12/07/2012

BofA, Citi to Fund Blackstone Hotel Takeover

Bank of America and Citigroup have agreed to supply $775 million of floating-rate debt to help finance Blackstone’s takeover of a nontraded hotel REIT.

Blackstone last week agreed to buy Apple REIT Six of Richmond, Va., for $1.2 billion. The investment manager is making the purchase via its $13.3 billion Blackstone Real Estate Partners 7 fund.

The five-year loan will likely be backed by the REIT’s entire 7,658-room portfolio, which encompasses 66 hotels in 18 states. Most are in the upscale, extended-stay or select-service categories. The predominant brands are Marriott and Hilton.

BofA and Citi will each fund half of the loan, with a portion likely to be structured as mezzanine debt. The duo will securitize the senior portion in a stand-alone offering in the first quarter.

Apple REIT Six was launched in 2004 by hotelier Glade Knight. It was one of a series of nontraded hotel REITs that Knight set up under the Apple name. Two of those entities were sold in 2007.

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