The Bratton Team

Process may resolve resort’s ownership by end of the year

August 29, 2012

By NANEA KALANI – Staff Writer ( , The Maui News

The Grand Wailea could be under new ownership before the end of the year as the hotel's owners seek to auction off assets and emerge from bankruptcy protection.

A Singaporean government investment fund has agreed to pay $1.5 billion to buy the Grand Wailea and three other U.S. luxury resorts that owners Paulson & Co. and Winthrop Realty Trust foreclosed on last year.

The offer by the Government of Singapore Investment Corp., a major creditor to the properties, will trigger an auction of the resorts in October, according to documents filed in bankruptcy court in New York.

The bidding entity is a sovereign wealth fund that manages Singapore's foreign-exchange reserves. The fund manages an estimated $300 billion in diversified assets in more than 40 countries.

A Sept. 10 hearing is set in Manhattan for a bankruptcy judge to approve sales procedures and consider the bid. An auction will determine whether another buyer will pay more for the portfolio of resorts.

In addition to the 780-room Grand Wailea, the other properties in the deal are the La Quinta Resort & Club and the PGA West golf course in La Quinta, Calif.; the Claremont Resort & Spa in Berkeley, Calif.; and the Arizona Biltmore Resort & Spa in Phoenix.

The hotels – all of which are managed under Hilton's luxury Waldorf Astoria brand, except for the Berkeley property – have been operating under bankruptcy protection since February 2011.

Local management at the Grand Wailea sees the new ownership opportunity as a positive.

"We think it's a good thing," said Matt Bailey, managing director for the Grand Wailea. "I don't want to minimize the significance of the bankruptcy, but we have tried to shelter our guests from it. It's business as usual."

He said the sale would help alleviate uncertainty for the hotel's approximately 1,500 employees.

"The auction, scheduled for October, will bring a close to our owner's bankruptcy case. While the Grand Wailea has been largely unscathed by the events of the past year, this ends any uncertainty surrounding ownership of the three Waldorf properties in question," Bailey said. "Hilton's management contract runs for the next 24 years at Grand Wailea, (and) we plan to continue offering a singular Waldorf Astoria experience for many years to come."

The Grand Wailea had last changed hands in 2007, at the peak of the real estate boom, when it was acquired by a subsidiary of Morgan Stanley.

Paulson & Co., a New York-based hedge fund, and Winthrop Realty Trust, a publicly traded real estate investment trust, took over the Grand Wailea and several other resorts by foreclosing on the previous owner.

Soon after, they put the Grand Wailea and four other resorts into bankruptcy to prevent foreclosure of $1 billion in mortgages and $525 million in maturing mezzanine debt held by the Singaporean investment fund, MetLife and others.

The fifth property – the Doral Golf Resort & Spa in Miami – was sold to real estate investor Donald Trump earlier this year for $150 million.

Paulson and Winthrop had previously agreed to make "periodic payments" to the Singaporean investment fund and MetLife with the goal of paying them off in full by Saturday, or the resort properties would be put up for sale.

A payment due Aug. 1 was not paid, according to bankruptcy documents.

"As a result, the debtors informed the court and their stakeholders that they would run an auction process," an Aug. 17 court filing said. "The debtors continued to engage potential purchasers and sponsors, including (the Government of Singapore Investment Corp.), to secure a backstop offer to purchase the properties and support a plan of reorganization."

An agreement was reached Aug. 16 on the Singaporean fund's $1.5 billion offer, which would include $1.12 billion in cash and paying off $360 million in debt.

Paulson initially was reportedly looking to take part in the auction in an effort to hang onto the properties, according to the Wall Street Journal.

The parties have agreed on a $28 million so-called breakup fee for the Singapore fund if another bidder is chosen at auction, according to court documents.

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