Defeat for U.S. Grant: Hotel Might Be Sold to Pay Debts
The historic U.S. Grant Hotel, once the center of downtown redevelopment, will be auctioned off on the county courthouse steps later this month unless the hotel’s owners make their delinquent $32-million mortgage loan current, the mortgage holder said Tuesday.
A Home Federal Savings and Loan spokeswoman Tuesday held out hope that Home Fed and hotel owners could resolve the overdue debt without resorting to the auction, which the savings and loan said would be held Feb. 24. Hotel manager Chris Venner and officials at New York-based Sybedon Corp., the hotel’s managing general partner, were unavailable for comment Tuesday.
Attorneys familiar with the case said they expect the hotel owner, U.S. Grant Hotel Associates, to seek protection under the U.S. Bankruptcy Code rather than allow it to be sold at auction. A bankruptcy filing would forestall a foreclosure sale by three to six months, they said.
High Debts, Low Occupancy
The Grant has suffered from high debt and lower-than-expected occupancy ever since reopening two years ago as a luxury class hotel after a four-year $64-million refurbishment. The hotel experienced its longest stretch of 100% occupancy last week when it hosted National Football League Commissioner Pete Rozelle and several NFL club owners and coaches.
Victor Vilaplana, an attorney representing Home Federal, said Tuesday that his client and Sybedon “never got close” in negotiations to cure the default. Talks will continue, he said, despite the notice of foreclosure sale to be filed today. “We felt we needed to adhere to the (foreclosure) schedule so as to produce an ultimate resolution or sale of the property,” Vilaplana said.
Home Federal holds a second mortgage on the 77-year-old hotel. The lender filed a notice of default Sept. 29, saying the hotel owners had been in arrears since February, 1987, on $2.8 million in back interest and principal payments. Legally, a lender can foreclose on a property 3 1/2 months after filing a default notice unless the default is settled.
The hotel owners are apparently current on payments on their first mortgage, a $4.8-million loan from the Joseph Drown Foundation.
The hotel owners also owe $6 million to the city in the form of an Urban Development Action Grant made to spur downtown redevelopment. The city’s loan appears to be poorly secured, however, because it will be paid back only after $41 million in other loans. Consultants hired by the city last year said the hotel might be worth only $35 million in a sale, leaving the city’s loan uncovered.
Assistant City Atty. Curtis Fitzpatrick said Tuesday the city will press forward with its cross-complaint filed last month against Home Federal and hotel owners in which the city is trying to improve its standing among creditors in the case the hotel is sold at auction.
Mayor Maureen O’Connor said the action by Home Federal was no surprise.
“We anticipated that. That (the financial problem) was obvious to the council from the beginning. What will happen is that it will be auctioned off and they can get an operator who can operate it with a profit,” she said.
‘Was a Tax Deal’
The mayor said the Sybedon-Grant deal “was not a business arrangement, it was a tax deal and I think it’s obvious that it’s not a sound business deal. Now if they auction if off, and get a price they can afford to run with, it will become a good business deal.”
Hotel investor Robert Lubin filed a class-action lawsuit against the Grant’s owners and Prudential-Bache Securities in December, alleging they used fraud and misrepresentation to attract $30 million from investors.
Times staff writer Ralph Frammolino contributed to this story.
