274 to lose Waikiki hotel jobs
By Andrew Gomes
Advertiser Staff Writer
As the Hawaiian Waikiki Beach Hotel heads for a May 16 foreclosure auction, 274 employees received termination notices this week from the hotel, but the owner of the mortgage on the 714-room property is planning a $30 million renovation.
In a letter filed with the state Department of Labor & Industrial Relations yesterday, the hotel said that because of the foreclosure, all its workers would be terminated permanently effective June 30.
Employees remain uncertain whether they will be considered for rehire after the auction and a confirmation hearing to approve a sale by their last day.
Leucadia National Corp., a publicly traded financial services holding company based in New York, acquired the mortgage on the Hawaiian Waikiki last June from Mitsui Trust & Banking Co. Ltd. after hotel owner Otaka Inc. defaulted on an $85 million loan.
Leucadia, through subsidiary Hawai'i Venture LLC, sued Otaka in August, alleging that the struggling hotel operator diverted funds from the Hawaiian Waikiki to support its money-losing Kona Surf Resort on the Big Island.
The court last year appointed local attorney Patricia Kim Park as an independent receiver to operate the hotel. Earlier this month, a judge ruled in favor of Hawai'i Venture, and ordered the property to be sold at foreclosure auction.
Ray Camacho, O'ahu division director of the International Longshore & Warehouse Union Local 142, which represents about 120 bargaining-unit employees at the Hawaiian Waikiki, said workers are concerned about current benefits and future employment.
Severance for the hotel's unionized workers totals $1.9 million, with another $360,000 in vacation time, he said.
Camacho added that because of the foreclosure process, he's not sure what will become of the existing employment contract, which is under extension.
"We don't want to see a situation where a prospective buyer came in and threw out the workers like used furniture," he said. "They've seen that hotel through its good and bad times, and to not be able to continue would be a shame. It would be a disaster for them.
"We have to hope for the best and prepare for the worst," he continued. "We're hoping it's going to be smooth."
Park did not respond to repeated requests for comment. Otaka, through a spokesperson, declined comment.
The situation for employees likely will be clearer once a purchaser is confirmed by the court.
It is possible, but not certain, that Leucadia intends to outbid any other interested buyers by credit bidding against the debt it holds on the hotel. As mortgage holder, the company can bid up to $85 million even though it acquired the mortgage at a discounted price estimated at around $30 million.
It is not likely that anyone would pay $85 million for the leasehold hotel, given that Otaka tried unsuccessfully to sell the leasehold hotel for $65 million last year.
Leucadia is a $715 million-company with principal investments and operations in insurance, banking, real estate, mining and manufacturing. Last year, Leucadia had domestic real estate investments in mostly office buildings and residential developments.
The company owns some hotels and is generally a long-term investor, according to Kelvin Bloom, chief operating officer of Aston Hotels & Resorts, which has been hired as a consultant by Leucadia.
Leucadia officials could not be reached late yesterday. Bloom said Leucadia has planned a roughly $30 million renovation of the Hawaiian Waikiki that would reposition it from an economy hotel to a mid-price hotel.
"They are very interested in Hawai'i," Bloom said of Leucadia. "They would be a very positive addition to our community."
Local tourism industry analyst Joseph Toy, who is president of Hospitality Advisors LLC and has done consulting work for Leucadia, said the company's financial stability (net profits were $115 million last year) give it the capability to improve assets.
"They are really the types of owners that our market needs," he said.
Otaka has been trying to get rid of poorly performing hotel properties for more than a year. Last year, the company sold the Hawaiian Regent in Waikiki to Marriott International, and closed the Kona Surf, which is also undergoing foreclosure proceedings.
Andrew Gomes can be reached by e-mail at agomes@honoluluadvertiser. com
