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Summary

  • Goldman Sachs has announced the sale of W2007's hotels for $1.925 billion.
  • No announcement yet on treatment of W2007's preferred shareholders.
  • Looks like preferred may eventually be redeemed in full plus accrued dividends.

Here is an update in the soap opera of Goldman's (NYSE:GS) activities with respect to W2007 Grace Acquisition I. In 2007, Goldman led a takeover of Equity Inns, a large REIT, but left the preferred shares (WGCBP and WGCCP) outstanding. The successor entity is now called W2007 Grace Acquisition I.

The preferred shares have not received any dividends since 2008, and currently have a redemption value plus accrued dividends of about $39 per share.

Today, W2007 Grace Acquisition I announced that it was selling all of its hotels to American Realty Capital Hospitality Trust, a publicly registered but non-traded REIT for $1.925 Billion. Once this deal closes, W2007 Grace Acquisition I will have no more operations and will likely liquidate.

Details are not yet publicly available, and given the veil of secrecy over W2007 Grace Acquisition I, they may never be. However, it appears that there will be enough cash generated by the deal to pay for outstanding liabilities and redeem the preferred shares at the full redemption value plus accrued dividends.

However, the lack of public disclosure certainly creates additional uncertainty. As part of previous debt restructurings of the firm (which were negotiated between Goldman-controlled W2007 and Goldman-owned Goldman Sachs Mortgage Corporation, GSMC), W2007 granted GSMC an option to purchase 106 hotels. This option was later transferred to and exercised by another Goldman affiliate, WNT Holdings, LLC.

It is thus not clear how much cash from the sale of the hotels will wind up in W2007. There is some apprehension that the cash from the sale of the hotels will be tunnelled away out of W2007 and into WNT Holdings to the detriment of the long-suffering preferred shareholders of W2007 Grace Acquisition I. The lack of disclosure by the company makes it very hard to figure out what is going on.

In the meantime, the preferred shares continue to trade in the gray market under the ticker symbols WGCBP and WGCCP.

Disclosure: I am long GS and WGCBP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Goldman Sachs And W2007 Grace Acquisition I: GS Announces Sales Of Hotels