I agree that its a ridiculus price but it's just as ridiculus to sell their properties at these prices just to complly with their creditors which are just making them sell them little by little so they don't have to foreclose them. It's cheaper and easier for the lender and the managemet team still gets paid, so I'm wondering were their priorities are.
There's no way they will sell equity at these ridiculously depressed levels. There's no imminent pressure to do so. I do believe they will do an offering at a price north of $3.
I asked them the question of an equity raise at these levels. They responded "absolutely not" at these prices.
Could not have said it better... the too big to fail hotels are kept alive because the lender can't afford the cost of foreclosing and operating them long term until they can be sold.
It is estimated by hotel operators for lenders that it will take three years before they can sell a foreclosed property that is a signature type hotel like the ones BEE owns... sell for for what it is worth that is.
I believe BEE will make it... I think the partnership with the lenders is based on this problem with the notes being too large to foreclose on a whim... so they will be flexible.
But I also think BEE will shrink its balance sheet, take years of dead money to own before it pays off to the investors and those things naturally must weight in a decision of when to buy.
The high interest costs that accompanies even mild inflation will put a lid on new construction...
I dislike that there seems to be no strategic vision behind their decision, it almost looks like creditors are pushing them into making decisions that are forced or without any clear vision. On the other hand most of their properties are halmark properties which will turn around much easier once the economy improves.
On the 225K per room for the Four Seasons Mexico City, that number is misleading as the hotel is extremelly poorly run, just catering to international visitors and not to the Mexican business market which could increase revenues by just developing a marketing campaign inside the country. That's now up for the new owner to deal with.
Finally, I understand the business but under current economic conditions I would hesitate to buy or sell if I owned the shares. I could be seen as a gamble or toss up.
Yes it was... real estate in these choice addresses in Mexico City is very expensive... with Mexico being a poor country it is hard for a person who has not been there to realize how expensive it can be... this was a very good price for the buyer.
That is not to say that there was no good reason to sell. I found the most compelling reason being that the hotel's amenities would require an up-grade to meet competition and BEE simply could not afford that plus the added hurdle of the increased competition made it all worst.
And look at the sale of the Paris hotel... timing was awful and losses disproportionate but I guess they where viewed as necessary to improve liquidity...
They are fighting for survival...
The Ritz Carlton was canceled for lack of funding. It would preasure them but they still had the upside of one of the best lots of land ton increase the hotel from 9 floor that it currently has to 40 like the BBVA towers next door or the Torre Mayor in front of them.
They sold it for 6-7 times free cash flow considering it had no debt and sold as such.