Marriott Gets New Owner; Foreclosure Surprises Industry : Finances: CIGNA insurance takes over Woodland Hills luxury hotel, viewed as anchor in area hospitality field, after former owner defaults on payment.
The 463-room Warner Center Marriott Hotel has been taken over by its mortgage lender after the previous owner defaulted on a $412,500 payment.
Property records show that title to the 17-story hotel was transferred to Connecticut General Life Insurance Co., a subsidiary of Cigna Corp., on Jan. 5. Cigna installed a new management team at the hotel Feb. 26.
Connecticut General, based in Bloomfield, Conn., issued a $47-million construction loan in 1985 to Warner Center Marriott Hotel Limited Partnership, the company that developed the hotel.
In a written statement, Cigna said, “The property was sold in an uncontested foreclosure on Nov. 17, 1993.” The new owner signed a contract with Pittsburgh-based Interstate Hotels Corp. to manage the hotel, which retained the Marriott name.
News of the foreclosure came as a surprise to hotel industry officials in the San Fernando Valley. The Marriott, in Woodland Hills, was seen as the anchor of the hospitality field in the West Valley, with one of the highest occupancy rates among luxury hotels in the area. Room rates ranged from $150 to $190 per night.
“Their occupancy rate was very good. The company was just over-encumbered. Simply put, there were too many debts,” said Irwin Woldman, who follows the hotel market for Grubb & Ellis Commercial Real Estate Service in Sherman Oaks.
Roger Conner, spokesman for the Marriott Corp.--the general partner that defaulted on the loan--downplayed the significance of the foreclosure, saying that Marriott Corp. never owned the hotel outright. Instead, the owner was a limited partnership of which Marriott was the general partner, and Marriott controlled the majority interest in the partnership.
“It’s not an unusual situation. In the 1980s, Marriott began managing hotels on behalf of a variety of owners that used the Marriott name. The majority of our hotels are not owned by Marriott,” Conner said.
He said the partnership defaulted on the loans because the Warner Marriott was overly leveraged, but declined to provide further details.
Under its strategy, Marriott would bring investors into a limited partnership to develop a hotel and Marriott would manage it. Marriott also allowed hotel franchisees to use the company name and logo, for a fee, which is what
the Warner Center Marriott is doing now.
“The differences were that in a franchise operation, the franchisee would pay us to use the Marriott name, but the management operator was not Marriott and the employees were not Marriott employees. In a (Marriott) management situation, the employees are Marriott employees,” Conner said.
In the case of the Warner Center Marriott, the Marriott Corp. was the general partner in the partnership and Marriott International Inc., a subsidiary, managed the hotel. The Warner Center Marriott cost $65 million to build and opened in March, 1986.
Before the foreclosure, the hotel had a long-term ground lease with landowner Warner Properties III, a partnership between the Voit Cos. and Copley Real Estate Advisors. Warner Properties developed the Warner Center Plaza and nearby Warner Center Business Park. Voit is Warner Center’s largest developer.
According to the Cigna statement, the company will maintain “the underlying land on a long-term lease agreement.” Cigna will also make “appropriate capital investments in the property,” but has “not yet developed a long-term operating strategy,” it added.
There is some confusion over whether Interstate Hotels, the company hired by Cigna to manage the hotel, owns an interest in the Warner Center Marriott. Interstate Hotels spokesman Tom Loftus insisted that the company only signed a contract to manage the hotel for Cigna and did not buy an interest in it.
However, the Cigna statement said Interstate Hotels “purchased a minority interest” in the Marriott. Interstate manages 31 of the 50 franchised Marriott hotels in the United States. In total, the company manages 79 hotels in the United States, including nine in California and one in Canada.
Locally, Interstate manages the Bel Age and Mondrian hotels in West Hollywood and the Radisson Manhattan Beach.
