Replies to post #110 on W2007 Grace Acquisition I, Inc. (fka WGCBP)

[Enterprising Investor]

Be calm and seek redemption.

By the time this deal gets done, preferred holders will most likely be due six and one-half years worth of accumulated, undeclared dividends.

WGCBP and WGCCP still have a great deal of upside ahead.

[Enterprising Investor]

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 [e-mail] and Eliot Brown at [e-mail]

http://online.wsj.com/articles/lenders-open-vault-for-hotel-deals-1403048547

[Enterprising Investor]

American Realty Capital Hospitality Trust Amends Agreement to Acquire Equity Inns Lodging Portfolio (11/13/14)

Extends Closing Date to February 27, 2015

Company to Acquire 116 Hotels Totaling 13,744 Rooms in 31 States for a Purchase Price of $1.808 Billion

NEW YORK, Nov. 13, 2014 /PRNewswire/ -- American Realty Capital Hospitality Trust, Inc. ("ARC Hospitality" or the "Company"), announced today that it has entered into a definitive, amended and restated purchase and sale agreement (the "Amended Purchase Agreement") for the acquisition of the Equity Inns Lodging Portfolio that consists of 116 hotel assets (previously 126 hotel assets) ("Equity Inns" or the "Portfolio"). Equity Inns is being acquired from subsidiaries of W2007 Grace I, LLC and WNT Holdings, LLC, each of which are indirectly owned by one or more Whitehall Real Estate Funds ("Whitehall"), real estate private equity funds sponsored by The Goldman Sachs Group, Inc.

The transaction is scheduled to close on February 27, 2015. Both parties have agreed to the removal of several contingencies that were included in the original purchase and sale agreement, which they believe provides greater certainty to the successful execution of the transaction. The acquisition of Equity Inns, when completed, will increase ARC Hospitality's lodging portfolio to 122 hotels totaling 14,925 rooms, establishing ARC Hospitality as one of the largest owners of select-service hotels (by enterprise value) in the North American lodging REIT sector.

Under the terms of the Amended Purchase Agreement, ARC Hospitality, through its subsidiaries, will acquire the Portfolio for a purchase price of $1.808 billion. The Portfolio will consist of 116 hotels totaling 13,744 rooms across 31 U.S. states, franchised by leading global hotel brands including Hilton Hotels & Resorts, Marriott International, Hyatt Hotels and InterContinental Hotels Group. It will encompass a number of well-known hotel flags, including Hampton Inn, Hilton Garden Inn, Homewood Suites, Embassy Suites, Courtyard, Residence Inn, Hyatt Place and Holiday Inn.

About ARC Hospitality

ARC Hospitality is a publicly registered, non-traded real estate investment trust ("REIT") that intends to qualify as a REIT for tax purposes with the taxable year ending December 31, 2014.

http://www.prnewswire.com/news-releases/american-realty-capital-hospitality-trust-amends-agreement-to-acquire-equity-inns-lodging-portfolio-282536211.html