Five Mile takes another bite at Innkeepers USA

The WSJ reports:

Five Mile submitted a preliminary nonbinding offer for Innkeepers earlier this week to acquire its 64 remaining hotels, the people said. The offer is slightly higher than an opening bid Five Mile and Lehman made for Innkeepers in a May bankruptcy-court auction. Since then, the two sides have been negotiating terms. The deal consists mostly of assumed debt and converting debt to equity, the people said.

Under the broad contours of the proposed deal, Five Mile would assume a substantial portion of Innkeepers's senior mortgage debt and, along with investment partners, make certain cash payments to creditors.

Those investment partners are Starwood Capital Group and Hersha Hospitality Management, which both would end up owning a piece of Innkeepers, people familiar with the matter said. Hersha, a hotel-management company partially owned by Starwood, would manage the properties for the ownership group, one of the people said.

Lehman would convert a chunk of its mortgage debt to ownership stakes in Innkeepers. Some of the remaining mortgage debt would be paid back, people familiar with the matter said.

Overall, the assumed debt, conversion of Lehman debt to equity and other cash contributions bring the value of the deal to more than $1 billion, the people said.

Timeline:

* Innkeepers Keeps Chapter 11 Control 9/14/2011
* Innkeepers, Cerberus Spar 9/1/2011
* Innkeepers Sues Cerberus 8/30/2011
* Innkeepers in Escrow Fight 8/24/2011
* Cerberus Puts Off Closing Innkeepers Deal 8/17/2011

Five Mile completes Red Roof Inn acquisition

Barclays noted in their weekly today that it completed on August 25th via a $700mm debt acquisition. They are still forecasting a 50 (reported sales price) - 60% (Barclay's high end estimate) loss severity, to be reflected in September's remits.

Innkeeper's USA Update

Bloomberg reports (sorry, no link) that the 72-hotel Apollo-owned Innkeepers portfolio has a new bankruptcy proposal filed pushing for control by Five Mile and Lehman. This follows the prior proposal which was ultimately blocked by Midland, one of the Specials because, at least in part, it resulted in the sponsor retaining an equity position.

The current plan focuses on the preferred equity holders retaining an interest in the 5 hotels that are not in CMBS deals and proposes an auction to see if there is a better bid from the market on the portfolio.

John Hancock Tower flipped, again

WSJ reports:

Boston Properties Inc. agreed to acquire the John Hancock Tower and Garage in Boston from private-equity firms Normandy Real Estate Partners and Five Mile Capital Partners for about $289.5 million, plus the assumption of about $640.5 million in debt.

Timeline
2006 - Broadway acquires from Beacon using $640mm Senior and a $723mm mezz.; Appraises at $1.3mm
2009 - Borrower defaults, Normandy and Five Mile pick up the mezz for $20.1mm, assume the senior, takeover ownership.
2010 - Normandy and Five Mile make 10x their investment less than 1.5 years later.

Good for GG9.

And the winner is...

The Starwood investor group—including TPG and Five Mile Capital Partners LLC—is proposing to put in more than $600 million in new equity, the people said. The rival plan had proposed as much as a $450 million investment from Centerbridge and Paulson.

But what will happen to the gargantuan $4.1b CMBS loan?

The Starwood proposal also calls for some of the existing holders of Extended Stay's $4.1 billion first mortgage debt to continue holding their debt, known in financial circles as "rolling" their positions.

extend, and ...

The Starwood-led plan puts a higher value—nearly $4 billion—on Extended Stay than other estimates that have emerged during the process, according to people familiar with the situation. Upon its bankruptcy filing, the company estimated its value at $3.3 billion. The company's financial advisers have pegged its value to be about $2.8 billion to $3.6 billion.

pretend.

It's not over yet, though

To be sure, the Starwood-led plan is still far from a done deal as Centerbridge and Paulson could increase their bid and other bidders also could emerge, the people said. And the plan still needs to be approved by the bankruptcy court.