Extended Stay reportedly in talks with lenders

The Lightstone-backed hospitality chain is in discussions to turn over the company to its lenders, according to a report. New Jersey-based private real estate company Lightstone acquired Extended Stay from Blackstone last year for $8bn.

The Lightstone Group is reportedly in talks to hand the US hospitality chain, Extended Stay Hotels, over to the chain’s lenders.

Extended Stay, which operates more than 680 hotel properties in the US and Canada, was acquired by the Lakewood, New Jersey-based private real estate company in April 2007 from The Blackstone Group for $8 billion.

Lightstone, which was founded by real estate mogul David Lichtenstein in 1988, also manages residential properties in the US and commercial properties in the US and Puerto Rico.

According to a report in The Wall Street Journal, the 2007 deal had been leveraged with more than $7 billion of debt, compounding the chain’s ability to survive the economic downturn. Although it has no major debt expirations due soon, the report cited sources who warned Extended Stay could default within the next two months if the economic situation worsens. Lightstone and Extended Stay were unavailable for comment by press time.

Extended Stay Hotels, based in Spartanburg, South Carolina, has hospitality properties under the Extended Stay Deluxe, Extended Stay America, Homestead Studio Suites, StudioPlus and Crossland brands.

Former Blackstone president John Kukral, named one of PERE magazine's ten fund managers to watch in the June 2008 issue of the magazine, led the private equity firm in its 2004 acquisition of the Extended Stay America hotel group for $2 billion, with the assumption of $1.1 billion in debt in 2004. Kukral was president of Blackstone from 2002 to 2005.

Blackstone combined the 485 properties in the Extended Stay portfolio with assets from its Homestead Studio Suites brand. In 2004 and 2005, Blackstone also added a number of properties to the Extended Stay portfolio, including publicly-listed Prime Hospitality. The Extended Stay portfolio was sold to Lightstone for $8 billion three years later.