Terranea Resort in Rancho Palos Verdes, which defaulted on two loans last year, has found new investors and successfully recapitalized, its owners said Tuesday.
The deal allows Los Angeles developer Lowe Enterprises to retain ownership of the $480-million resort, which opened last year amid the worst travel market since the Great Depression. Lowe was one of hundreds of California hotel owners that received notices of default or faced foreclosures by their lenders last year.
Terms of the transaction announced Tuesday include an extension of the loans on the property and new capital commitments of more than $100 million. The latest investment was made by a combination of new and existing investors in a new joint venture with JC Resorts, a San Diego hospitality company.
"We are obviously relieved that we have been able to work out the lender situation and attract $100 million of new capital to Terranea," said Robert J. Lowe, chairman and chief executive of Lowe Enterprises. "That's allowed us to settle unpaid claims and provide a strong capital base to succeed in the future."
Among the new investors are affiliates of ST Residential, which holds the loans on the property. ST Residential is a public-private partnership between the Federal Deposit Insurance Corp. and a group of hedge funds including Starwood Capital. Flamboyant and aggressive New York investor Barry Sternlicht is CEO of Starwood.
Last October, Sternlicht and his allies won an FDIC auction to take over the assets of Chicago-based Corus Bank, which had been seized by federal regulators. Since then the group has taken control of several commercial real estate developments across the country that had been funded by Corus.
Corus was also Lowe's construction lender. The agreement announced Tuesday in effect eliminates questions about whether Lowe Enterprises would lose control of the 582-room resort to the hedge funds and the FDIC.
"Terranea is a uniquely spectacular property," said John Barkidjija of ST Residential. "Our financial commitment to the future of Terranea demonstrates our confidence in the Lowe management team and the commitment by original investors and JC Resorts to invest in the project's future success."
It took nearly a decade to get Terranea designed, approved and built on the former site of the Marineland of the Pacific aquatic theme park. The hotel has upscale restaurants, a spa and one of the largest ballrooms in Los Angeles County.
Lowe declined to disclose occupancy rates at Terranea but said that bookings for next year look strong. "Clearly," he said, "the hospitality environment is improving."