Japanese Firm Buys Stake in U.S. Grant Hotel : Finance: It acquires HomeFed’s $45-million mortgage holding in the bankrupt downtown landmark.

A Japanese hotel company’s purchase of HomeFed Bank’s $45-million mortgage on the U.S. Grant Hotel last week should end the thrift’s drawn-out and troubled involvement with the owners of the downtown landmark.

HomeFed, the hotel’s leading creditor, would not reveal the amount Sansei U.S. Hotels Inc. paid for the notes and the hotel’s $5-million parking garage. According to HomeFed, the hotel and garage are worth $30 million. “We are very pleased with the deal,” spokeswoman Kaye Rowan said.

But Sansei’s acquisition of the notes and property does not necessarily mean that HomeFed will be severing all ties with the Grant, whose default on an initial loan of $32 million caused the hotel to declare bankruptcy in February 1988.

Sansei borrowed $30 million from HomeFed to finance the new arrangement.

“We’ve obviously assessed their credibility and determined that this is a worthwhile loan,” Rowan said. “We know that the U.S. Grant is in good hands.”

Under the purchase agreement, Sansei now owns the U.S. Grant’s 236-space parking garage, which HomeFed acquired as part of the hotel’s debt restructuring plan last year after its owners filed for protection under the federal bankruptcy code.

Sansei also will be able to foreclose on the hotel if its owners, U.S. Grant Associates, are not able to pay off their $50 million debt by Jan. 31, 1991.

Victor A. Vilaplana, a San Diego attorney who represented HomeFed in the bankruptcy proceedings, said HomeFed officials are relieved now that they can think of the hotel in terms of “normal loans, instead of a special arrangement . . . . All bankruptcy plans are sort of unusual.”

“I’m sure they are pleased that the matter has been restructured in a more conventional way,” he said.

Originally, Vilaplana said a second company, WestCoast Hotels, was going to join with Sansei in the deal. Under the final arrangement, WestCoast will simply manage the hotel.

John Roberts, who has been the U.S. Grant’s managing director since May, said the U.S. Grant’s new management company is considering adding a swimming pool and a spa to the hotel, which has 286 rooms and more than 30,000 square feet of banquet and meeting space.

Roberts also said the company is consulting with a major restaurant operator about the possibility of adding a theme restaurant.

But the most significant addition WestCoast and Sansei will bring to the U.S. Grant is stability, Roberts said. “Finally we have a permanent owner.”

The 80-year-old hotel reopened in 1985 after a four-year, $64-million renovation. Investors were originally optimistic about the hotel’s prospects as part of city’s downtown renewal, which included the construction of Horton Plaza and the San Diego Convention Center.

Within two years, however, unrealistic occupancy expectations and mismanaged marketing left the hotel mired in debt. HomeFed instituted foreclosure proceedings in September 1987. In February 1988, the Grant’s owners declared bankruptcy to block HomeFed’s plans to auction off the property.

A year ago, the hotel and thrift agreed to a restructuring plan under which HomeFed would have the right to foreclose if the Grant owners cannot pay off nearly $50 million in debt or find a buyer by January, 1991. Under the arrangement announced last week, Sansei will assume HomeFed’s right to take control of the hotel next year.

Roberts said business has been up at the hotel in recent months, though he declined to say by how much. Occupancy has generally been in the area of 50%, he said, which is approaching the hotel’s goal of 60% to 70% occupancy.

But, as Roberts acknowledged, meeting that goal could be tough, especially with the hotel room glut in San Diego.

“We’re doing as well as anybody in the downtown area,” Roberts said.