Maui Prince Hotel shutting down on Sept. 16

[flexible Senior Member Find all posts View Profile Close flexible]

I saw the notice below then googled to look at their website: Hawaii Hotels & Resorts | Prince Resorts Hawaii | Hawaiian Golf & Family Vacations & Packages - The website looks so good I wouldn't have thought the resort was shutting down.
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Maui Prince Hotel shutting down on Sept. 16
The Maui Prince Hotel and Makena North golf course will cease all operations on Sept. 16, it was announced this evening.

If you’re holding a reservation for a stay at the Maui Prince on or after Sept. 16, we’ll have details on where to call for cancellations, refunds and relocation information as soon as we get the info.

A spokesperson for Prince Resorts Hawaii told HawaiiMagazine.com this evening that information for reservations holders would be available on Tuesday. Please check this post again for future updates.

The West Maui property’s closure was announced by its management com...

[4ARedOctober Super Moderator Find all posts View Profile Close 4ARedOctober]

Wow. The beach is really nice there. We were there last year. I wonder who will take over.

[flexible Senior Member Find all posts View Profile Close flexible]

Wow. The beach is really nice there. We were there last year. I wonder who will take over.

Operators plan to close Maui Prince Hotel - Pacific Business News (Honolulu):

Prince Resorts Hawaii said Monday it plans to terminate its management contract and close the Maui Prince Hotel and the Makena North golf course next month.

The resort’s 380 full- and part-time employees were notified Monday that the Makena Resort hotel and golf course would close on Sept. 16, according to a statement from Prince Resorts Hawaii.

Lenders, represented by trustee Wells Fargo, filed a foreclosure lawsuit on Aug. 24 against the hotel’s owners saying they had defaulted on a mortgage of $192.5 million.

Maui developer Everett Dowling and Morgan Stanley had purchased the hotel and the 1,800-acre Makena Resort two years ago for $575 million from the financially troubled Seibu Group of Japan. Dowling did not immediately return a call from PBN seeking comment.

The lenders were “unable to meet the funding terms and conditions” the hotel operator required to keep the 310-room hotel and golf course open, Prince Resorts Hawaii President Donn Takahashi said in a prepared statement.

The hotel operator, Maui Prince Hotel LLC, has been in discussions with the lenders to fund the hotel’s payroll and accounts payable, which previously were the responsibility of the owners, he said.

“Maui Prince Hotel LLC cannot continue to operate the hotel without adequate assurance that funds will be made available to pay for payroll and operating expenses for the hotel and golf course,” Takahashi said. “As of our deadline, Friday, Aug. 28, we did not receive funding from the owner or the lenders to pay for past-due account payables, and as of our deadline today, Aug. 31, we had not received a favorable indication from the owner or the lenders that they are willing to guarantee the required funding going forward.”

Wells Fargo is taking immediate steps to keep the hotel open, the lender’s attorney said.

“Tomorrow, we will ask the 2nd Circuit Court on Maui to appoint a receiver to take over operation of the resort,” attorney Barry Sullivan said in a statement. “If approved, the receiver and its team will transition to a new management company to be approved to operate the Maui Prince Hotel and Makena Resort. We look forward to a smooth transfer with Prince Hotels.”

Prince Resorts Hawaii told employees that they would received up to 60 days’ severance under state law. The state Department of Labor and Industrial Relations said it was working with Maui Prince management and with the International Longshore and Warehouse Union on assisting the displaced workers.

Many of the employees have been with the hotel for more than five years, and some have been there since it first opened in 1986, Takahashi said.

“This is a heartbreaking scenario,” he said. “The Maui Prince Hotel is a well-run operation with a great heritage, excellent potential, and wonderful employees that has fallen prey to the economic downturn.”

[StressCadet Senior Member Find all posts View Profile Close StressCadet]

Wow is right. A nice, low key hotel, on a very nice beach.

[LisaH Senior Member Find all posts View Profile Close LisaH]

So sad to hear about this...

[hope54 Senior Member Find all posts View Profile Close hope54]

It is one of my favorite beaches! We stayed there last year and the place was like a ghost town. It has been a great place to stay and will miss it.
Marilyn

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

No need to worry. Someone will take it over. The same thing happened to the Ilikai in Waikiki. It was shut down for only a couple of days before it was re-opened under new management.

[Luanne Senior Member Find all posts View Profile Close Luanne]

Wow.

It is a great beach. We'd been going there since long before there was a hotel.

[hope54 Senior Member Find all posts View Profile Close hope54]

Wow.

It is a great beach. We'd been going there since long before there was a hotel.

Those were the days when it was 'undiscovered' and no one there!
Marilyn

[Luanne Senior Member Find all posts View Profile Close Luanne]

Those were the days when it was 'undiscovered' and no one there!
Marilyn

Right. No parking and no bathrooms.

[dale7 Senior Member Find all posts View Profile Close dale7]

Trustee attorney: Maui Prince will remain open - Mauinews.com | News, Sports, Jobs, Visitor's Information - The Maui News

Tourists and workers were assured Tuesday that the Maui Prince Hotel will operate continuously through foreclosure, although there will be some loss of jobs.

The hotel was foreclosed on a week ago, and Prince Resorts Hawaii released a statement Monday saying it would end its management of the hotel Sept. 16 because it could not get funding assurances from the trustee for the lender.

Barry Sullivan, attorney for the trustee, said Tuesday that two experienced hotel management companies with strong local connections are interested in taking over operation of the hotel.

At a news conference Tuesday in Honolulu, Sullivan said he was confident that a seamless transition would occur, and that the lender had arranged sufficient financing to cover accounts with suppliers and vendors and to meet payrolls, including a payday coming Friday.

However, the lender itself, although it has foreclosed, has not taken possession of the property and is legally powerless to "do anything but sign checks."

The trustee, Wells Fargo Bank, has asked the 2nd Circuit Court to appoint a receiver. The receiver would protect the assets and select a new management company.

Sullivan asked for an emergency hearing on the receivership, within 48 hours, although he said 2nd Circuit Judge Shackley Raffetto could appoint a receiver and team without a hearing.

Meanwhile, he wanted to counter national news stories that he fears may be chasing tourists away from the struggling hotel, which, he said, is losing more than a million dollars a month.

He said visitors could continue to make reservations for the period up to and beyond Sept. 16.

Donn Takahashi, president of Prince Resorts Hawaii, said Tuesday he was struggling to come up with payroll money, but Sullivan said the lenders had taken care of that.

In a statement issued late Tuesday, Takahashi said the hotel has been left with "very serious funding issues that are clearly the responsibility of the owner and lenders."

Past due amounts, which are the obligation of the hotel owner, exceed $1 million, he said.

Neither the owner nor lenders has provided or agreed to provide funds for the next payroll for employees, which is due today, he said.

On Monday, Prince Resorts notified its employees under the Dislocated Workers Act that they would receive 60 days pay and benefits in any case. The state Department of Labor and Industrial Relations mobilized its Rapid Response Team to assist employees as it did, for example, when Molokai Ranch shut down.

However, it now appears that a relatively small number of workers would stop working.

Willie Kennison, Maui Division director of Local 142 of the International Longshore and Warehouse Union, which represents around 200 union workers at the hotel (one quarter of whom are already on furlough), said it was uncertain how many workers a new management company would retain, but also uncertain how many current employees would want to continue.

Some, if offered a severance package, might decide to retire, he said.

"It's bad," he said Tuesday. Many, many resorts are having difficulty in coping with high debt loads when tourism is down so much, and the union has agreed in a number of cases to concessions.

That was the case at the Prince earlier this year, when a two-year contract extension provided for 49 furloughs, although the workers did maintain seniority and some other benefits.

Sullivan said that when the lenders asked for financial reports from Maui Prince, they were shocked to find the size of the losses.

And they also were disturbed that the first reports were quickly amended to show much greater losses.

In fact, it looks as if the hotel is not taking in enough money even to cover payroll, much less other running expenses and taxes, he said.

Nevertheless, the lenders felt it was important to keep the hotel open, even if it means they are signing checks without - so far - any control. The lenders judged it would be much better to throw in more money to keep operating rather than to let the hotel go dark and then try to reopen it.

Kennison agreed. The example of the Renaissance Wailea, which was closed to be rebuilt, is an example of how that plan has failed, he said.

The hotel has never reopened, and its workers are stuck. The owners have not said what they intend now, but rumors persist that rebuilding has been abandoned and the owners would like to reopen the hotel.

Even that would take a large investment in repairs. "They tell me the plumbing goes first," Kennison said.

Sullivan said as lawyer for the trustee, he could do nothing directly except plan. The plan is to continue the Prince in at least the quality it has been, three stars. The would-be new operators have local experience in three-star and better hotel operations in the islands, he said.

The purchase of Makena Resort from Seibu Group, which built it in 1985, was supposed to lead to, among other things, the replacement of the hotel. Small by standards of Maui luxury resorts and somewhat remote from resort destinations, the Maui Prince long had a good reputation - and a reputation for not being very full.

In its heyday, Seibu could afford to run a mostly empty hotel. The company was built on railway real estate in Japan and before the bubble popped had parlayed that into a string of related and unrelated businesses. One of its department stores alone did more than a billion dollars of business a year.

After developing the Maui Prince and Makena Resort, Prince Hotels built other hotels on the Big Island and in Waikiki. These are separately owned and managed by Prince Resorts Hawaii, Takahashi said. Since the sale to Maui developer Everett Dowling and his group of investors, the Maui Prince has been managed by but not owned by Prince.

The sale included a requirement that Prince continue to operate the hotel.

It has significantly underperformed other island resorts in its class since then, Sullivan said. All resorts are down, but Prince results, measured by occupancy rates, are about 27 percent lower than average.

A new operator will be expected to control costs and build business. The Maui Prince recently announced a $99 per night special on rooms. It applies to rooms Sunday through Thursday nights.

"The lender wants a solution, but it has now become evident that there are serious operational concerns," said Sullivan. "Maui Prince had been unable or unwilling to provide the lender with an accurate projection of losses and cash needs."

Although a statement from Takahashi on Monday said the lender had not made operating funds available, Sullivan said it had.

On the same day, he said,

it had advanced another $247,000 to pay vendors and suppliers of the hotel.

He noted that Seibu took $575 million in cash from the sale.

He said Prince demanded that the trustee assume $9.3 million of accrued benefits (vacation and the like) due to ILWU members as the cost of continuing to run the hotel.

"Maui Prince had been requiring a solution that involved the lender effectively assuming all of Maui Prince's obligations dating back to 1986," Sullivan said.

The lender considered that a Prince obligation, since it occurred during Prince ownership and operation.

That and other factors led the trustee to consider Prince management expendable, although Sullivan said it would be up to the receiver to chose an operator, which could again be Prince.

The Prince management has assured its employees that it would cover its obligations to them, including severance packages and vacation.

The receivers nominated to the court are attorneys Miles Furutani and George Van Buren.

The rest of the team would include Steven Mau as general counsel; Anna Elento-Sneed as labor counsel; and Peter Herndon as hotel management and transition adviser.

Including its union staff, the Maui Prince employs about 380 people full time, part time and as casual workers.

[dale7 Senior Member Find all posts View Profile Close dale7]

Makena Resort, its Prince hotel now toxic asset - Mauinews.com | News, Sports, Jobs, Visitor's Information - The Maui News


Makena Resort and its hotel, the Maui Prince, are now a toxic asset with creditors including the Swiss government.

UBS, the Swiss banking giant, put together the financing for the eye-popping sale of the resort for $575 million in 2007, using the commercial real estate version of the mortgage-backed residential real estate securities that caused so much grief in the housing market.

Only in this case, according to Barry Sullivan, the Honolulu attorney handling the foreclosure, there was no Fannie Mae or Freddie Mac to purchase the bonds created to fund the deal.

In this case, the lenders foreclose, the court appoints a receiver and eventually the receiver will hold an auction. If anybody bids, then the lenders get back some or all of their money.

Only, like houses in Phoenix, buyers are likely to be scarce. Probably only people willing and able to pay cash would be interested. The people who used to lend on CMBS (commercial mortgage-backed securities) paper have disappeared.

A market that hardly existed 10 years ago, but which funneled billions of dollars a year into commercial real estate by 2007, doesn't exist anymore. Not a single CMBS deal has been reported this year.

And, Sullivan said, the biggest hotel loan in the past year was a mere $10 million.

As with the auction of the Sheraton Keauhou Bay Resort & Spa on the Big Island, which his firm, Bickerton Lee Dang & Sullivan, handled earlier this year, there might well be no bidders, and the lenders would claim ownership. They then could try to sell it via negotiation, like any other kind of real property.

Sullivan's client is Wells Fargo Bank, but Wells Fargo is not the lender. It is only the trustee for the mortgage-backed securities that were created after the sale. Nor is Wells an owner.

Sullivan said the buyers apparently put up about $175 million of their own money. They also borrowed $192.5 million, which was guaranteed by a first mortgage on the real estate, as well as claims on revenue from the operating businesses.

But unlike buying a house, he said, in giant deals no one attempts to raise all the borrowed money via a first mortgage.

A big chunk of the borrowed money, around $227 million, came from so-called "mezzanine lenders," who were offered a higher rate of interest (although it was still a low 4 percent or so), but who in turn accepted a huge risk. They got no ownership of real property, but a share of the new owner's interest.

If the new owners couldn't make their payments, the first mortgage holders had at least the chance of taking over the real estate. If the owners walk away, as in this case, then the mezzanine lenders hold only a share in the owner's interest, which is worth nothing.

It happened very quickly. Only a few days before a July payment date did Wells Fargo learn that the owners - Morgan Stanley, Everett Dowling and affiliated partners - were not going to be able to pay.

A similar size debt - something more than $300 million by now - is in default at The Ritz-Carlton, Kapalua and has been for months, but in that case the owners have avoided foreclosure and said they were working to restructure the loan.

Apparently, the Makena owners saw no hope of restructuring or of finding new lenders. So they appear to have lost something like $477 million in equity, now worthless mezzanine investments and another $75 million or more in projects undertaken at the resort.

[hope54 Senior Member Find all posts View Profile Close hope54]

Is a developer going to get this property, tear down the existing structure and put in multi million dollar homes? That is a scenario I don't want to see happen. But the hotel industry seems unsustainable in this economy.

Marilyn