Strategic CEO Says He Can Refinance as Banks Return to Lending
Strategic Hotels & Resorts Inc. (BEE) will be able to rework or replace five loans approaching maturity as financial institutions regain their eagerness to lend to lodging owners, Chief Executive Officer Laurence Geller said.
“Provided your properties are in good physical condition and have good cash flow, you have many choices between lenders today, whereas six months ago there were basically none,” Geller said in a telephone interview today.
Strategic, based in Chicago, today said it amended and extended debt on the luxury Fairmont Scottsdale Princess hotel in Arizona after forming a joint venture with an affiliate of real estate investor Walton Street Capital LLC. A recovery in hotel occupancies and room rates is boosting lender confidence and will allow the real estate investment trust to recapitalize other properties, Geller said.
“Our experience has been we can choose between a bank, insurance company or CMBS debt to refinance our loans,” said Geller, referring to commercial mortgage-backed securities. “We have received multiple bids on our debt.”
Strategic has $121 million of debt on its InterContinental Chicago and $90 million on the InterContinental Miami coming due in October 2011, according to JPMorgan Chase & Co. (JPM) The REIT also has loans of $118.3 million on the Loews Santa Monica Beach Hotel and $76.5 million on the Ritz-Carlton Half Moon Bay maturing in March 2012, and $97.5 million of debt on the Hyatt Regency La Jolla coming due in September 2012. All three hotels are in California.
The REIT is seeking to eventually have 100 percent ownership of the properties, some of which it co-owns with Government of Singapore Investment Corp., Geller said.
Hotel del Coronado
In February, Strategic restructured debt on its Hotel del Coronado after Blackstone Group LP (BX) agreed to buy a majority stake in the Southern California resort, which was the backdrop of the film “Some Like It Hot.”
The reworking of the Scottsdale hotel loans included $47 million in payments by the Fairmont-Walton Street joint venture to cut total debt to $133 million. The maturity of the remaining CMBS portion was extended to Dec. 31, 2013, with an option for another extension through April 9, 2015.
“We are encouraged that Strategic found a positive outcome for the property and believe management continues to deserve significant credit for doing all the right things in terms of acquisitions and balance sheet initiatives,” Joseph Greff, a New York-based analyst at JPMorgan, said in a note today.
Hotel occupancies in the top 25 U.S. markets rose to 63 percent in the first quarter from 60 percent a year earlier, according to Smith Travel Research Inc. of Hendersonville, Tennessee. Revenue per available room, a measure of rates and occupancy used by hoteliers, climbed 9.8 percent to $74.59.
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