Friday, January 07, 2011

Old CNL Deal Makes News
The hotel / lodging real estate sector seems attractive to me, and presents some significant opportunities. Hedge fund Paulson & Co., seized control of the former non-traded REIT, CNL Hotels & Resorts, Inc.  This deal originally went full cycle in 2007, allowing investors to cash out near their original investment amount.  According to the Bloomberg article, Paulson restructured $600 million of debt, extinguishing $200 million and converting about $400 million to equity.  This is interesting:

Morgan Stanley bought CNL Hotels for about $6.7 billion, adding eight luxury U.S. resorts, including the Grand Wailea Resort Hotel & Spa in Maui; La Quinta Resort & Club and PGA West in La Quinta, California; and the Arizona Biltmore Resort & Spa in Phoenix.
The financing for the acquisition included $1.5 billion of senior debt, $1 billion of mezzanine debt and the $800 million of corporate debt, of which $200 million was previously converted to equity.
It looks like Paulson paid $3.2 billion for the former CNL hotel portfolio.  This is less than half (about a 52% discount) of what Morgan Stanley paid for the CNL assets in 2007.  I wonder whether how much of the original portfolio is intact.  This kind of deal is why the hotel sector is so exciting.

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