Ritz-Carlton hotel property sold at auction

Ritz-Carlton Grand Cayman main
In the highest-value real estate auction ever held in the Cayman Islands, the Ritz-Carlton, Grand Cayman hotel property was sold Wednesday to an American private equity company.

According to a press release issued by the law firm Conyers Dill & Pearman, RC Cayman Holdings LLC was the successful bidder for the hotel property.

RC Cayman Holdings – an affiliate of Five Mile Capital Partners LLC of Stamford, Connecticut – was the secured lender of the property and had sought to recover some US $234 million from Ritz-Carlton developer Michael Ryan and his companies, according to filings in the Cayman Islands Grand Court earlier this year.

The property was sold as a block and includes the 136-acre resort, the nine hole Blue Tip golf course and future development land.

“With this sale, only the underlying ownership of the property changes,” said Conyers Dill & Pearman representative Rick Finlay. “The resort will continue to be operated as before and by the same management structure.

“It’s a very satisfactory outcome, given the long-standing uncertainty surrounding the Ritz-Carlton, Grand Cayman resort.”

RC Cayman Holdings had initial set the reserve price for the auction at US$240 million, but later lowered it to US$177.5 million. The press release stated that RC Cayman Holdings “met the reserve price” at auction today.

Ritz-Carlton Grand Cayman

The Ritz-Carlton Grand Cayman

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  1. Let me see if I have this correct. The owners of the Ritz owe RC Cayman Holdings 240 million which they are unable to repay.

    RC Cayman Holdings seize the property and auction it off to recover their 240 million debt.

    RC Cayman Holdings purchase the (their?) property at auction for 177.5 million.

    Does this remind anyone of Pattison (Farm Soldier) purchasing corned beef from Merren’s store and reselling it at his store for less than he paid for it?

  2. Let me see if I have this correct. The owners of the Ritz owe RC Cayman Holdings 240 million which they are unable to repay.

    RC Cayman Holdings seize the property and auction it off to recover their 240 million debt.

    Baffled, simple math. 177.5 million is only the purchase price of Ritz but the loan was not yet extinguished.

    Ritz owe RC cayman of 240 million
    RC cayman purchase Ritz for 177.5 million
    Total cost of Ritz incurred by RC cayman 240 loan plus 177.5 auction = 417.5 million

  3. This is pretty simple. RC is not bidding new cash, they are in effect bidding an offset to their secured claim. RC figured there wasn’t much interest in the property so they lowered the reserve. That way they get the ownership, their secured claim is reduced by only 177 mil, and they still have an unsecured claim of 62.5 mil against the original debtors (assuming this was not a no recourse loan. If someone had come along with a big bid they might have let the property go, but no one did. Kiss the 6 mil duty claim goodbye because there is too much unsecured debt for CIG to get anything meaningful.

  4. catchandrelease,

    yes there is no cash infusion to the Ritz, this is all about owners, the news says ONLY THE UNDERLYING OWNERSHIP CHANGE, it didnt say of debt equity swap. what it means? equity would not change and so liability would remain the same. In this case the loan will be protected by the lender itself to ensure its settlement.

  5. Some excellent posts explaining the transaction. Cayman really dodged a bullet on this one, though it may end up be nothing more than kicking the can down the road a ways. Closure of the Ritz would have created a catastrophic eyesore (i.e. Hyatt, Merriott/Holiday Inn).

  6. As a former regular purchaser of foreclosure properties in the States let me explain how this works.

    In a typical mortgage loan there are two main documents.
    The mortgage and the promissory note.

    The promissory note is the promise to pay, there can be many signatories to it.
    The mortgage is simply the security agreement.

    In a foreclosure action the final judgement will state what is owed. This will include legal fees and unpaid interest.

    The property goes to public auction.

    There can be many bidders including the lender.
    let us say the lenders of the Ritz-Carlton are owed 250m.
    The highest CASH (public) bidder might be 200m.
    The lender can either accept that bid and receive the cash or they can continue to bid up to the amount owed.
    In either case, when the property is sold, the mortgage is gone, wiped out.

    The foreclosure sale will also wipe out any second mortgage or other liens. However, under US law this does NOT include governmental liens. I’m not sure of the law on this in Cayman. If it IS the law the CIG might still be able to collect the duty owed.

    Now the lenders own the Ritz-Carlton free and clear of all inferior liens. It becomes an REO (Real Estate Owned).
    Usually the lenders will want to sell that property and not hold it for the long term.

    If the amount realized at the foreclosure sale is less than the total owed, the lenders can pursue a deficiency judgement against the signers of the promissory note.
    If the amount realized at the sale is greater than the amount owed, the excess goes first to any second mortgage holder, then to other lien holders and then to the owners.