L’Ermitage Seeks Chapter 11 Shield : Luxury Hotel’s Move Reflects Ashkenazy’s Financial Ills
L’Ermitage Hotel, one of America’s most highly rated inns and a favorite Los Angeles-area resting spot for celebrities and wealthy businessmen, has been forced to seek bankruptcy protection because of the continuing financial problems of its principal owner, Severyn Ashkenazy.
According to court records, the Ashkenazy concern that owns the luxury-suite hotel, a partnership known as 9289 Burton Co., filed a petition under Chapter 11 of the U.S. Bankruptcy Code. The filing will give the hotel protection from its creditors while it reorganizes.
Ashkenazy said the bankruptcy action was taken to avoid a threatened foreclosure on the hotel by Beverly Hills Savings & Loan. Beverly Hills President David Bretoi confirmed that foreclosure was imminent but declined to comment further. “Now, this will be resolved in the courts,” he noted.
Bankruptcy court records show that Beverly Hills Savings has a $28.5-million second mortgage on the hotel property and Chase Manhattan holds a $2.5-million first mortgage. Ashkenazy estimates the hotel to be worth at least $45 million.
Ashkenazy filed a similar Chapter 11 petition on Feb. 20 for Ashkenazy Enterprises, another of his companies, after Southern California Savings & Loan threatened to foreclose on Le Dufy Hotel in West Hollywood. Four of Ashkenazy’s real estate and hotel companies have now filed for Chapter 11 protection since late last year.
Both Southern California Savings and Beverly Hills Savings were seized by federal banking regulators last year after poor-quality real estate loans drove them into insolvency. Both financial institutions remain open under new management with new capital provided by the Federal Savings and Loan Insurance Corp.
The 50-year-old Ashkenazy, a native of Poland, estimates his companies’ assets at nearly $250 million. His operations, which he owns with his brother Arnold, include a string of luxury hotels and real estate throughout Southern California.
But L’Ermitage is the flagship, carrying a Five Star rating from the Mobil Travel Guide and a Five Diamond award from the American Automobile Assn. It is one of the few hotels in North America to merit both ratings.
The hotel itself, located inconspicuously on Burton Way in Beverly Hills, looks much more like an apartment building than a hotel. The atmosphere inside, though, is one of European-style grace and elegance.
The price of rooms starts at more than $200 a night, including such amenities as complimentary wine, terry-cloth robes in the room and free limousine service.
Ashkenazy said guests at L’Ermitage should not be affected by the bankruptcy filing. “On the contrary,” he said, “the staff is very sensitive that this can’t be a reason why the hotel shouldn’t continue to be first class.”
The Ashkenazy companies began having noticeable financial problems last year after he undertook a rapid expansion of hotel properties in West Hollywood--a program that was bedeviled by high construction costs and low occupancy rates. He has been trying for months to find outside investors to pump cash into the hotels, even hiring Merrill Lynch & Co. to coordinate the effort. But so far he has nothing to show for his efforts.
Ashkenazy has estimated that his companies are delinquent on loans of more than $100 million, with the largest chunks being owed to Beverly Hills Savings and Western S&L; in Salt Lake City.
