County Pension Fund Wins Bid for Ritz-Carlton : Investment: Sources say the Employees Retirement Assn. offered up to $45 million for the landmark Pasadena hotel.
The Los Angeles County Employees Retirement Assn., the state’s fourth-largest public pension fund, made the winning bid for the landmark Ritz-Carlton, Huntington Hotel in Pasadena, sources close to the deal confirmed Friday.
The sources, who asked not to be identified, confirmed that the winning bid of between $40 million and $45 million came from investors led by the Pasadena-based $14.3-billion pension fund that covers 80,000 county employees and 40,000 retirees.
The deal appears to end uncertainty over the venerable hotel’s future, which has been up in the air since it was taken over in May by Dai-Ichi Kangyo Bank Ltd. of Japan after U.S. investors defaulted on a $100-million loan to renovate the complex.
But it also raises questions about the propriety of a public pension fund owning a hotel, though other pension funds have acquired hotels.
On Wednesday, Lowe Enterprises, a Brentwood real estate development and management firm, announced that it had made the winning bid for the hotel on behalf of a public pension fund that it declined to identify. On Friday, officials at the bank, the hotel and Lowe declined to comment on details of the sale.
The winning bid followed a 60-day offering period by Secured Capital Inc., the bank’s financial advisers, that drew more than 10 bids, the sources said. An official at Secured Capital also declined to comment.
Marsha Richter, chief executive of the Los Angeles County Employees Retirement Assn., or LACERA, said the pension fund has not had any hotel investments. She declined further comment.
A local landmark for more than 85 years, the Ritz-Carlton has played host to movie stars, politicians and star-studded galas, such as TV producer Harry Thomason’s 1992 surprise birthday party, whose guest list included a sax-playing Bill Clinton.
The 383-room hotel, formerly the Huntington Sheraton, was completely rebuilt after being declared seismically unsafe in 1985. It reopened in March, 1991.
Since then, the hotel’s occupancy rate has risen to about 82% from 71% in 1993 and 63% in 1992, said spokeswoman Judy Rowcliffe.
But the hotel’s owners, including several local investors, defaulted on a loan to Dai-Ichi Kangyo after failing to renegotiate terms, and ownership ceded to a trust on behalf of the bank, said Thomas Tellefsen, one of the former owners.
Since then, the hotel’s future has been uncertain. Over the last year, the hotel has been set for auction only to be hastily withdrawn at the last minute.
Tellefsen said his group retains ownership of several cottages on the hotel property, as well as an adjacent shopping center.
Opinions were divided on the wisdom of a public employees pension plan investing in hotels.
“I’d question the propriety of using (pension) money to buy a hotel,” said Jim Gutierrez, staff director of Local 660 of the Service Employees International Union, the county’s largest labor union, representing 40,000 workers.
But in Columbus, Ohio, Robert McLaughlin, an investment officer with the Ohio Public Employees Retirement System, said his fund had invested profitably in hotel properties around the country, including the L’Auberge Del Mar Resort & Spa near San Diego, which the fund bought from Dai-Ichi Kangyo for $11 million.
“We tend to buy things nobody else wants,” he said. “That’s how we make money. Junkyards make money, but museums don’t.”
Julian Harmon, a vice president with Dai-Ichi Kangyo, said he and other principals in the deal were to meet Monday to formalize the deal, which is expected to close by Sept. 29.
