Jan. 12, 2011 — Strategic Hotels & Resorts, Inc., one of the three partners owning the historic Hotel del Coronado, has announced that the partnership has received a one-month extension on the loan maturity date associated with the hotel. The maturity date has been extended to February 9, 2011. Strategic Hotels owns a 45 percent interest in the partnership, with affiliates of Kohlberg Kravis Roberts & Co. and KSL Resorts owning the other 55 percent.
The extension will allow all parties to continue negotiations toward a viable long-term restructuring, hopefully avoiding going into default on the loan.
The partnership acquired the hotel in 2006, at the top of the market for hotels, but hard times have made repayment of its debt problematical. In November 2010 the partnership moved around $260 million of its $621 million into special servicing, which means it wasn’t paid to the lenders as promised. According to one published report, the entire loan came due this month, which is why all parties are working around the clock to strike a deal.
The partnership remains optimistic that it will be successful in restructuring the debt. If they are not successful and the loan goes into default, the lender would have to go into the lengthy and expensive process of foreclosure and the property would probably end up being sold.
While all of this has been going on, the Hotel Del has continued its expansion plans, winning approval from the California Coastal Commission in October 2010 for a proposed project that would add 144 luxury condo hotel guestrooms, as well as a meeting center. The unanimously approved plan involves changes to the hotel’s 15-year master plan, which initially won city approval in 2003. The revisions are meant to address concerns raised by residents and two commissioners about building atop an earthquake fault and providing affordable rooms for visitors as well as maintaining views of the hotel’s iconic red turrets.
The plan allows the construction of a 50,000 square foot convention center; a 17,000 square foot underground parking garage; and new guestroom space totaling 86,000 square feet. In all, the Hotel del Coronado’s overall physical plant will be brought to just less than 1 million square feet. The additional 144 proposed luxury guest units brings the city of Coronado’s total number of hotel rooms to 1,947, spread over a total of 17 sites.
How or whether the mortgage negotiations would affect those expansion plans remains to be seen.