Extended Stay Hotels - It's baaack!

Some of the largest belly flops following the Great Recession were in the Hotel sector, and interestingly, we're seeing two of those spectacular failures come back into the market this month. Red Roof Inn is out in a new issue deal (which we will publish an update on as soon as it prices), and Extended Stay was in the WSJ this morning as it filed for an IPO.

You'll recall Extended Stay, a 680 property hotel chain, was purchased by Lightstone for $8 billion, went through Chapter 11, and was picked up by Centerbridge/Paulson & Co/Blackstone for $3.9 billion in 2010. The current owners have approximately $3.6 billion in debt part of which is in a 2010 deal.

In the original CMBS loan default, everyone sued everyone - even the special servicers involved ended up suing each other. We posted numerous updates about it as it played out. The potential buyers sued, the creditors sued, the Fed owned a big chunk via Bear Stearns... it was ugly. Of course, the day it first showed up in a deal many CMBS players were scratching their heads wondering how the deal got done in the first place.

Accor sells Motel 6 to Blackstone for $1.9 billion

Blackstone just agreed to buy Motel 6 from Accor SA for $1.9 billion dollars with a target close date in October 2012. The deal includes the 604 company owned hotels (my guesstimate at 97 keys per property puts that at 58,588 keys or $32,429 per key in terms of real property purchased only) and the franchise business from the 480 franchisees, and an additional 18 properties that were undefined (but this could be the Studio 6 brand that was part of the deal). The total deal value would have come in at $17,699 per key, but keep in mind that includes the Franchise and they're not actually buying that real estate. The WSJ published $25k per key, but I'm not sure how they got there. Looking at it from another angle, the price reflected a 9.3x 2011 EBITDA multiple.

JP and Deutsche Bank are providing the debt package, and I wouldn't be surprised to see it in the CMBS market in the near future.

Other interesting facts:

1. Accor originally purchased Motel 6 from KKR in 1990. 
2. Colony Capital owns a 21% stake in Accor.
3. Accor SA sold Red Roof Inns to a domestic investor group in 2007, right at the peak, and the $366mm CMBS senior mortgage from that deal ultimately defaulted in 2009, ultimately resulting in a 48% loss severity just one short year ago.
4. This almost completely removes Accor from the US market (other than Sofitel brands), but they have a substantial base internationally. The US now represents 1% of their total rooms - Europe= 56%; Asia Pacific = 28%. They even have a footnote stating that 35% of the hotel portfolio is in Emerging Markets - apparently roughly half of their pipeline is in Asia Pacific.
5. Reduces the percentage of owned rooms (versus leased, franchise, and just under management) to 10% of their total key count of 427,800 keys

The englais version of Accor SA's investor presentation on the Motel 6 disposal is here.


The current exposure to Motel 6 in CMBS is a little hard for me to gauge, and I'm sure I am missing some. It looks like the entered into a number of 20 year balloons and blocked off the properties in to SPEs with names like Mountain S9, East S9, etc. corresponding to their region. This is definitely not all of the debt associated with the hotels, though, because Accor noted in their press release that Blackstone is assuming €330mm in debt and fixed-lease commitments of €525mm - the debt below is listed with original face values (and it has amortized substantially in most cases) and only adds up to around €130mm using the original face and just a few dozen properties.

1. Accor- California South loan ($11.5mm) in CSFB 2001-CF2, which only covers 4 properties and matures in 2019. 
2.  Accor - Mountain Summary ($26.8mm) CSFB 1999-C1 is listed as a CTL so it's probably some master lease over a few properties. Matures in 2019.
3. Accor - California North Summary ($14.2mm) CSFB 1999-C1 with a 2019 maturity.
4. Accor - East Summary ($14.5mm) CSFB 1998-C2. 5 properties. 2019 maturity.
5. Accor - SouthEast Summary ($13.8mm) CSFB 1998-C2. 4 properties. 2019 maturity.
6. Accor - West Summary ($13.2mm). CSFB 1998-C2. 3 properties. 2019 maturity.
7. Accor - Texas Summary ($30.3mm) CSFB 1998-C2. 6 properties. 2019 maturity.
8. Accor - Florida Summary ($19.2mm). CSFB 1998-C2. 4 properties.2019 maturity.
9. Accor - Midwest Summary ($15.7mm). CSFB 1998-C2. 5 properties. 2019 maturity.
10. There are a couple of other non-defeased Motel 6 loans, but they look like franchises.

Blackstone raises $10 billion in 7th Real Estate Fund

The wsj reports.

Blackstone Group LP has raised more than $10 billion in less than a year for its latest real-estate fund and is looking to raise an additional $2 billion by year's end

...

This time around, Blackstone was able to raise the amount in less than a year—and about $4 billion since January—a faster pace than the previous fund, these people said. A second closing for the fund is expected next week.

Hotel Lenders avoid Foreclosure

Bloomberg has an interesting article on hotel lenders.

. "Servicers do drag their feet with them a lot more because they aren't sure what to do."

(unless there is a backroom deal to be had)

Among hotel loans being worked out is $1.44 billion in financing backed by 355 La Quinta Inns & Suites owned by a unit of New York-based Blackstone Group LP.

...
"Special servicing is a routine precondition to requesting an extension and we have done this in over a dozen other similar situations."

(translation, "we've defaulted on over a dozen other failed loans where we are the borrower)

"Having some type of extension on an existing loan already in place, rather than a foreclosure or REO situation, is more likely in hospitality than in other commercial sectors," Stacey Berger, executive vice president at Midland Loan Services Inc., said in October. REO refers to real estate owned by lenders following a foreclosure.

h/t Anon

Fink on Stuytown

From dealbreaker:

Today, the investors who bought equity in the [Stuyvesant Town] deal have also lost their money, including major BlackRock clients—most notably the $200 billion California Pension and Retirement System (calpers), the nation’s largest pension fund, which effectively lost $500 million. At press time, calpers was weighing whether or not to retain BlackRock as a real-estate adviser.At the mention of these blunders, Fink, who has been sprawled in his chair, suddenly stiffens. His voice takes on a harsh tone that is leavened only by his visible anxiety. “When you manage money, you are going to make mistakes. You are not going to be 100 percent perfect. Our job is to minimize those problems, to cauterize them,” Fink says, his voice rising. “We’re not perfect, and I’ve never said to anyone that we are going to be perfect. Our investors had all the information we did and they did their own due diligence.” He exhales deeply. “Our real-estate division is struggling because of bad performance, and we’re making changes. I don’t care if the whole industry blew up, our job is to do better than the industry, and we didn’t in real estate,” he says. “I am not making excuses. I lose sleep over these problems.” The Stuyvesant Town loss was “an embarrassment,” he says. Then his voice drops to a whisper. “I mean, my mother gets her pension from Calpers.”

Blackrock picks up Helix

Not sure what this says, but I bet Kevin Donlon (the CMBS one, not the Father one) is planning a real nice vacation.

Blackrock bought Helix. Blackrock currently sells a product to institutional investors that I assumed competed with Helix, but I'm not really familiar with both companies in that regard - at least not enough to fully tease out what the purchase means. I'm leaning towards either "Blackrock's CMBS analytics suck" or "Helix's analytics are that awesome".

Blackstone & Glimcher JV on two Malls

CoStar notes

The Blackstone Group and mall REIT, Glimcher Realty Trust, entered into a joint venture agreement that would be seeded by two of Glimcher's best malls -- Lloyd Center in Portland and WestShore Plaza in Tampa.

Under terms of the joint venture, Blackstone would acquire a 60% stake in the properties, while Glimcher would maintain a 40% stake and continue to lease and manage the center. The gross value for the combined transaction is approximately $320 million, which includes $218 million in mortgage loans in place on the properties. At this value, Blackstone's 60% acquisition price would be approximately $192 million, including the assumption of $130.8 million in debt.

Although not confirmed, the Wall Street Journal cited an anonymous source that broke out the acquisition price by asset. Reportedly, Blackstone would pay $39 million in cash and assume $75 million in debt for its stake in the Lloyd Center mall and would pay $27 million in cash and assume $54 million in debt for its stake in the WestShore Plaza mall. The capitalization rate is estimated at 9.5% for the two malls, which are among only seven malls of the REIT's best malls that it classifies as "Market Dominant."

WestShore serves as collateral in two deals, BSCMS 2003-T12 and MSC 2003-IQ6, with $100mm ($59.677 outstanding) portion of the A note in each. The 2Q '09 NCF DSCR was 2.10x, occupancy at 97%. Matures 9/9/2012.

Lloyd Center is also in two deals, WBCMT 2003-C5 and WBCMT 2003-C6, with $140mm ($63mm outstanding) portion of the A note in each. The 2Q '09 NCF DSCR was 1.88x, occupancy at 97%. It matures 6/11/2013.

Blackrock likes CMBS & Non-Agency in Credit Fixed Income

Bob Doll and Curtis Arledge from Blackrock this morning on CNBC

-Recession hit a bottom, slow recovery coming.
-Risk assets attractively priced
-Government to continue to provide support going forward. Involvement from the Gov't is with us for a while.
-Currently in the skeptical phase of the market - this is the sweetest spot for risk assets (including equities?, although they may be overbought in the near term)
-S&P 500 could get back to 950 in a correction
-Equities favorable to corporate bonds
-Prefer small over big, value over growth, domestic over developed international, but emerging over developed international too.
-Diversity needed, energy, defense, healthcare (good sell-off due to ObamaCare, good risk-return profile), and growth through technology.
-Fixed Income - Interest Rates still high relative to Fed Targets, but low overall. Thinks inflation will be muted in the medium term. Moving out the yield curve and expect flat yields.
-Like the IG Corporate Bond market.
-Favorite sectors Non-Agency, CMBS, Muni's, and some others that don't really matter so much. @12.15

Hat Tip H-S.