Marriott Ready to Operate Hotel Inter-Continental
The San Diego port district Tuesday approved the debt restructuring and change of operators at the Hotel Inter-Continental in San Diego, paving the way for Marriott Corp. to become the operator of what soon will be San Diego’s largest hotel.
Open since 1984, the 681-room Inter-Continental will more than double in size in December when a second 683-room tower is completed. Situated on San Diego tidelands, the hotel is adjacent to the San Diego Convention Center, which is under construction and scheduled for completion in the fall of 1989.
Marriott officials who attended the port district meeting refused to say when they expect to formally take control of the hotel. But Michael Cairns, Inter-Continental’s area chief executive for North America, said in an interview that the keys will be handed over tonight at 11:59 p.m. if the necessary documents are signed today, as expected.
By taking over operation of the hotel, which is expected to be renamed, Marriott will strengthen its position as a leading West Coast convention hotelier. The chain, based in Bethesda, Md., runs a 1,042-room convention center hotel in Anaheim and a 1,012-room hotel at Los Angeles International Airport. It is building a 1,500-room complex adjacent to Moscone Center in San Francisco and a 375-room hotel in Century City.
Inter-Continental sources said Douglas Manchester, the San Diego developer who controls the partnerships that own the hotel here, is forcing Inter-Continental out as its operator because the British-based hotel chain refused to make an equity investment in the hotel. Manchester has described the equity investment and debt restructuring as necessary for the hotel to avert bankruptcy.
Marriott is making an $8-million equity investment in the project and loaning $12 million to the developing partnerships, Pacific Gateway Ltd. and Pacific Landmark Ltd.
In return, Marriott will receive a 5% equity position in the project. Marriott will get a 30-year lease plus three 10-year options.
Smothered by payments on more than $217 million in debt, Inter-Continental lost $7.6 million in 1986 while operating at 69% occupancy. During the first four months of 1987, the hotel lost an additional $1.2 million, despite an 82% occupancy rate.
According to the debt restructuring agreed to by the hotel’s lenders, the holder of the first mortgage, Home Savings of America, agreed to lower the interest rate on its $207-million loan to 8% from 11%. Second-mortgage holder Beverly Hills Savings & Loan agreed to sell its $10-million note back to Manchester for $4 million cash.
