Declining Divorce Rate Is Wreaking Havoc on Extended Stay Hotels

Privately held group Extended Stay Hotels, which was acquired in June 2007 by NJ-based Lightstone Group LLC for an ungodly amount of money of which $7.4 billion was funded through debt (and the bulk of it was apparently securitized), has thrown in the towel and under the wise tutelage of Lazard and Harvey Miller (who is poised to become the best paid lawyer in the history of the world) - a dynamic duo putting bondholders in their place ever since Judge Peck decided to sell Lehman's brokerage group to Barclays for $0.69, dropped off its first day motions at 1 Bowling Green.

Extended Stay, whose various lines include favorites of soon-to-be-divorcees, such as Homestead, Extended Stay (Deluxe and America), CrossLand and StudioPlus, will likely not find solace in President Obama's too big to fail designation, and as such will have a bankruptcy that will be much lengthier and painful (to both itself and its peers) than the Chrysler/GM 363 sale juggernaut. One peek at the company's org chart should bring bloody tears to the eyes of any bankruptcy analyst who will have to summarize the various interco cash flow sweeps on just one page for his/her ADHD-afflicted superiors. More on the org chart, in the first day declaration below.



Curiously, Lightstone (and General Growth, Cohen and Steers, Ackman and Merrill's REIT team) have yet to issue a press release how this bankruptcy further solidifies their green shoot theory and how all CRE properties are massively undervalued and how bankruptcy is just a way to clean up legacy balance sheets, etc. Amusingly, as Joseph Teichman, Extended Stay's GC, described the company's business model: "it is a hybrid between a hotel and an apartment."

Brilliant - in other words, it has all the worst qualities of a hotel REIT and an apartment REIT. Nothing like a deluge of over 680 properties soon to be auctioned off flooding an already miserable CRE landscape. "Typical guests include government and business travelers, people on temporary work assignments [TD:up to but not over 1 hour] or training programs, individuals relocating or purchasing a home and individuals with other short-term housing needs.

Furthermore, as Extended Stay employs roughly 10,000 people, of whom at least half will now get the boot, the birth-death adjustment for June will have to be even more stupendously ridiculous to make it go with the program that this is the month when the recession ended and everybody is now employed.

One particular piece from the declaration is highly notable, as it cuts through all the green shoot fluff and propaganda and describes succinctly and to the point, the pain that every single comparable company is going though currently.



Most amusingly, the company's CEO, President, Chairman (any function missed here?) is David Lichtenstein (presumably unrelated to Steel Partners' recently illegally inebriated Warren) - his bio in the filing, among other things, lists that he is a member of NAREIT. Hold on, weren't these the same jokers claiming the commercial real estate is poised to raise over half a trillion dollars by 2013? Seems humor is a prevalent theme with NAREIT members - David obviously exudes it, having named his real estate company very subtly as a memento of his own deal making acumen and value investing prowess (Lichtenstein - Lightstone... get it?).

Anyway, for this and much more juicy amusement (as funny as a Merrill REIT report, just, you know, the opposite, i.e. factual), I present Teichman's entire Declaration below. Great read.

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Comments

[Between The...:]

I assume the "declining divorce rate" is a tongue-in-cheek joke, because your article could be more accurately titled "lack of occupancy wrecking havoc on extended stay hotels".
Pretty soon we'll be hearing "lack of credit bad for housing starts", "lack of jobs bad for credit-card charge-offs", and other obvious reasons for companies lining up at the bankruptcy court.

Jun 15 07:24 PM

[jjmagoo:]

The term is wreaking havoc, not wrecking havoc. Wrecking havoc is actually a double negative.

Jun 15 07:27 PM

[User 431835:]

Now when you use the term "Extended Stay" are you referring to the hotel chain or the company named Extended Stay? From my understanding, the hotel chain "Extended Stay Hotels" is operated by HVM LLC. Please clarify.

Jun 15 09:00 PM

[User 411290:]

Funny. the title on zero hedge is " Declining Divorce Rates Wreak Havoc on Extended Stay Hotels". once again lost in translation at SA courtesy of moderators.


On Jun 15 07:27 PM User 96362 wrote:

> The term is wreaking havoc, not wrecking havoc. Wrecking havoc is
> actually a double negative.

Jun 15 09:12 PM

[Donald Ingram:]

Whatever! The painful point in the entire story is that there are going to be 5,000 people lose their jobs. With hardly any chance of finding another in this tough economy. Might I just add that most of these people will be chamber maids and such, just those people that really can't afford to lose their jobs.

Now. Is that wreaking? Or wrecking? Its havoc. Is what it is!

Jun 16 12:55 AM

[TBill:]

Guess there will be some self deporting back to Mexico....

Jun 16 02:10 PM

[TeresaE:]

It won't be 5000 illegals getting the boot, that much if for sure.

One more in a long line coming.

Good luck finding any work, anywhere.

Losing low paying, hotel employee jobs will have a trickle down effect on WalMart's hiring rampage of 22,000 low paid workers.

Jun 17 01:34 AM