Bloomberg News

JPMorgan-Led Bank Group Said to Plan $1 Billion Motel 6 Deal

July 12, 2012

JPMorgan Chase

Signage stands outside JP Morgan Chase & Co. headquarters in New York. Photographer: Peter Foley/Bloomberg

A trio of banks led by JPMorgan Chase & Co. (JPM:US) are planning about $1 billion of bonds tied to Blackstone Group LP (BX:US)’s acquisition of the Motel 6 lodging chain, according to three people familiar with the offering.

The transaction, which may be offered in October, will be composed of debt taken on by the New York-based private-equity firm (BX:US) to acquire the motels, said the people, who asked not to be identified because the discussions are preliminary. JPMorgan is working with Deutsche Bank AG (DBK) and Citigroup Inc. (C:US) to arrange the offering, the people said.

Wall Street banks are funneling cash to the most creditworthy property owners, aiding borrowers and boosting values even as Europe’s debt crisis and slowing economic growth in the U.S. fuel volatility in the $550 billion commercial- mortgage bond market. Blackstone, with $48 billion in real- estate assets, agreed to pay about $1.9 billion for Motel 6 in May in the largest deal in the U.S. lodging industry since the $3.93 billion acquisition of Extended Stay America Inc. in 2010.

Elizabeth Seymour, a spokeswoman for JPMorgan, Amanda Williams of Deutsche Bank, Scott Helfman of Citigroup and Peter Rose of Blackstone, all based in New York, declined to comment.

Seeking Yield

Hotel investments are attracting yield-starved investors as the Federal Reserve’s unprecedented efforts to revive the economy keeps interest rates near record lows for a fourth year. The three banks have already sold $450 million in lower-ranking mezzanine debt linked to the Motel 6 deal with yields ranging from 7.5 percent to 10 percent, the people said.

Blackstone, which is preparing to unload office buildings acquired during the past six years, is adding to its holdings of hospitality properties. The world’s largest private-equity firm was part of the group that bought Extended Stay out of bankruptcy, and it announced a $950 million deal to purchase U.K.-based Mint Hotel in September.

Blackstone is buying Motel 6 and an extended-stay chain called Studio 6 from Paris-based Accor SA, Europe’s largest hotel operator. The acquisition includes 1,102 hotels in North America with more than 107,000 rooms, Accor said in a May 22 statement.

The Motel 6 chain, known for the advertising slogan “We’ll leave the light on for you,” was founded in 1962 in Santa Barbara, California, taking its name from the original cost of a night’s lodging, according to its website. The chain was bought in the 1980s by New York-based private-equity firm KKR & Co., which sold it to Accor in 1990.

Stunted Recovery

Lenders have arranged about $15.8 billion of securities tied to skyscrapers, shopping malls and hotel loans this year, compared with $28 billion in all of 2011, according to data compiled by Bloomberg. Forecasts for 2012 issuance range from Wells Fargo & Co. (WFC:US)’s $25 billion to Credit Suisse Group AG’s projection of as much as $45 billion.

Price swings on the debt, which can eat into banks’ profit margins on new deals, have stunted the market’s recovery after being shut down during the credit crisis in 2008. Sales have fallen from a record $232 billion in 2007.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Signage stands outside JP Morgan Chase Co. headquarters in New York. Photographer: Peter Foley/Bloomberg

Video Game Avenger
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $60.48 USD
    • 0.14
    • 0.23%
  • BX
    (Blackstone Group LP/The)
    • $33.33 USD
    • -0.17
    • -0.51%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus