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SPARTANBURG, SC-Locally based Extended Stay Hotels has filed for Chapter 11 bankruptcy protection in one of the largest filings by a commercial real estate company. The 680-property national chain cites $7.1 billion in assets and $7.8 billion in liabilities.

“The contraction of construction and new business development began to significantly and adversely affected Extended Stay’s revenue stream,” the company states in documents filed Monday in US Bankruptcy Court in New York City. It cited a 23% drop in average revenue per room through the first five months of this year compared to the same period in 2008.

Extended Stay was acquired in 2007 by Lightstone Group, which paid $8 billion to Blackstone Group at the top of the market. Among its creditors are Bank of America, through its Merrill Lynch subsidiary, and Wells Fargo & Co., which owns Wachovia Bank.

US taxpayers are also stakeholders in Extended Stay by way of a loan in the buyout from Bear Stearns Cos., which collapsed in March 2008 and was taken over by the Federal Reserve, according to a report by the Wall Street Journal. BlackRock Inc. has been representing the Fed in the restructuring talks, people with knowledge of the negotiations told the newspaper.

Extended Stay states in its bankruptcy filing that it will remain in business throughout its Chapter 11 restructuring and will seek a “comprehensive restructuring of the entire capital structure.” The company, which manages 77,000 hotel rooms, also says it will not need debtor-in-possession financing.

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