Case Study:

Briggs Hospitality - Exclusive Sale

Situation

• The potential client, Briggs Hospitality and related real estate entities (Company), owned and operated three Richmond, VA-area hotels with significantly varied levels of service, quality, size, real estate ownership, and other characteristics.
• The owners of the Company were interested in selling all of their hotel assets to monetize their combined equity and in order to retire.
• Matrix advised that in order to maximize value for the three hotels, it would be required to market the properties to different buyers and run separate, but concurrent processes.

Objective

• The Comfort Inn and Conference Center Midtown was experiencing significant financial distress. The property’s performance was continuing to deteriorate and the secured lender was considering foreclosing on the property.
• The Holiday Inn Crossroads property was leased and had less than 20 years remaining on the term including all options, which would affect buyers’ ability to finance the purchase and dramatically affect valuation.
• The entity that owned the Sheraton Park South Hotel included a limited partner that had a right of first refusal on a change of control and was concerned with tax ramifications to them that a sale of their interests would trigger.
• The Sheraton Park South had an existing mortgage note that was financed at an above-market rate several years prior to the sale and was not pre-payable.

Solution

• Matrix designed a confidential, bifurcated sale process that targeted buyers for the specific properties based on their investment criteria, financial capability, geographic interests, and franchise holdings.  Categories of buyers contacted included hotel chains, hotel management companies, REIT’s, franchisors, owner/operators and private equity funds. 
• Potential buyers that executed confidentiality agreements regarding the sale of the hotels were as follows: 
        -    175+ for the sale of the Sheraton Park South
        -    225+ for the sale of the Holiday Inn Crossroads
        -    250+ for the sale of the Comfort Inn Conference Center Midtown
• The transaction resulted in an expedited sale of the Comfort Inn to an owner/operator buyer group with multiple partners that have ownership interests in 10+ properties.  The sale occurred before the negative cash flows could result in further loss of capital and avoided a foreclosure by the secured lender.
• Matrix advised the Company on the negotiation of a 50-year extension on the Holiday Inn’s land lease, which allowed potential buyers to obtain financing on the purchase and greatly enhanced the value of the hotel.
• The Holiday Inn Crossroads was sold to an owner/operator buyer group with multiple partners that have ownership interests in 15+ properties.
• Matrix was able to market the Sheraton Park South in a manner that did not allow the limited partner’s ROFR to chill the bidding on the asset by negotiating with the limited partner prior to the sale and being able to provide potential buyers certain assurances regarding the types of offers that would not trigger an exercising of the right by the limited partner.
• Matrix allowed final round potential buyers to have discussions with and negotiate with the secured lender on the note that had to be assumed by buyers to allow buyers to negotiate the best terms they could with the lender in an assumption.
• The Company’s ownership interest in the Sheraton Park South was sold to Apollo Real Estate Advisors' Value Enhancement Fund with an assumption of the mortgage note and the limited partners’ minority ownership interest remaining in place.