SCOTTSDALE, Arizona—As part of a joint venture with Walton Street Capital LLC, Strategic Hotels & Resorts has recapitalized the Fairmont Scottsdale Princess.
According to a U.S. Securities and Exchange Commission filing earlier this month, the recapitalization reduces the 649-room hotel’s outstanding debt by 26.1% to US$133 million from US$180 million.
Highlights of the recapitalization are listed below.
• Walton and Strategic will share 50% ownership of the hotel.
• The hotel’s US$40-million mezzanine debt has been retired.
• Construction of a 23,000-square-foot ballroom with adjoining meeting space will occur.
• Payment of a US$1-million “acquisition fee” made to Strategic at closing.
The joint venture’s restructuring agreement was reached with Bank of America.
Amended and extended loan
Further, a US$140-million loan dated 1 September 2006 was amended and extended as part of the recapitalization. Terms are listed below.
• The loan was extended through 31 December 2013.
• Rate on the loan is LIBOR plus 0.36%, with the option for a second extension through 9 April 2015 at a rate of LIBOR plus 0.36% assuming the satisfaction of certain conditions.
• A principal payment of US$7 million.
• The joint venture must deposit funds with the lender (totaling approximately US$21.4 million) to fund the ballroom construction.
• Excess cash flow will be deposited into an account and held as collateral that could be used to pay down the loan’s balance or pay for costs and expenses associated with the loan, at the discretion of the lender.
• During the second extension period, 50% of cash flow will be held in the account as additional collateral, with the remaining 50% released to the joint venture.
“The company believes that the recapitalization will provide it with an attractive levered internal rate of return on its investment in the recapitalization through the final maturity of the loan,” Strategic said in the SEC filing. “The company also expects that the Hotel will earn approximately (US)$10.2 million of (earnings before interest, taxes, depreciation and amortization) in 2011.”
Officials at Strategic and Walton did not return requests for comment by deadline.
Contact:
Strategic Hotels & Resorts
Phone: 312-658-5000
Email: info@strategichotels.com
Walton Street Capital LLC
Phone: 312-915-2800