12/09/2011

Clarion Shops for $325 Million of Hotel Debt

Clarion Partners is weighing bids on a $325 million debt package that would refinance 50 Courtyard by Marriott hotels.

The investment manager is seeking roughly $275 million of senior debt and $50 million of mezzanine financing. The debt package would have a three-year term, with two one-year extension options.

The assignment has been shopped to a mix of balance-sheet, conduit and mezzanine lenders via Cushman & Wakefield Sonnenblick Goldman, which has already taken at least some bids. Clarion is expected to make a decision within a few weeks.

The New York firm bought the 7,220-room portfolio in 2005 via a separate account that it manages. The properties, managed by Marriott International, are concentrated in the Midwest, Northeast, Southeast and Southwest. The portfolio is valued at roughly $540 million, so the loan-to-value ratio on a $325 million debt package would be about 60%. Clarion would use the proceeds to retire an unspecified amount of debt that matures next year.

Many of the hotels were among the first developed under the Courtyard by Marriott brand in the 1980s. Clarion has spent $140 million on renovations, including upgrades to lobbies, bathrooms and fitness rooms. Some of the properties still need work, and Clarion plans to spend up to $40 million more on renovations over the next two years, according to market players.

The hotels averaged about $50 million of net operating income between 2004 and 2010. The forecast net operating income for 2011 is roughly $35 million, pegging the debt yield for a $325 million loan at 11%.

The properties are believed to include the 138-room Courtyard Philadelphia Valley Forge/King of Prussia, at 1100 Drummers Lane in Wayne, Pa.; the 134-room Courtyard Rockville, at 2500 Research Boulevard in Rockville, Md.; the 137-room Courtyard Hartford Windsor, at One Day Hill Road in Windsor, Conn.; and the 133-room Courtyard Chicago Naperville, at 1155 East Diehl Road in Naperville, Ill.

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