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Default Notice Is Served on Hotelier

May 14, 2003|William Overend | Times Staff Writer

New York hotelier Ian Schrager, who has been pleading money problems over the abandoned renovation of Montecito's Miramar Hotel, has been served with a notice of default giving him three months to pay off a loan of almost $16 million.

The foreclosure department of Chicago Title Co. filed the notice on the owner of the Miramar property, once one of California's coastal landmarks.

It said that if Schrager didn't pay $15,974,499.97, the property could be sold without court action.

The title company filed the notice on behalf of Santa Barbara Bank & Trust, which loaned Miramar Holdings about half the $30 million Schrager paid for the property in late 1998.

The hotelier has abandoned the renovation for three years, pleading money problems and a bad economy.

Outraged Montecito residents accused him of lying to them when he assured them last year that there was "light at the end of the tunnel" and that construction would definitely be resumed.

Schrager could not be reached for comment late Tuesday after the default notice was revealed. But one leading California consultant on hotel sales predicted that the issue probably will end up being decided in federal Bankruptcy Court, where Schrager's lawyers could reiterate the case he has been making: that he has suffered unexpected economic problems since the Sept. 11 terrorist attacks.

"What most likely will happen is that Miramar Holdings will file bankruptcy and then there will be lengthy proceedings," said Alan Reay, president of Atlas Hospitality Group, a Costa Mesa hotel consulting firm.

"I've followed the Miramar controversy closely," Reay said. "I'm surprised it took this long. That has turned into a horrible controversy up there.

"Some of the people were trying to buy the place themselves just to get it patched up," he said.

Schrager, once the owner of New York's Studio 54, spent time in federal prison for tax evasion.

Now the owner of a chain of luxury hotels across the country, he bought the Miramar property with the promise of turning it into a resort with an English cottage feel.

He appeared to be on schedule at first, leveling the blue-roofed landmark and tearing up the landscape.

But work stopped more than two years ago.

Instead of a classy renovation, Montecito wound up with a ruined piece of local history.

Santa Barbara County Supervisor Naomi Schwartz has been increasingly critical of Schrager in the last year.

Tuesday, she said that only time will tell what ultimately will happen to the property.

"My interest on behalf of the community is that it doesn't fall into further disrepair," she said.

"Every day that passes, the old cottages there continue to decay," she said.

"It is an eyesore to the entire community," she said.

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