Hotels
Full Service: Hilton Hotel - Suburban Chicago
Legendary Hotel and Piano Bar Plays on via CCR Bondholder Note Purchase.
challenge
An interest-only loan on a Full Service Hilton was fully leveraged and carried no reserves for Hilton’s required PIP (Property Improvement Program).
The loan maturity, coupled with the tremendous amount of new supply in the marketplace, created economic malaise and both RevPar and Occupancy stagnated.
New Hilton branded hotels drawing on the same Hilton Honors reservation system created increased booking competition at the property and occupancy rates further eroded.
The franchise agreement was expiring and the property needed significant improvements to qualify for a new, long-term franchise agreement with Hilton.
Solution
Referred by a national mortgage banking firm, The Henley Group came on board as a “virtual partner” to the hotel group of owners for the ensuing 18 months.
Serving as the coordinator and central hub, we spearheaded numerous, exhaustive conversations and strategy sessions with all stakeholders, including: the hotel operator, the sales and marketing management team, the lead investor, the Franchisor, the Special Servicer, the Lender’s third party vendors, the attorneys, the referring mortgage banker and the Trust’s bondholders and CCR.
The Henley Group first gained traction with the Lender on an A/B note resolution and then tapped into our bondholder and CCR (Controlling Class Representative) network to learn about a possible note purchase which was a cleaner and preferred resolution for the Borrower.
outcome
The Henley Group worked with a leading bondholder group and the constituent CCR’s to purchase the defaulted note out of the securitized pool under the "fair value” option. We reached the deal with a new Lender/Investor who joined the existing ownership and purchased the loan from the CCR.
Following, the loan was discounted, restructured and the PIP was funded. Fueled by our tireless pursuit of a solution and insider market intelligence, we are proud to have enabled the Owner to keep the hotel and restore its luster to the “Brat Pack” playing days.
Limited Service: Fairfield Inn and Suites – Wisconsin Franchise
Surviving: Default Interest, Defeasance, Recourse and the Other Advisory Company.
challenge
Two Midwest Limited Service Hotels were in a non-monetary default due to the personal bankruptcy of one of the loan’s guarantors who was no longer an owner or affiliated with ownership. This triggered the Lender to seek repayment of the CMBS loans, which included a combination of several million dollars in default interest, penalties, recourse debt, and a sizable defeasance penalty.
The Borrower owed approximately $2MM of defeasance and default interest to the Servicer, thus a refinance of the loans did not make economic sense given the current property values.
One of the two hotels was in default under its franchise agreement with Fairfield Inn and Suites because it had failed to begin the required $2MM of property improvements per the PIP (Property Improvement Program) agreement.
A major national advisory company had previously worked on the engagement and negotiations with the Servicer led to a dead end, with no relief for the Borrower.
The Lender had deal-fatigue and wanted to quickly exit these properties, creating more obstacles for The Henley Group to negotiate successfully.
Time was running out.
Solution
David met the Borrower for a strategy meeting at the airport on his way home from a family vacation and guaranteed that we would work nights and weekends to meet the Lenders’ deadlines.
The Henley Group researched, analyzed, and presented the economics for how the Servicer could recoup the highest net present value (NPV) by retaining the franchisor and keeping the Borrower managing the property.
David consistently kept in constant contact and tirelessly negotiated with the Servicer.
We advised on the new capital structure and helped to bring in new equity.
outcome
The Henley Group succeeded in providing ample and intelligent analysis to convince the Servicer to negotiate a Par payoff which saved the Borrower from recourse exposure, $2MM+ defeasance, late fees, and default interest. The Borrower was able to successfully refinance with new debt, including obtaining the capital to fund and begin the PIP requirements and retain the Fairfield Suites and Inn as a franchisee.
“Many of my telephone calls with David were logged after working hours or on weekends, no black out times. He’s a real pro in the inner workings of the CMBS Servicer world, and I trusted him to handle our most valued assets. Without him, we would have been totally exposed and could have lost so much.
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