The Westin Casuarina hotel’s operating company, Galleon Beach Resort Limited, is under new management following the appointment of receivers last Friday.
WMC Limited – an affiliate of Pyramid Hotel Group – and Russell Smith of Johnson Smith Associates Limited were named joint receivers and will supervise the day-to-day operations of the hotel for the foreseeable future.
Pyramid, a Boston-based hotel and resort management company has more than 64 hospitality assets throughout the United States and the Caribbean.
Larry Vitagliano of WMC Limited said it would be ‘business as usual’ at the hotel in a press release issued on Wednesday.
“There will not be any disruptions for guests, bookings, events, staffing, vendors or suppliers,” he said. “We want to make clear that this is a long-term commitment for us. We will be operating the Westin for the foreseeable future until the hotel is returned to profitability.”
Mr. Vitagliano noted in the press release that the Cayman Islands Government had assisted in the process that led to the appointment of WMC Limited.
“Representatives from the government made themselves available at short notice to be briefed on the issues and sought assurances in relation to the hotel’s staff, which we were able to provide,” he said.
“We are grateful for the facilitation the government has given to WMC Limited, which we hope will safeguard the uninterrupted operations of the hotel and the employment of its staff.”
Premier McKeeva Bush said the Westin is one of Cayman’s best known properties.
“[M]y government was committed to seeing the property remain open,” he said. “I am pleased this difficult transition has proceeded smoothly.”
Making further comment on the matter, Mr. Bush said he thought it was extremely important to work with the Westin’s new managers to arrive at a workable solution.
He said no Caymanian jobs would be lost in the transition and that all staff members would be allowed to stay on if they chose.
According to information provided by Trepp LLC, a provider of commercial mortgage-backed securities and commercial mortgage information, Columbia Sussex was given a loan of US$140 million by Wachovia on 31 May, 2007.
The loan called for interest only payments with a balloon payment due 15 June, 2017.
An appraisal prior to the loan, dated 1 January, 2007, indicated a property value of US$196 million.
However, when the loan ran into payment troubles and was sent for special servicing, another independent appraisal was done on 12 August, 2010, indicating the property had a value of US$85.1 million, less than half the earlier appraised value.
It is not known who prepared either of those appraisals.
As a result of the massive reduction in the appraisals, the outstanding balance of the loan was more than $50 million more than the hotel’s appraised value.
According to commentary compiled by Trepp LLC, the borrower ran into difficulties as a result of the economic conditions.
“According to the borrower, the property was [affected] in the 4th Quarter [of 2008] by the economy and increased cost of travel during the year,” the commentary noted.
“The decline in [earnings before interest, taxes, depreciation and amortisation] is largely related to an overall softening of business [throughout the industry].”
2009 had brought no better news for the 343-room property and Columbia Sussex started requesting modifications to the loan structure.
“….per borrower, the property is currently not producing sufficient cash flow from operations to meet debt service and they cannot continue to support the property as they have in the past.”
On 9 February, 2010, the property fell behind on its loan payments and the loan was transferred to special servicing. By May, the loan was reported to be in “imminent default” and foreclosure proceedings were commenced in October.
“[The borrower signed a [pre-negotiation agreement] in mid-November,” the commentary stated. “Shortly thereafter borrower indicated they will hand us the keys.”