Bonaventure Owners File for Bankruptcy
In another sign of the troubled commercial real estate market, the owners of the Westin Bonaventure--the largest hotel in downtown Los Angeles--on Friday filed for protection in U.S. Bankruptcy Court in Los Angeles, the hotel’s lender said.
The action will apparently forestall a possible foreclosure on the property by the lender, Equitable Life Assurance Society of New York. After declaring the hotel owners in default, Equitable disclosed last month that it was taking steps to foreclose on the property by Oct. 24.
The owners of the 1,400-room Bonaventure, a partnership led by Mitsubishi Trading Co. and Atlanta developer John C. Portman Jr., have been in default on their $75-million mortgage with Equitable since November, 1990.
“We are confident that our investment will be protected through the bankruptcy process,” Equitable’s real estate arm, Equitable Real Estate Investment Management Inc., announced in a prepared statement released late Friday.
The Bonaventure will remain open and will continue to be operated by the Portman-Mitsubishi partnership, possibly until a bankruptcy judge appoints a trustee.
Neither Portman nor Mitsubishi could be reached for comment Friday, so it could not be learned how the bankruptcy filing might affect Portman’s far-flung real estate empire, reportedly saddled with $2 billion in debt. It could not be immediately determined whether the partnership sought a reorganization or liquidation.
But only last month, the developer struck an agreement with more than 50 banks and investors to give him a financial reprieve and provide $8.25 million in new capital, in exchange for about 8% of his company’s assets. The ceded property included one northwest Atlanta office building, an industrial warehouse, some parcels of undeveloped land and some minority partnership interests, according to news reports.
The partnership’s bankruptcy filing highlights the tactics many troubled commercial real estate owners are taking to blunt the aggressive efforts of many banks and insurance companies to dispose of problem real estate loans and shore up their profitability.
Bankruptcies and financial reorganizations are being sought by scores of Southern California hotel owners that are reeling from the recession, a 39% increase in hotel rooms in an already glutted market and a decline in travel.
Equitable said in a statement released Friday that “in light of the difficult hotel market in Los Angeles, we believe the best thing that can happen to the hotel at this point would be for Equitable to take control.” But Equitable said it would play no role in the operation or management of the Bonaventure until the bankruptcy process is completed.
