Posted on: Thursday, May 17, 2001
Hawaiian Waikiki Beach Hotel gets Hawai'i Ventures' sole bid
By Glenn Scott
Advertiser Staff Writer
As worried employees of the Hawaiian Waikiki Beach Hotel looked on at a foreclosure auction yesterday, a New York-based holding company that owns the mortgage on the hotel moved closer to acquiring the property.
Leucadia National Corp., through subsidiary Hawai'i Ventures LLC, won the right to buy the hotel with the sole bid of $80 million, about $5.5 million less than hotel owner Otaka Inc. had owed the lender before foreclosure.
If Hawai'i Ventures receives judicial approval during a confirmation hearing expected in two weeks, it will be in position to take ownership of the 715-room Waikiki hotel by its target date of June 30.
Aston Hotels and Resorts already has announced that it will manage the hotel as of July 1, provided the deal is completed.
Hawai'i Ventures was expected to be the only bidder yesterday, but its representatives were not alone during the auction on the patio of the 1st Circuit Court building on Punchbowl Street.
About 35 hotel employees with the International Longshore and Warehouse Union, Local 142, attended the brief auction, many carrying signs that read: "We should be part of the deal."
The hotel's 274 workers have lived with uncertainty since notification in April that their jobs would be terminated June 30 because of the foreclosure. Some of the workers said yesterday they object to the notion that they should reapply to new managers for jobs they've held for years.
Willie Kepa, a pantry worker at the hotel for 24 years, wore a dark-green ball cap from Dartmouth College. She called the cap a symbol of her years of loyal service with the hotel and earnings that helped send her daughter, Ginet, to the Ivy League school.
"If they recognize that we're not like pieces of furniture, that would be much appreciated," said Kepa. "We're hard-working people."
In addition to concerns about their labor contract, which was extended after a Jan. 31 expiration, union officials said yesterday that neither Otaka nor Hawai'i Ventures has so far offered assurances that the workers' accrued severance and vacation pay — valued at an estimated $2.3 million — would be honored in the changeover.
"We'll bring that up with the judge at the confirmation hearing," said Ray Camacho, the union's O'ahu division director.
Susan Tius, an attorney for Hawai'i Ventures, declined to discuss labor questions yesterday but said the company would address related issues at the hearing.
Leucadia is a publicly traded, $715 million company with investments and operations in banking, insurance, real estate, mining and manufacturing.
The company's bid to take over the sagging Hawaiian Waikiki Beach Hotel fits a recent trend in which well-capitalized Mainland investment companies have acquired hotels here from Otaka and other highly-leveraged Japanese companies.
The purchasers generally have infused cash into remodeling, substantially reduced debt and brought in national brands to manage and market the properties more aggressively.
Leucadia officials have suggested they will invest about $30 million to renovate the Hawaiian Waikiki Beach.
Leucadia became involved with the hotel in June 2000 by paying about $30 million to purchase secured loans worth $85 million from the original lender, Mitsui Trust & Banking Co. of Los Angeles.
In the auction, Hawai'i Ventures bid what amounts to money it would recapture in the foreclosure.
Honolulu lawyer Patricia Kim Park, who is serving as both court-appointed receiver and commissioner in the case, noted yesterday that other parties can still bid on the hotel during the confirmation hearing. They must bid at least $84 million, a 5 percent increase above Hawai'i Ventures' existing bid.
The hotel, at the corner of Kalakaua Avenue and Paoakalani Street, holds a 2000 tax-assessed value of $67 million. As of April 1, outstanding debt on the property was $90 million, according to Park.
Two parcels make up the property: a fee-simple section of 7,200 square feet, including a mauka tower of 71 rooms; and 58,000 square feet of leasehold land owned by the Smyth Family Trust and including the 644-room main tower.
