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California company buys troubled Aston Kauai hotel

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The financially troubled Aston Kauai Beach at Makaiwa hotel was sold at the end of July to JMI Realty, a California real estate investment and development firm, according to sources familiar with the transaction.

Hotel manager, Aston Hotels & Resorts, yesterday notified the state of the sale of the 311-room resort and possible layoff of 112 employees on Oct. 12 when Aston’s contract is terminated, according to the filing with the state Department of Labor and Industrial Relations.

However, most — if not all — of the work force will likely be retained with the new owner, which will conduct jobs fairs in the near future, according to the court-appointed receiver Joseph Toy, who has been overseeing hotel operations since June 2009 after the seller defaulted on a $43.2 million loan.

The terms of the sale were not disclosed.

"The sale of the property actually brings more stability to the property and for the employees, it provides long-term security," Toy said. "Generally, when a new owner comes in they invest in the property and provide more financially stable ownership."

The sellers, a joint venture between Gaylord Entertainment Co. and RREEF Global Opportunities Fund II LLC, a division of Deutsche Bank, and lenders — a commercial mortgage-backed securities fund — agreed to a private sale, as opposed to a foreclosure auction.

Gaylord and RREEF acquired the resort that sits on 10 beachfront acres amid a century-old coconut grove in June 2006.

Representatives of JMI Realty couldn’t be reached for comment. A Gaylord spokesman declined comment.

JMI Realty, established in 1992, is owned in part by John Moores, owner of the San Diego Padres. The company, which redeveloped San Diego’s Ballpark District, manages a real estate investment portfolio valued at about $600 million, according to its website.

Toy estimates that there is close to $3 billion in loan defaults at Hawaii’s major hotels, forcing some into foreclosure.

More than 20 Hawaii properties have been in some stage of distress in the past few years, with owners unable to pay their mortgages, refinance or sell in a down economy, he said.

The more recent hotel purchases used loans that were packaged and resold to investors as commercial mortgage-backed securities. More hotel owners are expected to default as short-term mortgages expire in the next few years.

"There are a number of hotels that have been placed into receivership, foreclosure or are with a special servicer," Toy said. "Obviously the economic downturn and collapse of the financial markets have lead to the current distress in the industry. Although we’ve seen similar cycles, this current one is far deeper than anyone has ever seen before."

 

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