An off-island consortium has agreed to purchase the Hilton Guam Resort & Spa for “very close to $34 million ” according to Journal sources.

The Hilton consortium will operate under the name of Pacific Holdings Trust.

David L. Wickline managing partner of Pacific Holdings is no stranger to Guam attending the 2nd Micronesian Real Estate Investment Conference on Sept. 19 2003.

Pacific Holdings secures hospitality assets in the Asia-Pacific region and the West Coast. Properties acquired act as part of an investment vehicle for international private equity investors to assemble a portfolio in the Asia-Pacific region and the western United States.

According to Journal sources the Hilton purchase was carefully negotiated to allow for both renovation linkage of payment price to operating performance of the hotel and a management contract with Hilton International.

W. Nicholas Captain president of The Captain Co. and consultant to the consortium told the Journal “The buyer knows and understands that renovations will be required to the Genji Restaurant the Magalahi Wing and various suites.” Captain said the contract made allowance for the renovations which are expected to be in the region of $11 million to $12 million.

The contract has the potential and a formula for deferred payments depending on Hilton profitability. Captain said “There is a clause in the contract which allows for some deferred payments to the seller. It has to do with operations. It makes a lot of sense — it’s a creative way to satisfy both parties.” He classified the sale as “a major deal — the biggest deal in Guam in 15 years.”

Manfred H. Pieper general manager for the Hilton Guam declined to comment in detail on the purchase contract or the management contract. Choosing his words carefully he said “Hilton is very interested in retaining management.”

In a Jan. 26 Journal story “How low will Hilton go? ” Pieper said were the sale to close “This amount of money could be used to buy seven or eight management agreements in other locations. Any proceeds from the sale will be used to expand into management agreements.”

Hilton International’s most recent management contract for the Sanya Resort and Spa on Hainan Island in China was announced on March 22.

Shelley K. Winkel area director for Hilton public relations and communications for the Middle East and Asia Pacific also declined to comment on specifics. She told the Journal “As a public listed company we are subject to the special rules governing the distribution of price-sensitive information.” Winkel said an announcement would be made regarding Hilton International’s plans for the Hilton Guam the moment the chain was able to publicly do so.

While Pieper declined to comment on Pacific Holdings or Wickline he did address Hilton’s intent to see the property renovated one way or another. The disclosure survey of the condition of the Hilton was undertaken by Von Watson Architects which completed previous work at the hotel. Executives at Von Watson previously declined an interview with the Journal.

Pieper said with regard to the increase in tourism numbers and the gaming initiative on the November election ballot the new owner would be well positioned. With regard to casino gaming he said “Whether Hilton gets a license or not the overall effect it would have would enhance the investment. Anybody who buys this property does so with the positive message that the initiative will be on the November ballot.” Pieper said the possibility of casino gaming for Guam “has the potential to carry the reinvestment to a new level.”

The Journal first broke the story of the Hilton sale in its Dec. 1 issue (See “Bargain buy — $35 million gets Hilton.”). Hilton International released to the Journal in December its plans to move more properties to a management contract and to operate new properties under that arrangement. A further press release expanding on those intentions was released to media in February.

The sale was handled by Jones Lang LaSalle a broker in Singapore with the exclusive right to represent the Hilton. The final contract may be signed as early as next month.
Tanota Partners whose founder Alfred C. Ysrael still retains a small share interest in Hilton Guam told the Journal in November that it had discussions with Hilton and presented offers on the hotel before Supertyphoon Pongsona. Tanota’s price offer was understood to be around $43 million. Michael Ysrael president of Tanota said Hilton at that time had decided not to sell while it considered the likelihood of casino gaming moving forward. Ladbrokes Group the betting and gaming division of Hilton Group had been aware of the possibility of casino gaming on Guam.

Wickline was one of a number of top-notch keynote speakers at the real estate conference hosted by the Capt. Co. together with Willie Tan president of Tan Holdings Corp; and Richard W. Gushman II president of DGM Group which owns Guam Premier Outlets.

His speech was viewed as thoughtful and positive (See “Real estate conference offers solutions” in the Oct. 6 2003 edition of the Journal.). In what now seems a prescient speech he told attendees that the depressed market offered opportunity. He said “Part of today’s opportunity will be for well-capitalized buyers to take over properties at prices that are a discount to replacement cost and provide reasonable current returns while positioning for the future.” Wickline said however governments in the region should “provide the kinds of certain climate to attract capital.”

He told those at the conference that besides offering a visitor market “China can become a major source of capital investment in the islands.” He also suggested private residential clubs “a relatively new development in the U.S. might appeal in Asia to “those boomers who like the amenities of a resort unit managed by the club without the higher cost and responsibility of their own vacation home.” He also mentioned the appeal of eco-resorts spa resorts and retreat centers. Wickline suggested opportunities applied in the U.S. mainland that might apply to Micronesia such as capitalization on the aging of the Japanese population where 17% are over age 65 and might be drawn to the region.

Wickline resident in San Francisco was contacted but chose not to comment at this time. MBJ