Judge Grants Disney Control of Grand Hotel

The Walt Disney Co. gained control of the Grand Hotel on Wednesday, ending months of legal wrangling over the fate of the troubled Anaheim hotel and moving Disney closer to revealing plans for its long-awaited companion park next to Disneyland.

U.S. Bankruptcy Judge Alan Ahart in Los Angeles approved Disney’s plan to acquire the 11.1-acre site for $13.3 million and shutter the 242-room hotel.

Disney officials declined to comment on their intended use for the site until they have title to the property firmly in hand, but sources say Disney plans to tear down the hotel as part of its park expansion.

“We are pleased that the judge confirmed our plan,” Disneyland spokesman Tom Brocato said. “That’s all we can say at this point, but we are very happy.”

Employees of the Grand Hotel had little to celebrate, however.

Mary Lou Lytle, an 18-year veteran of the hotel’s accounting department, said the hotel’s final guests checked out at noon Wednesday and that employees have been asked to vacate the premises by Friday.

Lytle said workers had resigned themselves to the hotel’s closure. Most have already secured other employment, while a skeleton crew of 15 employees has been winding down the operation for weeks. But that doesn’t make leaving any easier, she said.

“It’s just a real empty feeling,” she said. “It was a great place to work.”

Disney outlasted two rival bidders for the property, including a group led by Anaheim hotelier Tushar Patel, who had planned to continue operating it. Patel had bid $12 million for the Grand Hotel, but was outflanked in recent weeks when Disney raised its bid from $12.2 million to $13.3 million.

Patel said he withdrew his bid just before the court hearing got underway Wednesday, after Disney agreed to compensate him $150,000 for expenses incurred in bidding on the hotel. Disney reached a similar agreement with the third bidder--the O’Conner/Peterson Trust and Joseph Brown Foundation--which withdrew its bid and agreed to support the Disney plan a few weeks ago.

“We couldn’t match Disney’s price,” Patel said. “But we’re happy we could come to an agreement that covers our investment.”

Court sources said Disney also agreed to pay $75,000 to the Hotel Employees and Restaurant Employees Union Local 681 to provide severance pay to displaced hotel workers. Union officials could not be reached for comment.

In the end, Disney was forced to pay significantly more for the hotel than it had originally planned.

Disney acquired the $8-million mortgage on the Grand Hotel in 1993 and began foreclosure proceedings in early 1995 when the partnership that owned the property defaulted on the note. Disney was a day away from foreclosing on the hotel in January when the judge gave the partnership a 90-day reprieve to find a buyer.

Instead of picking up the hotel for $10.2 million--its investment plus interest--Disney was forced to make a formal bid and compete with the other suitors for the property.

Although the company has refused to discuss its plans for the site, it is widely believed to be a linchpin in Disney’s long-awaited and much-delayed plans to construct a new theme park next to Disneyland.

Disney had planned to build a seven-story parking garage on the site as part of its $3-billion Westcot project announced in 1991. The company scrapped that project in 1995 when it was deemed too costly, but the company is expected to announced a scaled-back version sometime this year.