When The Wall Street Journal broke news Tuesday that approximately US$3 billion of the debt associated with Blackstone’s acquisition of Hilton Worldwide would be sold in the next two weeks, it started a buzz in the HotelNewsNow.com office. First issue: Could we confirm it? Second issue: If it were true, did it matter to our readers?
Sorry to spoil the end of this story, but we couldn’t come to a conclusion on either point. Nobody is talking (on the record) about the potential sale and therefore we can’t cover something that might—or might not—happen.
I was in the minority with my belief this is an issue readers would care about. Maybe I’m a sucker for a headline that includes “billion.” Maybe this is something that will prove to be the hallmark of the return of debt activity. Where do you fall on this issue?
Let’s assume the debt will be sold soon. Here are the reasons why I would write the story:
1. Market confidence. If the stagnation of debt killed the United States hotel finance market, then signs of life are good. The WSJ said this is one of the biggest commercial real estate debt deals since the financial crisis. Bankers who handle the hotel sector are probably looking at this deal as a bellwether. Are there any hotel owners looking at this as a glimmer of hope? I think so. As long as no one takes it as an immediate sign of a comeback, it’s safe to be happy about this news.
2. Interest in the hotel sector. A large deal involving a hotel company is good for the industry.
If the holders of the senior debt, which include Bank of America and Deustche Bank, are ready to sell, then someone is seeing an upturn in hotel sector confidence. If and when the deal comes to light, the price will make headlines, too. The WSJ article claims the debt is being sold dollar-for-dollar. That’s good news for the entire real estate finance industry, which includes hotels.
While I’m at it, I think it’s pretty cool the WSJ took time to write a story about Hilton’s debt even without being able to cite sources. They don’t stick their necks out for puff pieces.
3. The CMBS comeback. I disagree (with no material finance experience, mind you) with Joel Ross that this means nothing for small hotels. CMBS reincarnation has to start somewhere. Why not start with a huge deal involving the loan on a hotel company? And should this deal come to fruition, I am sure bankers, brokers and multi-property owners will be analyzing the SEC filings from BofA and Deustche Bank.
4. Historical significance/record keeping. This is sometimes the simplest reason to cover an event, but nevertheless valuable. Do I assume that all of our readers are on Wall Street, waiting for this deal to close? Certainly not. But I do know that you have come to expect an understanding of the bigger issues that affect the industry. When we look back at 2010, will this make the cut? I say yes.