The oceanfront Terranea Resort, built on the former site of the Marineland of the Pacific theme park on the Palos Verdes Peninsula, opened this summer amid much fanfare. But its long-running financial challenges remain.
The 582-room luxury hotel and spa, completed in June at a cost of $480 million, remains open and is performing better than expected, according to Bob Lowe, chairman of Lowe Enterprises, the resort's principal.
But Terranea faces financing challenges on two fronts, falling into default with one of its lenders and losing out, for now, on a promised loan from the city of Rancho Palos Verdes, where it is located.
Lowe Enterprises of Los Angeles spent a decade planning and building the 102-acre property on bluffs overlooking the ocean formerly occupied by Marineland, a theme park closed in 1986 that featured whales, dolphins and other aquatic attractions.
Terranea finally hit the market at one of the worst times for luxury hotels since the Great Depression. Occupancy and room rates have fallen at many coastal resorts as both business and leisure travelers have cut back on spending to cope with the recession.
Financing for construction of Terranea came from Corus Bank, a troubled Chicago lender that announced this year it was undercapitalized and in danger of being taken over by federal regulators. Corus has not given Lowe the promised final $12.5 million of the construction loan that the company counted on to build the hotel, Lowe said.
Terranea has subsequently fallen behind on payments to a secondary lender, Cascade Investment Co., a Lowe spokeswoman said. Cascade filed a notice of default last week "to protect their legal position," Bob Lowe said. Lowe Enterprises and Cascade are working on a plan to restructure Terranea's loan and investors' equity, Lowe said.
With the $12.5-million shortfall in its construction loan, Terranea's owners were unable to meet the terms for a promised loan from Rancho Palos Verdes. The agreement with the city would have allowed Terranea to postpone payment of about $8 million of its transient occupancy taxes, also known as bed taxes.
City officials said they would consider reinstating the loan if Terranea could solve its financial issues.
The resort, which has one of largest ballrooms in Los Angeles County and is able to host five weddings at once, has been about 90% occupied on weekends this month, Lowe said.
Times staff writer Jeff Gottlieb contributed to this report.