Nov. 14, 2008 - --If you want to own a trophy property, it's best to be the second owner -- after the first has gone broke.

That's an old saying in the hotel industry, and it would seem to apply to the downtown Renaissance Hotel at the moment. The Renaissance has struggled with its debt load since it opened in 2002, and it's about to skip an interest payment on $98 million worth of bonds.

The hotel's owners, however, aren't ready to let go of their trophy just yet. In a meeting held Tuesday at the hotel, they asked bondholders to sign a forbearance agreement, essentially postponing any foreclosure action until at least Dec. 31, 2009.

It was an unusual plea. The owners admitted that they have been unable to find new investors, and they presented numbers that show the hotel's performance going from bad to worse. Their argument boiled down to this: If you force a sale, you wouldn't get much money.

Tom Leonhard Jr., president of Historic Restoration Inc., was one of the people making that plea. "What we said was that now is not the time to sell the hotel under any circumstances," Leonhard said in a telephone interview. "Capital markets being what they are, there's no financing for hotels that is readily available. There are some vulture funds out there that would love to buy the hotel at a fire-sale price, but that would not be in the bondholders' best interests."

Historic Restoration is negotiating to take over majority ownership from Kimberly-Clark, the original equity investor. Both firms have put up money to make interest payments in the past, but neither is willing to do so now.

Leonhard and Robert Bray, the Renaissance manager, didn't sugarcoat things for bondholders. They presented a budget that shows an operating profit of $1.4 million next year, compared with $3.8 million this year and $5 million in 2007. (Even at last year's higher level, the earnings couldn't cover $7 million a year in interest on the bonds.)

What's more, that budget was drawn up in September, before the economy took a turn for the worse. Revenue projections are "likely to worsen," according to an online summary of Leonhard's and Bray's presentation.

That presentation also refers to the 6-year-old Renaissance as an "aging hotel" that will lose business to new or renovated properties such as Hotel Lumiere and the Ballpark Hilton.

The hotel requires "significant capital to fund required capital expenditures, including a soft goods refurbishment of the guest rooms," the bondholders were told. Further, a fund set aside for replacing furniture, fixtures and equipment is underfunded by $9 million.

"It's more of a reserve issue than a physical issue today," says Leonhard, who emphasizes that the hotel remains in beautiful condition.

Still, it's one more issue that a new owner would have to deal with. The current owners certainly succeeded in painting a candid, if unattractive, picture of their trophy hotel.

Will the bondholders go along with the please-don't-foreclose plea? That's hard to say. "It's definitely going to be an uphill fight" for the owners, hotel consultant Gary Andreas says.

One problem: If the bondholders agree not to foreclose, things may not look any brighter a year from now. "It's even hard to imagine it turning around in 2010," says Andreas, a partner at H&H Financial in Chesterfield.

Keep in mind that most of the bonds are owned by money-management firms that have taken plenty of lumps lately on other investments. We'll find out soon whether they want to postpone the pain on this one.

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