U. S. Grant Hotel Held in Default on 2nd Loan; Foreclosure Looms
Home Federal Savings & Loan has declared the owners of the historic U. S. Grant Hotel to be in default on their second-mortgage loan, exacerbating the financial woes of the downtown San Diego landmark.
In the notice of default filed Sept. 29 at the San Diego County Recorder’s office, Home Fed said Sybedon Corp., the New York real estate investment firm that bought the 283-room hotel in 1984, has been delinquent since February on interest and principal payments on a $32-million second-mortgage loan.
Sold in 1979
Unless Sybedon cures the default, a foreclosure sale of the 77-year-old hotel could be held in January, a Home Fed spokeswoman said. Sybedon bought the hotel in 1984 from CDS Grant, a San Diego partnership headed by developer Christopher Sickels. Sybedon paid $30 million cash and assumed nearly $50 million in debt, including the Home Fed loan, Sybedon spokesman Dan Peeples said Thursday.
Sybedon is current on the first mortgage, a $4.8-million note held by the Joseph Drown Foundation. Drown and San Diego financier Robert Peterson sold the hotel to the Sickels partnership in 1979. Sybedon is not required to make payment for several years on other liens, including a $6-million urban development action grant note held by the City of San Diego and $6.5 million owed to Sickels.
“Sybedon officials are in San Diego trying to work out a preliminary plan” to cure the default, Peeples said. “We expect to issue a joint statement early next week, and we expect the news to be favorable.”
The hotel was built by Ulysses S. Grant Jr. and named in honor of his father, the former President and Civil War general. Guests have included U.S. Presidents Franklin D. Roosevelt, Harry S. Truman and John F. Kennedy, as well as Albert Einstein and Charles Lindbergh.
Situated on Broadway across from Horton Plaza, the hotel fell into disrepair in the 1960s and 1970s. Sickels bought the hotel in 1979 with the intention of spending $11 million on a historically faithful rehabilitation in the spirit of the Stanford Court hotel in San Francisco.
But Sickels’ architects discovered serious deterioration of the Grant’s basement support columns and steel support beams. The renovation, which dragged on for four years, ended up costing $80 million by the time the hotel reopened in December, 1985. Nightly room rates at the luxury-class hotel started at $110.
Sybedon bought the hotel thinking that the scheduled 1987 opening of the San Diego Convention Center downtown would supply the hotel with a steady stream of delegate guests. But cost overruns and political wrangling have since pushed the convention center’s opening back to 1989, depriving the Grant of the anticipated guest traffic.
The convention center delay contributed to the Grant’s anemic 45% occupancy rate during 1986, during which it lost $7 million. The loss, greater than expected, caused Atlas Hotels, a hotel management company headquartered here, to back out of its agreement to operate the hotel in November, 1986. Sybedon has been running it itself ever since while looking for a new operator.
Still Hopeful
So far this year, the hotel’s occupancy rate has been running at between 50% and 60%, below the industry benchmark of 70% needed for most hotels to break even. Earlier this year, a Sybedon spokesman said he expected the hotel to lose between $1 million and $2 million in 1987.
Home Federal would not give a precise figure for the total amount Sybedon is in arrears. The Home Fed spokeswoman, Monica Wiley, said Home Federal had tried to be flexible. “We have talked to Sybedon and we continue to hope we can come to a solution to the problem,” she said.
Sybedon specializes in organizing investment partnerships to renovate historic hotels, Peeples said. The firm has similar projects in New Orleans and Richmond, Va., but the Grant is its only one in financial trouble, he said.
A plan announced in January for an $8-million, 96-room addition to the Grant is on hold, the spokesman said, until Sybedon can find a new management firm willing to make an equity investment in the hotel.
