A GIC Real Estate-led consortium is considering selling an £870m hotel portfolio ahead of an impending debt maturity.
The sovereign wealth fund of the government of Singapore, Lehman Brothers Real Estate Funds and Starwood, which bought the Holiday Inn portfolio in 2005, is also investigating a refinancing or repayment extension to its £680m debt pile.
Following a two-year debt maturity extension given in 2010, the owners are next week expected to find out whether they have won a further 12-month window before the loan needs to be repaid.
Although it is expected that this extension will be granted “on or about 15 May” the consortium is looking at a potential sale of the portfolio, given the strength of interest from investors in the hotel market.
Sources said the dearth of banks willing to lend to real estate, and the difficulties in persuading bond investors to agree to any further delay to realising their investment after a three-year extension, make a sale a valid option.
The consortium bought a portfolio of 57 Holiday Inns and four Crowne Plazas for £1bn in 2005. The debt was securitised through the Tahiti Finance vehicle.
When the debt originally matured in March 2010, bondholders agreed the owners could inject £77m of new equity into the deal and pay higher interest rate margins in return for a two-year extension, which ended this week.
It also included the option for a further 12 month extension provided certain conditions, including the portfolio’s loan tovalue covenant, was not breached.
A notice to the stock exchange said that a valuation of the portfolio was “carried out by Christie + Co and gave a new value to the properties as at 28 February 2012 of £870m”.
On the basis of this new valuation, the LTV trigger clause is expected to be satisfied and the loan repayment date pushed back to 24 May 2013. However a formal test of the debt’s loan to value ratio will take place “on or about 15 May 2012”.
