Strategic Hotels & Resorts plans to recapitalize the Fairmont Scottsdale Princess via the extension of an existing CMBS through December 31, 2013, with the option for a second extension through April 9, 2015.
Under the terms of the transaction, a new joint venture has been established between the Strategic and Walton Street Capital, L.L.C., a private equity real estate investment firm. Walton Street Capital and Strategic Hotels are equal partners in the new joint venture, with Strategic serving as the managing member and continuing as the property's asset manager.
Under the recapitalization plan, the terms of the existing CMBS deal include and amendment of a $7.0 million principal payment to the CMBS first mortgage. In addition, the new joint venture has acquired and retired the hotel's $40.0 million mezzanine debt. In total, the result is a reduction of total property debt from $180.0 million to $133.0 million.
The joint venture is also investing in the development of a new, 23,000 square foot ballroom and adjoining meeting space at the hotel.
Combining the CMBS first mortgage principal payment, the acquisition and retirement of the mezzanine debt, ballroom development costs and other related restructuring and partnership expenses, the total transaction consideration is approximately $71.0 to $73.0 million, of which Strategic anticipates a total investment of approximately $35.5 to $36.5 million for its proportionate share
" The combination of attractive financing terms, improving hotel performance, increasing stabilization of the Scottsdale market, and the addition of a sophisticated joint venture partner paves the path for us to achieve favorable returns on our investment," said Laurence Geller, Chief Executive Officer of Strategic.