|By Mark Albright, St. Petersburg Times,
Fla.McClatchy-Tribune Regional News
June 16, 2009 - Extended Stay America Inc., which operates eight limited-service hotels in the Tampa Bay area, filed for bankruptcy protection on Monday in one of the largest commercial real estate industry defaults in years.
The Spartanburg, S.C., chain operates 684 properties in 44 states under the Extended Stay America, Homestead Suites and Studio Plus nameplates.
The company plans to continue managing its inventory of 770,000 rooms without interruption during the bankruptcy case.
"All hotels are open and welcoming guests as usual," said Gary DeLapp, president of HVM LLC, which is not part of the bankruptcy but manages the chain for Extended Stay America Inc. and 69 other connected ownership entities.
After paying $8 billion for the chain at the peak of the real estate boom in 2007, the new owners, Lightstone Group, a New Jersey real estate investment group, soon had trouble refinancing the $7.6 billion debt, half of which is short-term notes that come due this year. The company reported assets of $7.1 billion in its Chapter 11 bankruptcy filing in New York.
Extended Stay was a 1990s brainchild of Florida billionaire Wayne Huizenga, who also started the Blockbuster video company. He later sold his interest in the hotel chain.
Extended stay properties are a hybrid hotel and apartment complex for people staying more than a week. There's no room or maid service. The oversized units -- usually suites -- come with small kitchens, an on-site laundry and rent by the week at nightly rates that currently are $40 to $65. Guests often are moving to a new city, visiting to take job training or on assignment working as a contractor for weeks or months.
The business model is under stress. Business travel is way down, and people are not moving as frequently. The company's $1 billion in revenue in 2008 declined as revenue per available room, a measure of room occupancy and average daily rate, plunged 23 percent.
Meantime its mortgage debt was sold and resold to investors as cheaply as 10 to 60 cents on the dollar. About half the debt is owed to Bank of America, Wachovia (now Wells Fargo & Co.) and a government trust administering some of the remains of Bear Stearns, the brokerage and investment bank that collapsed last year.
The banks moved to take over after Extended Stay owners missed a $3.5 million phone bill payment in May. The other debt holders sued to shift the case to bankruptcy court, claiming the banks were trying to ace them out.
Mark Albright can be reached at firstname.lastname@example.org or (727) 893-8252.
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