George Yao, who once bought the most expensive house ever sold in Orange County, was struggling on Friday to prevent the Radisson Plaza hotel in Irvine from sliding into a foreclosure sale next week.
Yao spent Friday negotiating with the Kansas City bank that now holds a $19.3-million first loan on the 289-room property, according to Jess Robert Bressi, Yao's Irvine-based lawyer.
Hotel industry sources have speculated that Yao would have to push the hotel into bankruptcy proceedings on Friday to derail the planned foreclosure. But Bressi said other alternatives were being sought before next Wednesday's scheduled sale. In any event, the hotel is expected to keep operating routinely.
"We're presently in negotiations with the lender and hope to avoid having to file," Bressi said. "It's likely to be Wednesday morning before we know one way or another where it's heading."
Yao owns 98% of GMY Investment Co. LP, which acquired the Radisson Plaza Hotel Orange County Airport in 1989. Yao, who serves as GMY's general partner, signed a $19-million promissory note to help finance the deal.
Officials at Bank Midwest, the Kansas City bank that apparently initiated the foreclosure action, were not available for comment Friday. Bressi said that Yao will not discuss his business affairs.
Little is known about Yao, who evidently has owned properties in California, Hong Kong, Taiwan and Hawaii.
The publicity-shy businessman made news in 1991 when he paid a record $13.6 million for a three-story, 12,000-square-foot house on Newport Harbor. The massive home has seven bedrooms, seven fireplaces, 13 bathrooms and a nine-car underground garage.
Yao borrowed $6.7 million and paid the remaining $7.5 million in cash, according to court records. Yao was back in the news in 1993, when he pushed the company that he created to own the Newport Beach house into bankruptcy proceedings.
The ongoing California real estate slump has rapidly chipped away at the value of the mansion. Title to the house transferred during a June trustee's sale to a company called Little Dix Bay Island Co., according to La Jolla-based DataQuick Information Systems Inc. The price was listed as $6.6 million.
Yao's finances began to crumble in the early 1990s, according to court documents filed in connection with the Newport Beach house.
Like many hotel deals struck in the 1980s, the Radisson in Irvine proved to be a troublesome venture.
In a letter filed in U.S. Bankruptcy Court in Santa Ana, Yao wrote that the hotel "turned out to be a much larger burden on my [finances] than I anticipated. . . . I have found it necessary to liquidate many of my other properties to fund the Radisson Hotel."
Yao wrote that his financial woes had forced him to sell land in Taiwan and properties in Southern California, including a condominium project in Alhambra and a condominium in Los Angeles' Westwood neighborhood.
Yao initially borrowed funds for the Radisson hotel from Homestead Savings.
When the S&L; failed, the loan was shifted to the Resolution Trust Corp. The loan evidently was shifted from there to the Bank of America before being acquired by Bank Midwest in Kansas City.
It was uncertain on Friday whether the RTC remains involved with the loan.
Yao apparently has continued to pump money into the hotel. "It's sucked a lot of cash, millions of dollars, out of Mr. Yao," Bressi said.
"He completely renovated it when he bought it, and . . . has renovation plans that, hopefully, will be undertaken early next year."
Hotel industry observers estimate that the hotel's value has fallen to somewhere between $13 million and $15 million.
"It's not a pretty picture," one hotel industry expert said. "That property is totally underwater."
Bressi described the hotel investment as "another case of a foreign investor coming here and paying far more than the asset was worth.
"It's the same story as all the Japanese banks that bought property here and were forced to sell."