Colony NorthStar is the post-foreclosure owner of a 148-hotel portfolio worth $1.3 billion, the Los Angeles-based real estate investment trust said on its second-quarter earnings call last week.
The firm was the lender on a $289 million junior mezzanine loan for investment bank Goldman Sachs’ $1.2 billion purchase of the hotels in 2006. The firm assumed ownership of the portfolio during the third quarter, Darren Tangen, Colony NorthStar’s chief financial officer, said on the earnings call. “Ownership of the… portfolio came via consensual foreclosure from an original mezzanine loan position,” he said.
Goldman, which could not be reached for comment, purchased the hotels through Whitehall Global 2005, an opportunistic fund the firm closed on $3.8 billion, according to PERE data.
Colony NorthStar now owns about 55 percent of the portfolio on its balance sheet, while the remainder is owned through its third-party investment vehicles. While the firm declined to comment, PERE understands that capital for the original loan came from various investment vehicles, including one of Colony NorthStar’s opportunistic credit funds. Colony NorthStar plans to refinance the portfolio, improve its performance and then sell it, a source with knowledge of the deal said.
The firm also manages $3.9 billion in other hospitality assets on its balance sheet, according to its second-quarter earnings. Its hospitality segment comprises 167 properties, most of which are Marriott-branded.
“We are optimistic about the ultimate prospects for this investment,” Tangen said on the call.
Goldman originally bought the hotel portfolio from Tharaldson Hospitality Management, a Fargo, North Dakota-based investor. The portfolio included assets such as the Beavercreek Residence Inn, a 100-unit, limited-service hotel in Beavercreek, Ohio, according to data provider Real Capital Analytics.
In June, the investment bank sold American Casino & Entertainment Properties to Golden Entertainment for $850 million. It originally purchased the four-property casino company for $1.3 billion through its 2007-vintage Whitehall vehicle, PERE previously reported.