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Eagle Hospitality, Blackstone Reach Compromise: Sell Instead of Foreclose
Wall Street Journal, 09/10/2012
By Kris Hudson

Eagle Hospitality Properties Trust, owner of 13 upscale U.S. hotels including the Cincinnati Landmark Marriott, struck a deal with its debt holder to avoid foreclosure.

Eagle and Blackstone BX +0.35% Group agreed to a compromise to be announced Monday in which Eagle will market the 13 properties for sale. Blackstone will accept as payment an undisclosed sum that is less than the mortgage’s face amount but still more than what Blackstone paid to buy the loan earlier this year. Any proceeds in excess of Blackstone’s take will be divided among Eagle’s other creditors and equity holders.

All told, Eagle’s hotel portfolio spans 3,538 rooms. It includes eight Embassy Suites hotels, the Hilton Cincinnati Airport and the Chicago Marriott Southwest at Burr Ridge. The portfolio registered an average rate of $126 and average occupancy of 75.4% in the past year. Revenue per available room increased by 7.1% in that time.

Eagle, which is owned by private equity firm AREA Property Partners, had faced a due date Sunday for the $606 million mortgage on its properties. Eagle was in a bind because it couldn’t refinance the mortgage, given that the value of the hotels had declined markedly since AREA bought Eagle in 2007.

In addition, Blackstone bought Eagle’s mortgage at a discount last May from Maiden Lane, the Federal Reserve-controlled entity overseeing the assets and loans of now-defunct Bear Stearns. Blackstone could have moved to foreclose on Eagle’s hotels once the mortgage’s due date passed without payment this week.

Marc Beilinson, Eagle’s chief restructuring officer, declined to say how long Eagle’s sales process will last. “It’s a great outcome that is beneficial and allows Eagle to enter a robust, wide-ranging marketing program with the opportunity of paying off Blackstone at a meaningful discount” to the debt’s face value, he said.