For the second time in six months, a financially troubled local Ritz-Carlton resort hotel--this time in Rancho Mirage--has been taken over by new owners as the previous owners struggle to rid themselves of debt problems.
The 240-room Ritz-Carlton Rancho Mirage was built seven years ago on 24 acres in Riverside County and has become a popular destination for Southern California's rich and famous.
It was taken over last week by Olympus Real Estate Corp., a real estate merchant banking company in Dallas, from an investment partnership called Rentel, whose general partner is Houston-based Federated Development Co.
Olympus purchased the hotel's $50.5-million mortgage from the previous lender, Chemical Bank, for less than the note's full amount, sources said. Terms were not disclosed.
Rentel had reportedly missed mortgage payments and Chemical was preparing to foreclose, the sources said.
To facilitate the sale of the hotel and to provide for orderly payment of other outstanding creditors, Rentel filed for protection under Chapter 11 of the U.S. bankruptcy code on Friday.
Olympus, in cooperation with Chemical, Rentel and the hotel's operator, Atlanta-based Ritz-Carlton Hotel Co., will become the resort's new owner upon the final disposition of the bankruptcy filing.
The transaction removes uncertainty concerning the future of the hotel. Earlier, a dispute between Rentel and Chemical Bank led to the hotel's being placed in receivership in September under the control of C.W. Hospitality Group in San Diego. That company will remain the receiver pending the disposition of the bankruptcy filing.
The new ownership is not expected to affect the resort's operations, hotel general manager Scott Nassar said.
"We think that it's a great resort," said Olympus managing director Michael Medzigian. "It's had some challenges . . . but that's resolved now, and we look forward to making it a successful investment."
In August, the Los Angeles County Employees Retirement Assn. pension fund made the winning bid to buy the Ritz-Carlton Huntington Hotel in Pasadena after the hotel was taken over by a Japanese bank when the previous owners defaulted on their note.
The problems are not uncommon among luxury hotels, said Laurence Geller, a Chicago hotel consultant.
Simply put, the hotels don't bring in enough revenue to service the massive debt on the properties, even when they are doing well, Geller said. "They just cost too much and make too little," he said. "Ritz personifies the problem in many ways, but they're certainly not unique."
In the case of the Rancho Mirage resort, occupancy was 67% last year and revenue is expected to jump 10% this year from $22 million in 1994, Nassar said. The hotel hired 40 new employees in January, bringing the total staff to about 400.
Though owned separately, the Pasadena and Rancho Mirage hotels are both managed and operated by Ritz-Carlton Hotel, which provides its services in exchange for a percentage of revenues. There are 30 Ritz-Carltons worldwide.