|By Tavia Evans, St. Louis Post-Dispatch
Knight Ridder/Tribune Business News
Jan. 4, 2006 - Bondholders and the owners of the Renaissance Grand St. Louis and the Renaissance St. Louis Suites have made little headway in reaching a plan to rescue the financially embattled hotels in downtown St. Louis.
Neither side could agree on a financial restructuring plan discussed during a Dec. 22 conference call. Steven Stogel, a St. Louis developer who is serving as an unpaid mediator for the parties, said during the conference call he hoped to have another proposal on the table within the next 60 days.
But it's clear the hotels have hit rock-bottom. A debt service reserve fund virtually has been depleted. The fund's balance has been whittled to $177,000 after hotel owners, led by Kimberly-Clark Corp., paid out a scheduled $3.5 million on Dec. 15 in bond interest payments.
And it's not clear whether the hotels will be able to make the next interest payment on June 15, according to a public notice of the Dec. 22 conference call.
But both sides are quiet about the status of proposals to save the hotels. An attorney representing the bondholders declined to comment. Stogel said he could no longer comment on the project.
A sluggish convention business has plagued the region's hotels in recent years. Competition from other mid-sized cities has increased, experts say, along with a glut of downtown hotel rooms in an already soft market.
The St. Louis Convention & Visitors Commission booked 410,000 group room-nights in 2004, according to a market report released last summer. That's about half the room-nights originally projected. The report suggests the Renaissance hotels have struggled as a result.
The Renaissance Grand had a 66 percent occupancy rate between June 18 and Sept. 19, at an average rate of $114 a night. The Renaissance St. Louis Suites did slightly better, with a 74 percent occupancy rate, at $115 a night.
The only clear-cut solution, in the short- and long-term, is to attract more business, said Richard Mersman, attorney for the owners. He said the hotels have increased their sales and marketing budget and staff in recent months to make more direct sales.
"When the hotels' underwriting was originally financed, it was based on the CVC's estimates, and we're running substantially less than those original projections," he said. "That has impacted the hotels' ability to generate sufficient income to pay their debt."
In earlier conference calls, selling the Renaissance Suites and converting it to condos was discussed.
Closing the hotels is not an option, said Jeff Rainford, Mayor Francis Slay's chief of staff. But he didn't rule out a condo-conversion or an ownership change.
Bond investors haven't been as upbeat. The properties' bond rating was downgraded in November to Caa2 from B3 by Moody's Investor Service and put on a watch list for another possible downgrade. The longest-term bonds, which mature in 2035, traded for 71 cents on the dollar Tuesday, down from 90 cents in September.
"Unlike most tax-exempt financing, this project was contingent on the successful financial operation of the hotel," Anne Van Praagh, an analyst for Moody's, said in a phone interview.
"The risk was clear to investors that the hotel had no track record and may not be able to make their occupancy forecasts. But that's the risks that investors took on."
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