Tuesday, March 23, 2010

Four Seasons Maui on Ropes

MARCH 22, 2010

Dell Family Investment Firm Skips Mortgage Payment, Seeks Debt Restructuring

By KRIS HUDSON, Wall Street Journal

The Four Seasons Maui has gone delinquent on its $425 million of mortgages just as the Four Seasons New York and others have reached compromises with their lenders.

MSD Capital LP, the private investment firm of Dell Inc. founder Michael Dell and his family, skipped the February payment on the debt as it seeks to restructure the loan, according to credit-rating company Realpoint LLC. The 380-room hotel's debt is split between two securitized mortgages, one of $250 million and one of $175 million.

The Four Seasons Maui has struggled in the past year along with most luxury hotels in Hawaii. Its occupancy fell to 60% in last year's third quarter from 79% a year earlier, according to Realpoint. Its net cash flow declined from $32.9 million in 2007 to $10.9 million in the first three quarters of 2009.

With the hotel unable to make its $23.6 million in annual debt service, MSD had paid more than $12 million in the past year to bridge the gap. An MSD spokesman declined to comment. The special servicer overseeing the loan, CWCapital Asset Management LLC, didn't return messages seeking comment.

Meanwhile, Beanie Baby tycoon Ty Warner's Ty Warner Hotels and Resorts reached a deal last week to extend by two years its mortgage on several resorts, including the 368-room Four Seasons New York, according to a person familiar with the talks. The mortgage had come due last January, but the four resorts pledged as collateral for the loan weren't generating enough cash flow to qualify for an extension.

Under the new pact, Mr. Warner's company has agreed to pay $25 million of the mortgage, bringing its outstanding balance to $320 million. He also added his Montecito Country Club in Montecito, Calif., as collateral. The other properties covered by the loan are the Four Seasons Resort The Biltmore in Santa Barbara, Calif.; San Ysidro Ranch in Santa Barbara; and the Las Ventanas resort in Los Cabos, Mexico.

A spokeswoman for the special servicer overseeing the Ty Warner mortgage, Berkadia Commercial Mortgage LLC, declined to comment.

Securitized mortgages are chopped up and sold to thousands of investors as bonds, with servicers overseeing the loans in the interests of those investors. Special servicers handle complex negotiations with borrowers.

Other Four Seasons hotels are working on compromises with their lenders. Mixed-use developer Millennium Partners LLC this month saved its Four Seasons San Francisco from foreclosure by bringing in Westbrook Partners LLC to pay $35 million of the hotel's $90 million securitized mortgage.

Four Seasons Dallas owner BentleyForbes LLC is negotiating with the special servicer overseeing the hotel's $183 million mortgage to revise the loan's terms. In the interim, the two entered a forbearance pact in which the special servicer has agreed not to foreclose as they try to work out a compromise.

MSD Capital bought the Four Seasons Maui for $280 million in 2004. It then refinanced the property in 2006 with the two mortgages totaling $425 million.

The Maui hotel is one of several Mr. Dell purchased in Hawaii in recent years. His MSD Capital partnered with Rockpoint Capital LLC in 2006 to pay $502 million for the 243-room Four Seasons Hualalai hotel and 8,800 adjacent acres for residential development. MSD has in excess of $10 billion in assets under management.