urbanSTL

HRI takes over downtown Renaissance Hotel

After more than two years of searching for a financial savior, St. Louis' struggling Renaissance Hotel appears to have found one.

^ Nope, Kimberly-Clark will retain ownership.



http://www.bizjournals.com/dallas/stori ... ily41.html



Kimberly-Clark Corp. will make the next $2.2 million interest payment due on the struggling Renaissance hotel in downtown St. Louis and retains an ownership stake in the property.



Marriott, which manages the convention center hotel, opposed a deal to transfer Kimberly-Clark's stake to the hotel's developer, HRI Properties, according to a summary of a conference call for bondholders held June 11.

Bondholders, Renaissance collide on hotel's troubles



David Nicklaus

By David Nicklaus

ST. LOUIS POST-DISPATCH

10/31/2008



Almost from the day it opened, the downtown Renaissance Hotel has been a financial train wreck waiting to happen. Now, with the economy softening and credit hard to come by, the collision is near.



Historic Restoration Inc., the New Orleans company that has an ownership stake in the hotel, notified bondholders this week that it will miss an interest payment on Dec. 15. If that happens, the owners will be in default on $98 million of debt and bondholders will have the right to foreclose on the property.



Bondholders are scheduled to meet next month with officials of Marriott, which runs the hotel, and HRI to discuss "a forbearance option," according to a letter from HRI President Tom Leonhard Jr. That usually means the owners will hold out some sort of carrot — a new investor, a turnaround plan or a restructuring — to persuade bondholders not to foreclose.



The hotel owes $3.5 million in interest on Dec. 15, and Leonhard said in June that the payment shouldn't be a problem. Since then, the hotel's results have taken a turn for the worse.



"The rapidly declining economic environment has contributed to this previously unforeseen deterioration in the project's performance," Leonhard's letter says. "Based on Marriott's projections, the project is expected to have a Series A debt service shortfall of approximately $1.4 million. Neither the project owner nor any of (its) respective affiliates are prepared to fund such shortfall."



The hotel, which opened in late 2002, has been struggling with its debt burden ever since. It quickly exhausted the reserves that were set up to protect bondholders, and it tapped original owner Kimberly-Clark several times for extra cash. In June, HRI chipped in $2.2 million to avoid a default.



Dan Boyer, the hotel's marketing director, said business has been down across "all facets of the industry." Convention attendance is down, high gasoline prices cut into tourism last summer and companies are reducing travel budgets.



"When hard times hit corporate America, one of the first things they cut back is travel and meetings," Boyer said. He said the Renaissance's convention bookings essentially are flat for next year, but that industrywide forecasts show a revenue decline of 3 percent to 5 percent.



Against such a backdrop, the Renaissance may have an even harder time meeting future debt payments. Bond traders realize that: They marked down the Renaissance bonds to as little as 53 cents on the dollar this week, compared with more than 80 cents last summer. Read More

Friday, October 31, 2008

No Renaissance for hotel bonds

St. Louis Business Journal - by Lisa R. Brown



What started as a grandiose idea to catapult St. Louis into a major convention center city has turned into a deal gone bad for its owners and investors and could end with the city owning the hotel.



The next $3.5 million interest payment on the Renaissance Grand and Suites Hotel downtown is due Dec. 15, and the owners say they expect the hotel to fall short by $1.4 million.



Developer HRI Properties of New Orleans and Kimberly-Clark subsidiary Housing Horizons, the hotel’s lead investor, each say they will not put another dime toward covering the hotel’s twice-yearly interest payment on its $98 million debt load.



The hotel has repeatedly failed to meet its revenue projections to cover its debt obligations in the five years after the $277 million hotel was built. That leaves it up to bondholders to decide what to do with the hotel — foreclose on it and try to find another buyer, or attempt to restructure the debt. Restructuring is a tall order, given the hotel is estimated to be worth as low as half the $98 million owed on the property, according to those close to the deal. Read more

Convention hotel owners miss interest payment

The owners of the Renaissance Grand Hotel & Suites downtown, St. Louis’ largest hotel, failed to pay the full amount of a $3.5 million interest payment due on its debt Dec. 15.



Housing Horizons, a subsidiary of Kimberly-Clark, is the lead investor on the convention center hotel, which opened in 2003. Since its opening, the hotel has repeatedly not generated enough revenue to cover its twice-yearly interest payments due on its $98 million debt load.



No disruption at the hotel is expected. "At this time, the trustee has no plans to change the operations of the hotels," UMB Bank, the trustee for bondholders, said in a statement Thursday. "The trustee has been in communication with the city, the hotels’ management and others. All agree that the hotels should continue to operate as four-star hotels."





http://stlouis.bizjournals.com/stlouis/ ... ily60.html

Time for a new owner and new management company!

Remind me why the Roberts need to build a hotel right around the corner if the Renassiance cannot fill its rooms? Doesn't this dilute the market even further?

shopgirl10 wrote:Remind me why the Roberts need to build a hotel right around the corner if the Renassiance cannot fill its rooms? Doesn't this dilute the market even further?

That's a very good question. And I hate to be a pessimist, but I can see a future where the buildings at 921 and 923 Locust Street are demolished, and- guess what?- the Roberts Brothers decide that they won't move forward with Hotel Indigo because of the economy. Then we'd have just what downtown needs- another vacant lot.

Well, this really doesn't have to do with "filling rooms" as much as over-projections and rates on the management and ownership of this hotel. Downtown St. Louis hotels (there are A LOT) are doing OK and are relatively where most hotels (downtown hotels) across the board (coast to coast / city by city) in percentage filled per night.



The problems at the Renaissance isn't as much that they are not filling the rooms, but their (management/ownership) had originally based rates and occupancy projections too high for the market and convention outlook. The hotel opened after 9/11 and convention projections were far higher than came to fruition. Not only that, this year and last year with the economy, many more conventions have downsized or eliminated their convention plans.

Moreso, the Renaissance Grand projected higher rates in their original investment in the hotel. When conventions/ers come to STL they were finding that the Renaissance Grand "convention hotel" was sometimes double in rates what other propertiesd close to the convention center were offering... yet, the Renaissance was having to price out their rooms at higher rates to cover their costs.



In a nutshell, the hotel had a huge deficit/loan to fill and make even before it opened. It was poorly projected, even after 9/11 and the economy crisis, and never has been able to keep up with the other hotels in downtown.



The article above really states a lot of this.



Here are some good quotes from that article:



"Housing Horizons, a subsidiary of Kimberly-Clark, is the lead investor on the convention center hotel, which opened in 2003. Since its opening, the hotel has repeatedly not generated enough revenue to cover its twice-yearly interest payments due on its $98 million debt load."



"New Orleans-based HRI Properties, the hotel’s developer, also has an ownership stake in the Renaissance. Representatives from both HRI and Kimberly-Clark said this fall that they would not make any further payments to cover a gap to pay for interest payments due. There is a $1.57 million gap to cover the Dec. 15 interest payment and an anticipated shortfall of $2.6 million to cover the June 2009 interest payment. The hotel owners will be considered in default on the December payment if a full payment is not made by close of day Dec. 18."



"Additionally, Bray said revenue per room, or RevPAR is expected to decline 8.4 percent in 2009, compared to a previous estimate of a 6 percent decline. Occupancy is expected to decline to 58.7 percent next year. Room rates are expected to rise slightly, to $124.74, up 32 cents per room compared to 2008. Bray told bondholders that the Renaissance Grand’s furniture and fixtures budget is under funded by $9 million in 2009 and $21 million in 2010."

This may not end well... Just rec'd a letter from an attorney about the property to be sold on the court house steps in February.

Yep.

Even if troubles at the Renaissance Grand have less to do with filling rooms than they do with overly optimistic projections and an economic downturn, it still doesn't seem like the right time to add two more hotels to downtown even if one will be a boutique hotel.



(I'm thinking specifically of the Hotel Indigo proposed for Tenth and Locust streets and the recent announcement that Spinnaker intends to move forward with an Embassy Suites in the former Stix, Baer & Fuller/Dillard's space at Sixth and Washington.)

I'd hate to see the Renaissance closed and empty again. 20 years from now it'll be on another one of those "crumbling landmarks" lists.

shopgirl10 wrote:Remind me why the Roberts need to build a hotel right around the corner if the Renassiance cannot fill its rooms? Doesn't this dilute the market even further?

The downtown hotel market as I understand it is doing fine. It is the tremendous debt burden on the Renaissance Grand that is causing the problem. When was the last time we saw a hotel close downtown?

I dont think there is any talk of closing it is there?

I can' t seem to copy the link - but the Post is reporting that the hotel will indeed be foreclosed on Feb 2 (I think that date's right).... very bad news



could someone post the link.

markofucity wrote:guys - I gotta say it - things don't look too good for the city right now. AB. BPV. The Renaissance going Belly Up. I know everyone is in a downturn but I've lost my optimism. I really have.

^ Oh no, just what will we do?!? Should we sob? Group hug?



This is just natural movement in the economy. Things should pick back up in 2010. Until then, hold on and try not to get too excited.



More info here: http://www.iht.com/articles/2009/01/12/ ... /12bis.php

innov8ion wrote:This is just natural movement in the economy. Things should pick back up in 2010. Until then, hold on and try not to get too excited.

I agree with the first two statements, and I think the third statement is good advice for anyone to follow in 2009.



St. Louis, and the United States for that matter, have faced far worse challenges in the past and persevered, so I have every reason to believe our city and nation will rebound from the current economic downturn, maybe even next year...



Or think of it this way: Between an economic rebound, the synchronization of traffic signals at all major city intersections, and successful seasons for the Blues and the Rams, I'd be more than willing to put the little dab of money I have on the first thing on that list happening first.



Back to the Renaissance Grand, do we really know yet how the impending foreclosure would impact operations, at least in the immediate future?



It'll also be interesting to see whether the Hotel Indigo and the Embassy Suites at The Laurel proceed, although the RG's troubles aren't directly related to overall downtown occupancy rates as previously stated.

I'm not trying to be overly dramatic and I realize that the economy will bounce back eventually (2010 is a good guess). But I'm seriously down on our prospects - and I've been a cheerleader for our prospects for the last ten years.



i think the vote against the metro tax hurt the most - it just reaffirmed in my mind the notion that St. Louis really is bound by a provincial mindset. .. you could react to the downturn in two ways: (1) dig in your heels and refuse to pay for anything new or (2) fund bold new infrastructure that will (hopefully) position your city to boom when the economy gets back on track. St. Louis chose the former. California is funding stem cell research and building high speed rail. We're trying to kill stem cell research via a constitutional amendment (again) and voting against the meager rail system that we currently have. which state will be the leader in the future?



i don't know - I'm rambling. But it sure seems like st. Louis keeps losing major companies (ag edwards, AB, TWA, famous barr etc etc etc ) and I can't remember the last one we've gained. The airport is a shell of its former self. .... do you guys really think we're going in the right direction here?

copy that post and start a new thread.

Good idea Moorlander. I started a new thread in Urban Living to discuss what investments Missouri can make in itself for a brighter economic future. Something worth discussing. I can understand MarkofUCity's discouragement. Of course, this economic cycle is effecting the nation & the world, not just St. Louis. But, being prepared for the next up cycle is a good topic. Having said all that, the Ren-Grand problems are related to a tangled debt situation that was doomed to fail. Not really because of the economy or management of the hotel. Or InBev, etc.



If anyone finds out if the Ren will continue to operate under its new owner (the bank for now), please update us. Rennaisance/Marriott has not gone belly up, just the financing on this building. Or that is how I understand it.