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Tuesday, 23 July 2013

Extended Stay America Seeks IPO to Pay Down Debt

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Commercial Real Estate Direct Staff Report

The owners of Extended Stay America Inc., a hotel company that emerged from bankruptcy three years ago, have filed to take the company public through the sale of common shares.

The Charlotte, N.C., company owns 682 extended-stay hotels with 75,928 rooms that are branded Extended Stay America, Extended Stay Deluxe, Homestead Studio Suites, Studio Plus and Crossland and are managed by HVM LLC. It was acquired for $3.925 billion by a group comprised of Centerbridge Partners, Paulson & Co. and Blackstone Group.

Selling shares in Extended Stay through an initial public offering of shares would allow the company to pay down some of its $3.6 billion of debt, which last year required $258 million of payments. Its three owners plan to maintain a substantial ownership stake in the company, which last year generated $22.3 million of net income on $1 billion of revenue. The company also plans to consolidate all its properties under the Extended Stay America brand.

Before selling shares in the company, the Centerbridge group will restructure it. Extended Stay, for instance, will buy HVM, giving it the ability to internally manage its properties. And it will maintain a 55 percent ownership stake in the 682 properties that its REIT subsidiaries will lease. The remaining stake in the properties will be kept by the Centerbridge group.

The company's fortunes have improved sharply since its emergence from bankruptcy in 2010. Average daily room rates, for instance, have increased by 22.8 percent to $51.12, and revenue per available room has jumped by 21.4 percent to $37.63. The company has invested $423.4 million on capital improvements and plans to invest up to another $200 million on upgrades to its portfolio.

The company is led by James L. Donald, who joined last year and previously was president and chief executive of Starbucks Corp.

Extended Stay had been owned by Lightstone Group, which had purchased the company from Blackstone Group at the market's peak in 2007 for $8 billion. The Lakewood, N.J., investor funded its acquisition with some $7.4 billion of debt, including $4.1 billion that was securitized.

Soon after Lightstone's acquisition was completed, the portfolio struggled with its massive debt and the company entered into talks to renegotiate its terms. However, by the end of 2009, with the hotel sector on its knees, Extended Stay was pushed into bankruptcy. Its portfolio's value had plunged to $2.8 billion.

It emerged from bankruptcy three years ago through a recapitalization orchestrated by the Centerbridge group, which raised $2.7 billion of fresh debt, some of which was funded through the CMBS market. That debt was taken out earlier this year with a $3.6 billion debt package, $2.5 billion of which was securitized through Extended Stay America Trust, 2013-ESH. That deal was underwritten by a group of investment banks that includes JPMorgan Securities, Deutsche Bank and Goldman Sachs, which will be underwriting Extended Stay's stock offering.

The debt that the company raised is a mix of fixed- and floating-rate loans and includes $1.1 billion of mezzanine debt that matures in 2019 and has rates that range from 8.3 percent to 11.5 percent. A total of $270 million of that debt is freely prepayable anytime this year.

A total of $350 million of the senior debt, which has a rate pegged to Libor plus 210 basis points, matures at the end of next year, but could be extended for up to three additional one-year terms. The remainder of the financing is comprised of a $1.8 billion loan with a 4.1 percent coupon and 2019 maturity, along with a $350 million loan with a 3.4 percent coupon and 2017 maturity.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.


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  • Subject: REITS -general (REITS), Stock/Equity Offerings (IPO)
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Read 1457 times Last modified on Tuesday, 23 July 2013

Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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