Lodgian Portfolio Re-finance Situation

Analysis: - HREC Investment Advisors (HREC IA) was retained by Lodgian to re-finance a portion of their portfolio that included numerous brands and were located in several markets across the country. The properties that were included were the Crowne Plaza - Worcester, MA, the Holiday Inn - Hilton Head Island, SC, the Crowne Plaza - Phoenix Airport, the Radisson - Phoenix Airport, the Holiday Inn - Phoenix West, the Holiday Inn - Palm Desert, CA and the Crowne Plaza - Pittsburgh Airport. The portfolio included a total of 1,269 rooms.

Key Issues: The difficult part of this assignment was that these properties were at different phases of their life cycles in that two were somewhat stabilized, four were in the growth mode following major renovations and one was in need of a major renovation. To further complicate matters, our client wished to not cross collateralize the assets, and was seeking non-recourse debt. Two of the initial assets had maturing loans, and a replacement lender(s) needed to be located within 10 days, with a loan funding within 30 days.

In order to generate the most interest, the highest level of proceeds and the most favorable terms, we decided on a two pronged approach whereby we took the two stabilized properties to market first and then followed up with the others a month later.

Outcome: There was a tremendous amount of interest in the first two assets in that we received over 10 term sheets in less than 10 days. The decision was made to go with two separate lenders and the total proceeds received were $29 million. One loan was a fixed rate loan at attractive terms, with an aggressive Loan-to-Value, and the other loan was a floating rate debt vehicle, as ownership wanted to reserve the flexibility to sell the asset in the near future.

Once we had the commitments on the first two assets, we then took the next five assets to market that were deals that had more of a "story" attached to them. Even though these assets were not true "cash flow" deals, they were good brands in good markets with a good sponsor. Hence they generated a lot of interest, however, the primary obstacles of timing, Loan-to-Value, cash flow and the past history of the sponsor needed to be addressed. Lodgian had a new management team in place and had made positive strides in creating shareholder value; hence, the lending community was able to recognize this entity as an excellent sponsor. We ended up receiving 9 term sheets that included both fixed and floating rate debt. At the end of the day the financing of these assets was split between two lenders and the total proceeds were $44.95 million, for total proceeds on the entire portfolio of approximately $74 million. The entire project was completed in 3 months.