Hotels 1,700-Room Convention Hotel
Situation: This complex assignment involved a $100 million syndicated loan secured by the condominium interest in the hotel portion of the building. Due to the onset of the economic recession, along with poor property maintenance, occupancy levels declines precipitously and hotel revenues did not cover operating expenses. In addition, management was wrongfully diverting hotel cash flows to the commercial (retail and office) condominium interest.
Strategy: We commenced a foreclosure to control property cash flows. In lieu of a court-appointed receiver, the court agreed to our request that an accounting firm be hired to supervise the property finances and controls. Through extensive litigation we were able to change property management and thereafter establish a reservation system and hotel flag to improve accounting and branding. Additionally, we renegotiated union contracts of over 1,000 workers at the property. Eventually, we restructured the debt on a pay/accrue basis and simultaneously brought in a new investor to inject equity and take control of property. Throughout the workout process, we had the heady task of negotiating between the various interests of the bank groups involved who each held differing collateral packages and some of whom had been closed by the FDIC and wanted liquidation.
Resolution: We were able to stabilize the property operations
and management, control the cash flow, and arrange for a
new equity investment prior to selling the debt.
125-Room Holiday Inn Hotel and 125-Room Howard Johnson Hotel
Situation: These two properties had previously been taken into a bank’s REO and sold with 85% financing by the bank. Not long after the sale, the hotels’ owner was struggling to maintain the properties and service debt. As a result of the poor property condition, the hotels’ respective flags were almost terminated.
Strategy: We restructured the debt on a pay/accrue basis in order to keep the loan performing. The debt restructure managed to save the Holiday Inn flag by providing enough forbearance for the owner to complete a property improvement plan (PIP). Thereafter we negotiated with the owner to sell the Howard Johnson to reduce the bank debt. Resolution: We sold the restructured debt at a higher price than otherwise possible due to our efforts to stabilize the property and maintain the Holiday Inn flag prior to disposition.
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