Investor Group May Rid RTC of Hyatt Newporter : Liquidation: Hotel that had been scheduled for the auction block is among S&L; properties Patriot American Investors is considering buying.
The Hyatt Newporter Hotel is part of a $500-million package of Resolution Trust Corp. properties that a U.S. and Canadian group of investors and developers are considering purchasing, a member of the group said Wednesday.
New York-based Patriot American Investors selected about 75 office buildings and 30 hotels, including the Newporter, from more than 45,000 commercial and residential properties under control of the RTC--the federal agency in charge of disposing of failed savings and loan assets. The final list of properties had not been determined, but the deal is expected to be completed next month.
Paul Nussbaum, a partner in Patriot American, confirmed that the Newporter is one of the properties. Patriot American officials would not say whether other Orange County properties are included in the proposed deal. Most of the properties are in the Southwest and have been for sale by the federal government for six months or more.
“Despite our efforts to reduce the prices, they have not moved,” said Stephen Katsanos, an RTC spokesman in Washington. “This is a way of returning the properties to the private sector, and putting them into the hands of investors who have a proven track record in property management.”
Patriot American was formed to negotiate purchases of RTC properties, said Nussbaum, a New York real estate attorney.
The RTC took over the Hyatt Newporter last January from its owner, Beverly Hills-based Columbia Savings & Loan, which was seized last year by federal regulators. Earlier this month, the RTC sold Columbia’s 20 branches to American Savings Bank, of Stockton, Calif.
The 410-room Newport Beach resort had been headed for the auction block. The federal agency included the hotel on a list of 15 S&L; properties to be auctioned Nov. 21 in Palm Springs.
But the hotel was pulled from the list last week when a potential buyer emerged, Katsanos said.
Donald Wise, a senior associate with CB Commercial Real Estate Group in Anaheim, estimated the hotel’s sale price at less than $20 million--a tiny part of the half-billion-dollar deal. Wise was supposed to manage the Newporter’s sale at auction.
In previous sales, Wise said, the hotel’s marketability has been hurt by the fact that it sits on 26 acres of Irvine Co. land, so a new owner would acquire only the building. The lease expires in the year 2048.
The 29-year-old Newporter--sprawling California-style bungalows surrounded by a nine-hole golf course--was the first big resort hotel built in Newport Beach.
Over the years, newer hotels in the area have lured away business from the Newporter. The hotel has been through six owners, including the RTC. Columbia Savings bought the hotel for $26 million in 1985 from Ridgeway Ltd. of Newport Beach, and sunk at least $17 million into renovations.
In exchange for picking up the properties at a discounted price, Patriot American will pay the RTC about 30% of the profits from sales of any of the properties, Katsanos said. The agreement also specifies that the RTC will take a portion of money generated by the buildings while under Patriot American’s ownership.
Therefore, guests at the hotels included in the deal will be helping to bail the government out of the S&L; mess. “They will be making a patriotic contribution,” Katsanos said with a laugh.
Hyatt Corp. took over management of the Newporter in 1989. “We would certainly love to continue to manage it (after the sale), and to my knowledge there’s nothing to indicate that we won’t,” said Pat Engfer, the hotel’s general manager.
But Wise said that in most hotel sales, the buyer usually wants to start anew: “Two things change immediately for almost any hotel going through a transfer--the chain affiliation and the management.”
The Newporter has faced the same difficulties as other hotels in the John Wayne Airport area.
Jim Burba, a hotel consultant with the Irvine office of accounting firm Pannell Kerr Forster, said the average occupancy rate for airport-area hotels in June was 61.8%. “The Newporter falls into that range,” he said. “For a healthy profit, hotels typically want to see numbers closer to 70%.”
The four partners in Patriot American are John Daniels of Toronto, a founder of Cadillac-Fairview, a major developer of shopping centers and office buildings; William L. Mack, a developer and investor in commercial properties in New York and New Jersey; George Mann of Toronto, a chairman of Lincoln Savings Bank in New York and chairman of Union Gas Ltd., a natural gas utility in Canada, and Nussbaum.
