Lender Asks Court to Name Receiver for Grant Hotel

The U.S. Grant Hotel’s largest lender Friday filed a request in Superior Court for a court-appointed receiver to take over management of the troubled downtown San Diego landmark.

Home Federal Savings & Loan, which initiated foreclosure proceedings on the beleaguered hotel in September, also asked the court to assign hotel rents and other income to Home Federal, and to grant a temporary restraining order prohibiting the Grant’s owners from disbursing income until a receiver takes over.

No Payments Since January

Home Federal, which holds the $32-million second mortgage on the 283-room hotel, said it has not been paid principal or interest payments totaling more than $3 million since January. The lender’s foreclosure action could culminate in an auction of the historic property as early as January unless owner U.S. Grant Associates, a partnership headed by Sybedon Corp., cures the default.

Officials at Home Federal and Sybedon Corp. were unavailable for comment late Friday.

Home Federal’s attorney, Victor Vilaplana, said his client and Sybedon have held numerous meetings and discussions in an effort to resolve the default, but that “so far nothing concrete and specific has really been agreed to.”

“This is a standard remedy sought by a secured creditor,” Vilaplana said. “We just need to protect our rights.” Having the court appoint a receiver to run the hotel is an important way of protecting what Home Federal sees as its right to the hotel’s income while the property moves through the foreclosure process, he said.

Little Danger of Closing

Observers said there was little danger of the Grant being closed since it is in Home Federal’s financial interest to keep it open.

Financial problems caused by the high debt and lower-than-expected occupancy have plagued the 77-year-old Grant since it reopened in December, 1985, after a four-year, $64-million renovation. The hotel was built by the son of the Civil War general and 18th U.S. president.

Discouraged by losses of $9 million in its first year of operation, the Grant’s initial operator, Atlas Hotels, terminated its management of the downtown landmark in November, 1986. Sybedon, a New York-based real estate investment firm, has operated the hotel ever since while searching unsuccessfully for an operator.

The Sybedon partnership bought the hotel for $79 million in 1984 from San Diego developer Christopher Sickels. To make the purchase, Sybedon raised $30 million in cash from hundreds of private investors, including many San Diegans.

Sybedon has not made mortgage payments to Home Federal since a $5-million letter of credit put up by Atlas and Sickels was used up in January, sources said.

Hotel occupancy was 40% in 1986, below the 60% projected. So far this year, the Grant’s occupancy has been about 52%, far below the 60% to 65% hoped for, hotel officials said.

To cut costs, the Grant has laid off a third of its staff and cut room service. The Garden Room restaurant has been closed and is being turned into meeting space.

In a bid for much-needed cash, the Grant’s owners asked the city to subordinate its $6-million third mortgage so that the hotel could receive $1 million in new funds from Home Federal.

But the City Council voted down the request Oct. 26 after bankruptcy attorneys retained by the city said the hotel was on the verge of collapse and that the move would only put the city farther back in line to recoup its loan in the event of a foreclosure sale.