Default of Owner Leads to Foreclosure of Hotel in Hawaii

hotel-in-hawaii

The default of owner of Sheraton Bay Resort and Spa is facing foreclosure after the owner defaulted on loan. It is another symptom of the sick condition of the tourism industry in Hawaii since the recession.

Kenneth Marcus has been appointed commissioner by Ronald Ibarra, the Circuit Court Judge. He confirmed that the hotel will be put up for auction on 31st July 2009.

The owners of Koa Hotel have failed on a loan with dues running into nearly $60 million. Marcus said that right now, at least for some time, the hotel will continue to function as before. Marcus said, “As far as the operations of the hotel, nothing is likely to change, for all outward appearances. In terms of the short term, it should be business as usual.”

It remains unsure what will happen to the running of the hotel after the auction. It is however unlikely that anybody buying the hotel will shut it down. Koa hotel is owned by an equity firm – Brickman Associates based in New York. The major creditor of the property is Lehman Brothers. The latter had collapsed last year and filed bankruptcy.

The business of the resort started to decline when visitors in general began to stop coming since spring of 2008. This year the tourist number so far has declined by 15% compared to the same period during 2008.

The premises comprises of 521 rooms as well as a spa standing on 20 acres. The land is owned by Kamehameha Schools. There are three eateries and bars, shopping centre, exquisite pool as well as a spa. It also has a wedding chapel, a centre for fitness, business hub, and a couple of tennis courts.

The notice for the foreclosure for sale has not been put up as yet but will soon be done. No minimum bidding price has been said. Those who are interested are expected to register with Marcus – but not later than five days prior to the auction date. The bidders would have to ink an agreement of confidentiality before being allowed to browse through some financial documents. The winning bid would be taken by Marcus to court of Ibarra where more bids would be permitted. The winning bidder will get the approval of Ibarra.

Koa Hotel is current in payment of property taxes; neither were they defaulting in lease payments. Koa Hotel was bought from the previous Kona Surf Hotel in 2001. The owners took a loan of $82 million from Lehman Brothers.