While San Francisco’s W Hotel has sold for $90 million (less than half its estimated replacement cost), a “two-year $90 million loan for the 277-room Four Seasons Hotel San Francisco” is now in default. Apparently on purpose.
[Millennium Partners] has purposefully stopped making debt payments as a strategy to jump start renegotiating the debt with the special server, LNR Property Crop. The Four Seasons is the second luxury hotel to default on its debt payments in recent weeks. The owners of the 393-room Renaissance Stanford Court Hotel in Nob Hill, funds controlled by JER Partners, defaulted on a $89 million loan, according to lender Barclays Capital.
Keep in mind “the action pertains only to the debt on the San Francisco Four Seasons Hotel property, which is owned independently of all other Millennium properties, including the Millennium Tower at 301 Mission St.”
Cue Jean Paul Getty’s infamous quote: “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
UPDATE (12/11): “The Four Seasons San Francisco is heading closer to foreclosure after lenders rejected owner Millennium Partners’ proposal to renegotiate the loan on the property, according to the credit-rating agency Realpoint.”
∙ S.F.’s W Hotel sells for $90M [San Francisco Business Times]
∙ Four Seasons San Francisco in default [San Francisco Business Times]
∙ Millennium Tower (301 Mission) Update: Timing, Kitchen(s) And Bath [SocketSite]
∙ Four Seasons close to foreclosure [San Francisco Business Times]
I would LOVE to be able to do this with my student loans but oh yeah, it would destroy my credit score for years. Horsefeathers!
Man I feel old. I remember when
$100K/room was the going rate.
One more object lesson to those who confuse money w/wealth.
slappy — stay tuned, you’ll get a chance to default on your student loans consequence-free in a bit (probably during the second dip :)).
Yeah, Slappy missed the last boat. He could have bought an average 800K house 0 down in 2005, refi-ed it in 2006 for 900K, repaid his student loan with part the money, live for 2 years without making a payment. Sure he’d have a ding on his credit, but he would come ahead by 100K+.
does the quote still apply if the bank knows you could actually pay?
Half it’s replacement cost? Who says and who cares? You mean like a used BMW is worth half it’s replacement cost?
Some might argue that business loans are made with a certain assumption of risk, whereas personal loans to individuals, while structured the same way, carry personal responsibility. I do not look at my business finance the same way I look at my personal finance, and few would. That is why businesses actually pay more for loans than homeowners do for mortgages or student loans. Its more akin to credit card risk where business loans are concerned.
Some might argue that business loans are made with a certain assumption of risk, whereas personal loans to individuals, while structured the same way, carry personal responsibility.
Those argue such things should be kept safely away from money. Rates are determined by credit, collateral, and capacity to re-pay. Of course, loans backstopped by the government, whether guaranteed student loans or agency mortgages, or FDIC bonds, carry a lower rate, but there is no “personal responsibility” discount, or expectation of such, above and beyond the usual adjustments for creditworthiness, which applies to companies as well.
But, back to the topic at hand — is anyone other than me on a deathwatch for The Millennium? I’m assuming high odds of foreclosure within 2 years. Typical HELL property (Huge Expensive Leveraged and Late).
If these hotels understood the sales dynamic they would not be in this situation. How pathetic…..
mike wrote:
> If these hotels understood the sales
> dynamic they would not be in this
> situation. How pathetic…..
I’m not going to say that every hotel that has trouble this year is perfect, but when ADR (“average daily room rates”) and occupancy both drop quite a bit at the same time there is not much any operator (even one that understands the “sales dynamic”) can do to cover debt service.
Makes the Four Seasons business model look prophetic. They (almost?) never own the real estate.
Of course they’re caught in this downturn, but in way better shape w/o the property.
And this: “the action pertains only to the debt on the San Francisco Four Seasons Hotel property, which is owned independently of all other Millennium properties, including the Millennium Tower at 301 Mission St.”
I love how the corporate lawyers can just seal off the risk of each business endeavor. Of course, Robert points out that it may not matter if each compartment is flooding, but I’m sure there’s plenty of safe money immunized from these indidual risks.
What does this mean for the Millennium Tower? Will they have to lower prices (Finally?) They’ve held out under the guise of being so strong that they can survive with an empty building (30 units occupied!). That can’t last long with other of their properties in DEFAULT!
“The Four Seasons San Francisco is heading closer to foreclosure after lenders rejected owner Millennium Partners’ proposal to renegotiate the loan on the property, according to the credit-rating agency Realpoint.”