholders would, of course, take the money and run. PFD Holdings, LLC, which owns at least 58.8 percent of the outstanding shares, would opt for ARC Hospitality preferred shares.
Why?
PFD Holdings, LLC and any investor who bought at huge discounts from par will pay capital gains tax. [I no longer have this issue. I sold my taxable holdings and bought a like amount in my IRA about 18 months ago.] By exchanging WGCBP and WGCCP for ARC Hospitality preferred shares, PFD Holdings, LLC would be able to defer the gain until redeemed (unless exchanged for something else down the line). In addition, the new preferred stock will generate a much greater cash return on investment on PFD's cost basis.
Another option would be for PFD to take the entire liquidation value in new preferred.
Then again, what do I know?
I think h_man_investor's walk down of implied value is a legitimate scenario. I also agree that the issuance of new pref shares from Whitehall's seller financing is a possibility, but ARC would be very motivated to pay off this seller financing as quickly as possible since it would be dilutive to their dividend thresholds(they need to distribute dividends of ~6.5% versus the coupon on the pref in one of the SEC filings which is something like 7.5% - they will want to take this out as quickly as possible with cheaper equity dollars). My scenario analysis and implied share value is as follows (assuming a roll-forward to 09/30/14):
Scenario A - deal with ARC falls through. You can nibble around the edges on price, but the PSA that has been entered into at $1.925 billion has established that there is equity beyond the debt and preferred equity liabilities on all 126 hotel assets. That said, all of the accumulated dividends must be brought current for Whitehall to receive any equity distributions, therefore I set a floor value at the accrued dividend amount, or ~$15/share.
Scenario B - h_man_investor's scorched earth scenario. The 20 hotel pool serves as collateral for the Trust Preferred debt liability and only proceeds that flow to the Company (3% of Senior Mezz LLC and 100% of the 20 hotel Pool) are used to pay off accumulated dividends and release the dividend blocker resulting from the suspended dividends. Value ~$22/share.
Scenario C - Same as Scenario B only now accounting for roughly $10 million of operating cash on-hand and repayment of the ~$46 million of net proceeds from asset sales that were 100% owned by the Company and were voluntarily utilized to paydown the prior GE senior debt proceeds - this is super relevant because the Company is now only receiving 3% of the benefit from that (which would have otherwise flowed 100% to the Company). Value ~$32/share.
Scenario D - The Trust Preferred, Preferred B & C, and Accumulated preferred dividends are treated as ENTITY LEVEL liabilities and are therefore serviced with total pro rata net proceeds prior to equity distributions upstream. So yes, WNT Holdings does now own 97% of Senior Mezz LLC, but Senior Mezz LLC is encumbered by mortgage, mezzanine, and preferred equity liabilities and those liabilities need to be serviced before any common equity distributions can be made. Value is par plus accrued or ~$40/share.
Not really stealing. They were given a warrant to purchase 106 hotels at what I assumed is the cost of debt. They got this in return for forgiving debt and a cash contribution totaling $735m.
It's a fact that around $1.6b of the purchase price is only 3% owned by Grace (with $976m in debt).
The other 20 hotels, debt and mezz are held by Grace.
Your theory implies that Goldman is going to keep the remaining portion of the public's share of $2bil for itself. I think that it is one thing to delay paying us for many years, but it is much more serious to cash us out at less than we are owed and keep it for themselves. In America, this is called stealing.
I just find this intriguing and want to share - not anything that anybody doesn't already know:
Section 5.(B)(6)(b) of the Amended and Restated Charter of W2007 Grace Acquisition I, Inc., Voting Rights (with respect to either preferred class of stock), states:
"If and whenever distributions on any shares of Series B Preferred Stock or class of Parity Stock shall be in arrears for six or more quarterly periods (whether or not consecutive), the numbers of directors then constituting the Board of Directors shall be increased by two and the holders of such shares of Series B Preferred Stock...will be entitled to vote for the election of the two additional directors of the Corporation at any annual meeting of stockholders or at a special meeting of the holders of the Series B Preferred Stock and of the Voting Preferred Stock called for that purpose. The Corporation must call such special meeting upon the request of any holder of record of shares of Series B Preferred Stock..."
Why doesn't a holder of record request a special meeting to elect two board members? Per the Charter, the Corporation must oblige otherwise they are in breach of contract. There is no excuse, they simply must oblige per the letter of the governing document. After the last meeting was called and a quorum was found not to be present, they simply have not met their contractual duty (unless no holder of record has requested a special meeting).
Ok great..you're on record.
TY
My prediction:
-60% of existing shares replaced with new ARC preferreds that are mandatory redeemed over 4 years
- $13.50 payment on remaining shares
- no accrued interest paid
This puts a recovery value at a little over $21/ share.
So to answer your question, I'm not buying or selling and hope that I'm wrong.
There is potentially upside to $28/share depending on who paid the principal balance down for the April refi.
You're smarter than that. We both know that they aren't getting $1.425b in cash:
Represents an adjustment for pro forma capital structure, see table below.
Face Amount
(in thousands) of Instrument
Mortgage debt assumed by ARC Hospitality in this transaction $ 865,000
Mortgage debt assumed by ARC Hospitality in this transaction 111,000
Class A Units 451,000
Common equity 498,000
Total $ 1,925,000
http://www.sec.gov/Archives/edgar/data/1583077/000114420414034823/v380013_ex99-4.htm
Real Estate Sale Agreement
[...]
2. PURCHASE PRICE. The total consideration to be paid by Purchaser to or on behalf of Sellers for the Property is $1,925,000,000.00 (subject to adjustment pursuant to the terms hereof), consisting of (i) $1,474,000,000.00 in cash (the “Cash Consideration”)...
[...]
http://www.sec.gov/Archives/edgar/data/1583077/000114420414034823/v380013_ex10-1.htm
Unfortunately names don't really matter much and it's ownership that matters. Grace I doesn't own any of Whitehall or Goldman Sachs and only a sliver of 106 hotels of those in your reply.
Additionally, they are not paying $1.45b cash either. In fact they are only paying $498mm in cash and are assuming $976mm in mortgage debt.
Answer: No mention of a shareholder vote.
In addition, ARC Hospitality submitted a pro forma balance sheet with notes. The amount of $101.206 million is shown in the Pro Forma Adjustment column, which results in $0 outstanding for Preferred Stock.
http://www.sec.gov/Archives/edgar/data/1583077/000114420414034823/v380013_ex99-4.htm
Maybe I should have used the word "sellers".
The "Sellers" are W2007 Equity Inns Realty, LLC, W2007 Equity Inns Realty, L.P., W2007 EQI Urbana Partnership, L.P., W2007 EQI Seattle Partnership, L.P., W2007 EQI Savannah 2 Partnership, L.P., W2007 EQI Rio Rancho Partnership, L.P., W2007 EQI Orlando Partnership, L.P., W2007 EQI Orlando 2 Partnership, L.P., W2007 EQI Naperville Partnership, L.P., W2007 EQI Milford Corporation, W2007 EQI Louisville Partnership, L.P., W2007 EQI Knoxville Partnership, L.P., W2007 EQI Jacksonville Partnership I, L.P., W2007 EQI Indianapolis Partnership, L.P., W2007 EQI Houston Partnership, L.P., W2007 EQI HI Austin Partnership, L.P., W2007 EQI East Lansing Partnership, L.P., W2007 EQI Dalton Partnership, L.P., W2007 EQI College Station Partnership, L.P., W2007 EQI Carlsbad Partnership, L.P., W2007 EQI Augusta Partnership, L.P. and W2007 EQI Asheville Partnership, L.P.
So these "Sellers", in which each legal entity starts with a "W2007", will one way or another receive $1.474 billion in cash for the real estate assets.
In any case, W2007 Grace I, LLC is indirectly owned by various Whitehall Real Estate Funds, an investment fund controlled by The Goldman Sachs.
Due to origination of the Deutsche Bank Loan, the ownership of 106 properties was transferred to WNT Holdings, LLC, which is also indirectly owned by Whitehall.
In a nutshell, entities with a "W2007", "Whitehall" or "Goldman Sachs" in the name will be seeing some cash flow.
FYI - it wasn't the first half of the quote I was focused on...it was the second half "the liability is about 50% higher than your stated".
FYI - the value that is mentioned ($17/$17.50) as being carried on the balance sheet is simply the mark-to-market at that point in time (03/31). No other magic behind it.
Simply false. W2007 is receiving 3% of the difference between the allocated sales price of the 106 purchase option hotels less the $976mm mortgage, the allocated sales price of the 20 hotels delivered free and clear, and the prorata amount of $451mm in preferreds ARC is issuing.
Additionally, the preferreds are carried at $17.50 & $17.00 so the liability is about 50% higher than your stated.
The securitized amount is $865 million.
EQTY 2014-INNS
Joint securitization by Deutsche Bank and Goldman Sachs.
Do you have the name of the CMBS for the 106 hotels? Thanks in advance.
In reading through the FAQ again very literally, it's clear that the Company owns 3% of the Equity in the 106 hotels and 100% of the Equity in 20 hotels. There are three critical points here that will determine implied pref value:
1) In order for WNT to receive any common equity distributions (it owns 97% of senior mezz llc), the prefs have to be brought current. Which set of sources do those economics come from - proceeds on the 106 hotels or proceeds on the 20 hotels?
2) What is the collateral package for the $50 million Junior Subordinated Debt (which is a Trust Preferred security)?
3) Overarching all of this, how does Goldman allocate value to each individual hotel?
In any event, my rough math suggests that there is absolutely value beyond the liquidation preference ($25/share),and with a literal read of the charter, I still believe the prefs will be brought current with the pro rata portion of equity from the 106 hotels and 20 hotels, which would leave enough proceeds to redeem the prefs at $25/share. So I think fair value is par plus accrued.
I guess we'll see. Like I said, part of the consideration is newly issued preferreds.
H-Man, it does not make sense that ARC would have anything to do with our preferreds. You can take the purchase price then subtract away the assumed debt amounts (along with any other acquired liabilities). ARC can not assume the preferreds if this is an asset purchase as it definitely appears. So, they have to provide some type of funds on their own and/or there needs to be seller financing.
Most disconcerting is that Dan Smith today puts forth another press release that is full of obfuscation. Why can we not know the current level of cash? Why can a dividend on at least one quarter of the arrearage not be paid NOW? And, the excuse of needing the funds for future capital expenditures is disingenuous as they could get equipment lease financing or simply delay these upgrades.
I detest it when companies act so unfriendly to security holders.
Two items. (1) The subordinated debt of $50 mil., where will it wind up? and (2) one of the reasons given for not paying a dividend was the 3/15 maturity of a less than $4 mil. debt, come on get real.
Make that sense, not since.
I think it makes since. The average book value of the 20 hotels was more than the average book value of the 106 hotels. While that doesn't mean that the average market value is higher, it makes it probable to me. I sent a letter to W2007 Grace Acq. I asking which of the 126 hotels are excluded from the 106. No answer was forthcoming. If any of you know the 20, please post.
The updated FAQ seems to imply a pref share value of ~$36/share. Per the FAQ, the Company owns a 3% interest in 106 hotels with ~$1.03 billion in debt obligations and wholly owns the equity interest in 20 hotels with ~$158 million in debt obligations. Per the CMBS issued on the 106 hotels, the value of those 106 hotels are appraised at $1.6 billion which would imply a value of ~$350 million on the other 20 per ARC's purchase price. This implies the Company owns equity interests worth ~$209 million against ~$78 million in accrued dividends and ~$146 million in liquidation preference. Accrueds have to be brought current to distribute to common, which would leave ~89 cents on the dollar for the liquidation preference of the prefs, or ~$22.50/share.
Does this make sense? Thoughts?
Update to Equityinns.com. No distribution this quarter. A bit of illumination on where we stand. There will eventually be distributions, but timing and amount to be determined.
Expect payment near/at closing.
This allows everyone (including a certain LLC) an opportunity to squeeze out a few more bucks.
Then again, I might have all of this wrong.
Please be more specific. What doesn't make sense?
It is your opinion that ARC is paying $1.925b in cash for the assets?
H-Man, your scenario does not make sense. This is clearly an asset sale (at least at this point in time).
I'm not trying make enemies either but it's clear that roughly 20% will be exchanged for ARC debt/preferred securities.
EI - I would be interested to hear your thoughts on the 2Q 2014 dividend - do you think they declare a 2nd quarter dividend today? Given the cash trap on the senior obligations is gone, I don't know how they would justify NOT declaring, other than the "we do not have to" argument. At least prior, they had a legitimate reason as to why no dividends were paid (i.e. the cash trap).
What no one wants to say is that Goldman is going to do EVERYTHING to make certain that the preferreds do not receive a distribution. Yes, this is reprehensible but you know they have their attorneys trying to figure out how to make it so they maximize their return at the expense of everyone else. There is a reason why this does not trade at par + accrued. Just try and do a pro-forma balance sheet and unless you start making a myriad number of assumptions it is impossible.
I view that as "highly unlikely".
In addition, I have no desire to go round and round with you or anyone else for the next couple of months. I am not here to make enemies, just money. Let's just wait to see how things play out.
I hope your expectations includes getting some preferred shares in a new ARC entity.
I'm not so sure that Grace I has any ownership of WNT with the exception of the 3%. These other 97% may be held by a Whitehall affiliate but that's outside Grace I.
I agree on your "good money after bad" PFD Holdings comment but they are set to gain ~$2 for every $1 they lose on that investment.
I expect all of this to play out the exact same way.
Right, but everything rolls up to Grace Acquisition I Inc, which is ultimately what Whitehall owns. So yes, WNT Holdings now owns 97% of a subsidiary entity, Senior Mezz, LLC via the exercise of the warrant. The way all of the press releases read suggests this 97% is a common equity interest, which under the charter is still subject to a dividend blocker until the preferreds are brought current. The semantics behind the creation of the warrant, the purchase by WNT Holdings and simultaneous exercise are simply to extinguish the substantial amount of mezzanine debt that existed prior to the 2008 restructuring that would have otherwise had a priority cash flow claim to both the preferred and common equity. Given WNT Holdings is an SPE owned by Whitehall, the money is now fungible, so it doesn't really matter.
Two other points as well - if the shareholders get nothing, than PFD Holdings gets nothing. PFD Holdings is, again, a subsidiary of Whitehall. Why would Goldman throw good money after bad? IF their intent is to in fact eliminate the preferreds, they could have achieved this without injecting additional equity dollars into the transaction through PFD Holdings. IF PFD Holdings is truly an arms length entity and they do not receive consideration for their investment, wouldn't they seek to exercise any remedies available to them, including legal action? Very convoluted, I know, but I am just trying to make the argument as to why I believe this is simply a strategic discounted payoff of the preferreds. One could reasonably make the case that PFD's basis in the prefs is in the mid-single digits which would suggest that the preferred liability is now a self-funded liability. Said differently, if they pay themselves par plus accrued, they can pay themselves back their investment basis, pay off the remaining ~40% prefs at par plus accrued and still post a profit on those dollars.
Just some food for thought. Maybe I am way off, but this is the thesis that keeps me going.....
I have always attempted to convey that whoever holds the equity will one day need an exit strategy.
That's my point- the equity isn't in Grace I but in WNT Holdings.
While EIs comment is correct and may feel right to you, there simply isn't any equity
(or very little equity) to distribute.
Very simply though, Enterprising Investor's point about it only mattering to the flow of COMMON equity to various entities feels spot on. Remember, per the charter NO common equity may be distributed to ANY downstream entities unless and until all prefs are brought current. So, at the very least, these should theoretically become current paying securities.
Based on the carrying value on the balance sheet I think it's an at-the-money option to purchase at the mortgage amount. Therefore, no payment to exercise. I'm sure there was a working capital payment, etc though.
Regardless, a keepwell agreement only helps if there are assets.
I admit that I find this situation very confusing. Two items that may help us are (1) Grace I has a "keepwell" agreement with Grace Acq. I concerning our preferred dividends, and Grace I has or had 99% of the equity of W2007 Equity LP; and (2) doesn't a purchase option mean that money will be paid when the purchase option is/was exercised?
After the deconsolidation of the 106 "purchase option hotels" which was exercised by WNT Holdings after the refi I get very little, if any, equity in Grace I. This includes consideration for the accrued dividend and par for the preferreds which in total is approximately $225mm.
My point is that the preferreds DO NOT stand in the way of Whitehall monetizing its investment because WNT Holdings basically already did that.
Hotels Lacking Amenities Lure Buyers Seeking High Returns (6/19/14)
Hotels with the fewest amenities are proving among the most attractive to U.S. lodging investors as they search for higher returns.
Blackstone Group LP (BX), the world’s largest alternative-asset firm, is close to an agreement to buy a group of select-service hotels from Clarion Partners LLC for about $800 million, adding to its already sizable portfolio of such properties, a person with knowledge of the deal said yesterday. Barry Sternlicht’s Starwood Capital Group said today that an affiliate agreed to acquire TMI Hospitality Inc., including more than 180 limited-service hotels owned by the Fargo, North Dakota-based company.
Investors are drawn by the lower operating costs and higher returns at select-service hotels compared with more upscale properties. The segment -- which lacks restaurants and have limited beverage and other service offerings -- includes brands such as La Quinta, Super 8 and Days Inn. Purchasing such properties and boosting their profitability is often easier than acquiring and remaking higher-end hotels.
“The returns are very attractive and the financing for these deals is much easier and cleaner to underwrite,” said Samantha Fisher, a Los Angeles-based senior vice president at investment-services firm Jones Lang LaSalle Hotels. “Limited service doesn’t have a big food and beverage component. These things can almost run themselves. Whoever is the buyer doesn’t have to put much into them to see returns quickly.”
Highest Total
Last year’s $6.2 billion in select-service hotel deals was the highest total since before the last recession, according to Jones Lang LaSalle data. The sector accounted for 30 percent of all U.S. hotel-transaction volume in 2013, on par with the peak years of 2006 and 2007. Jones Lang expects transactions to grow to $6.5 billion this year.
Starwood Capital’s acquisition of TMI Hospitality’s properties for an undisclosed amount adds to the 103 select-service hotels Starwood and its investors already own.
The purchase “offers Starwood Capital the exciting opportunity to build on our investments in select-service and extended-stay lodging,” Suril Shah, senior vice president of acquisitions at Starwood Capital, said in a statement today.
NorthStar Realty
Among other buyers in the sector is NorthStar Realty Finance Corp. (NRF), which said earlier this month that it bought 47 limited-service hotels for $933.9 million in a joint venture with Chatham Lodging Trust. Also this month, American Realty Capital Hospitality Trust Inc., said it’s paying $1.93 billion for a group of 126 hotels, most of which are limited-service properties, including Hampton Inn, Hilton Garden Inn and Homewood Suites locations.
Photographer: Aaron M. Sprecher/Bloomberg
A Hampton Inn & Suites advertisement is displayed on billboard along Interstate 45 in Galveston, Texas.
Andrew Backman, an American Realty spokesman, and Joe Calabrese, a NorthStar Realty spokesman, didn’t return telephone calls seeking comment on their companies’ purchases.
The U.S. hotel industry has recovered since the financial and real estate market meltdown. Room rates in the first five months of this year hit a record, according to Jan Freitag, senior vice president at research firm STR Inc. This year through May, the average price for a hotel stay nationwide jumped to $113.58 a night, up 4.1 percent from a year earlier, according to Hendersonville, Tennessee-based STR.
Blackstone’s agreement would be for 47 extended-stay Residence Inn and Homewood Suites hotels, with a majority located in the top 25 U.S. markets, said the person with knowledge of the negotiations, who asked not to be identified because the deal hasn’t been completed.
Hampton Inn
Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment on the talks. Paula Schaefer, a spokeswoman at New York-based Clarion Partners, didn’t return telephone calls seeking comment.
The deal would follow a transaction in September, when a Blackstone affiliate agreed to buy 16 hotels, including Hampton Inn and Holiday Inn Express properties, from Hersha Hospitality Trust for $217 million. Blackstone’s $1.3 billion acquisition of hotel owner Apple REIT Six Inc. was completed last May, which followed a $1.9 billion deal in 2012 for the Motel 6 and Studio 6 budget chains.
The Apple REIT Six hotels “generate 15 to 20 percent more revenue than the competitive set they compete against, they have higher gross operating profit margins and they offer very attractive cash-flow yields,” A.J. Agarwal, senior managing director at Blackstone’s real estate division, said in an interview last year. “We’re just economic investors, focused on providing the best returns for our limited partners, and these assets accomplish that.”
Goldman Sachs
American Realty is acquiring the Equity Inns lodging portfolio from subsidiaries of Whitehall Real Estate Funds, which are sponsored by Goldman Sachs Group Inc. (GS) The purchase consists of 126 hotels with 14,934 rooms in 35 U.S. states.
“There has been a large amount of money pent up, and finally big portfolios this year and last have come to market, and investors had a possibility to go after them,” said Fisher of Jones Lang LaSalle Hotels. “Everybody is seeing that operating performances are still going up, that there is still growth. I suspect we’ll see more of this.”
To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net
http://www.bloomberg.com/news/2014-06-19/hotels-with-few-amenities-lure-investors-seeking-higher-returns.html
Lenders Open Vault for Hotel Deals (6/17/14)
Banks Made $31 Billion in Hotel Loans Last Year
Banks are checking back into the hotel business.
J.P. Morgan Chase & Co., Deutsche Bank AG and other firms are ramping up lending for lodging acquisitions and debt refinancing to levels not seen since before the financial crisis. Lenders made $31 billion in hotel loans last year, nearly double the 2012 level, according to the Mortgage Bankers Association, while all commercial-property lending rose 47%.
Credit is flowing against a backdrop of rising room rates, limited new construction and a spike in leisure and business travel in big cities such as New York and Los Angeles. Net operating income increased by 10% for the average U.S. hotel in 2013, according to PKF Consulting USA, which predicts "double digit annual gains" through 2015.
The easy money means hotel companies and investors can use less of their own cash to make deals, potentially amplifying returns. Debt now accounts for more than 67% of a hotel purchase price, up from about 56% in 2010, says PKF. That level is just below the high of around 70% in 2005.
Some of the largest hotel transactions have relied even more heavily on debt. NorthStar Realty Finance and a partner this month borrowed about $840 million from J.P. Morgan to acquire a 47-hotel portfolio for about $1 billion.
"There's been a sea-change during the past two months," says Monty Bennett, chief executive officer of Ashford Hospitality Trust, a Dallas-based hotel investor. "It's pretty close to the 2007 lending environment again."
The market isn't as frothy as it was at the peak in 2007, when a record $73 billion in loans tied to hotels were made, according to the Mortgage Bankers Association. Then, loan-to-value ratios could be as high as 90%.
Still, some analysts are warning that debtholders could be in trouble if the rosy outlook for hotels or the economy fades. Many hotel loans have floating interest rates, which means any rise in rates from rock-bottom levels will make it harder for borrowers to pay back their debt.
"Any hiccup in the economy could cause the value of the property to fall below the value of the debt, or cash flow might not cover interest payments," says Ryan Meliker, a hotel analyst at MLV & Co.
That scenario played out on a large scale in 2009, when hotel values plummeted by half from their 2006 peak, according to STR Analytics. That loss in value led numerous hotel owners to hand over their properties to lenders.
Concerns are rising at Moody's Investors Service because the ratings company prefers hotel loans to be made based on a measure of revenue per room that is relatively close to historic norms. "A number of hotels are getting outside our comfort zone on that basis," says Tad Philipp, head of commercial real-estate research at Moody's.
Banks seek to reduce their risk by packaging many loans into commercial mortgage-backed securities and selling them to investors. They can also sell the junior portions of the debt, which are riskier because they absorb the initial losses if an owner defaults.
Private-equity and real-estate investment firms like PCCP LLC and Starwood Mortgage Capital are getting into the game, too, sometimes providing a junior loan on top of a bank's senior mortgage. Some life insurers also are making more senior loans to hotel owners, but they usually require a larger percentage of equity from the borrower than banks demand.
Compared with other sectors of real estate, owners of hotels have been taking on slightly less debt. Owners of apartment buildings routinely secure loans for more than 70% of the value of their properties.
But hotels are considered far riskier investments compared with apartments, office buildings and malls. Given that rates change daily, income is highly volatile depending on the state of the economy, while office buildings and malls have more stable cash flows given long-term leases.
For instance, a 126-property hotel portfolio that is being sold to American Realty Capital Hospitality Trust Inc. generated $102 million of cash flow before debt service in 2013, and its owners and lenders are expecting it will stay near that level in coming years, according to loan documents. But three years earlier, the properties generated just $78 million.
Even so, American Realty last month agreed to pay $1.9 billion for the portfolio of mostly limited-service hotels with only $270 million of equity.
For top-performing properties or iconic hotels, analysts say, owners have had an easy time refinancing. Woodridge Capital Partners and Oaktree Capital Management acquired San Francisco's famed Fairmont Hotel atop Nob Hill for $197 million two years ago. With plans to invest $21 million for hotel renovations, the partners this month took out a loan on the property from J.P. Morgan for $221 million.
"If you can finance at these levels," says Mr. Meliker of MLV & Co., "it's like selling the hotel in advance."
But the competition among lenders also is making it tough for some. For example, Wells Fargo & Co. has made a few recent hotel loans, which the bank keeps on its balance sheet. But Christopher Jordan, an executive in Wells Fargo's hotel-lending group, says that he often finds himself competing against global banks and private-equity firms.
"Right now it's a trading business, not a lending business," Mr. Jordan says.
Write to Craig Karmin at craig.karmin@wsj.com and Eliot Brown at eliot.brown@wsj.com
http://online.wsj.com/articles/lenders-open-vault-for-hotel-deals-1403048547
EL, how do you know that Grace is not involved?
Simply, it only matters to those GS affiliates.
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W2007 Grace Acquisition I, Inc.
6011 Connection Drive
Irving, TX 75039
Grace Acquisition I, Inc. is the result of the October 25, 2007 acquisition of Equity Inns, Inc. The company owned 111 hotels at closing.
The aggregate purchase price paid for all of the equity securities was approximately $2.2 billion, including assumed debt, which purchase price was funded by the equity financing from Whitehall Street Global Real Estate Limited Partnership 2007. Goldman Sachs provided financing in the aggregate principal amount of $1.8 billion.
Each share of common stock was converted into the right to receive $23.00, without interest, and (ii) each share of 8.75% Series B Cumulative Preferred Stock and 9.00% Series C Cumulative Preferred Stock of the Company outstanding immediately prior to the effective time of the Merger was converted into the right to receive one share of 8.75% Series B Cumulative Preferred Stock (WGCBP) and 9.00% Series C Cumulative Preferred Stock (WGCCP), respectively.
There are 3.45 million shares of 8.75% Series B Cumulative Preferred Stock and 2.4 million shares of 9.00% Series C Cumulative Preferred Stock outstanding.
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