In a press release about the deal, the Dallas-based REIT says its yield is projected to hover 23.9% based on the purchase price discount to par and forward Libor curve through maturity. The loan matures in June 2009, but has three one-year extension options and a wide-open prepayment door.
New York City-based Lightstone Group and its partner packaged $6 billion of first mortgage and mezz financing in June 2007 when it bought the portfolio for $8 billion from affiliates of the Blackstone Group, also New York City. Ashford holds a junior loan position to the lead financing, but is in front of $1 billion of mezz financing from a different lender and $600 million of equity.
Ashford's debt service coverage ratio is about 1.63x based on a trailing 12-month net cash flow from a 681-asset portfolio, according to the press release. The $8-billion buy originally totaled 687 hotels, with 76,000 rooms, but Ashford says its stake is backing a 681-hotel portfolio. The REIT's investment represents 75% to 80% loan to cost or $82,142 per key.
"The continued sale of assets has enabled us to re-allocate capital to very attractive opportunities," says Monty J. Bennett, Ashford's president and CEO. The REIT, in sales mode, is deploying gains into debt reduction, share repurchases and mezz loans.
Lightstone and Uniondale, NY-based Arbor's portfolio is an extended-stay mix of brands, with 600 hotels flagged as Extended Stay America, Homestead Studio Suites and Extended Stay Deluxe. Other flags are StudioPlus, Crossland and Wellesley Inn & Suites.
At acquisition time, Lightstone reported its equity investors also included some Blackstone affiliates. Lead mortgage and mezz financing was provided by Wachovia Bank, Merrill Lynch Mortgage Lending Inc., and Bank of America.
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