As word filters out that The Hotel Santa Fe is on the market W. Nicholas Captain president of the Captain Co. and Captain Realty Advisors said there has already been significant interest.
The Santa Fe was acquired by GL Commercial Real Estate 1 LLC on July 28 2003 following foreclosure on the hotel and lifting of bankruptcy protection on the property.
Lehman Bros. purchased the note from mortgage holder LB Guam Opportunity LLC which purchased the lien on the property from First Commercial Bank on June 18 2002. Santa Fe Corp. formerly managed the hotel but filed for Chapter 11 bankruptcy protection on July 27 2001.
GL is a division of Lehman Bros. GL contracted FlexStay Services LLC a subsidiary of GL as the management company for the hotel.
The seller is “working closely” with Captain “to find the right buyer” through Captain Realty Advisors. Captain told the Journal “There are already a number of buyers that are completing due diligence and I’m hopeful that we will receive several offers over the next month or so.”
No firm asking price has been set although the credit bid when GL acquired the hotel was $4 million.
GL told the Journal — through Captain “We’re trying to get a number as well. $5 million-plus would be very nice but not a hang-up; we are testing the market to get realistic expectations and will sell at the market rate.”
Captain said “I think they acquired the asset near the bottom of the market. They invested nearly a million in renovations. The owners feel confident they will profit from a sale at this time.”
GL does not own other properties on Guam but affiliated companies own loans on other commercial real estate properties in Saipan. Captain said the owners had said they are “Testing the market to get realistic expectations and will sell at the market rate.” The Santa Fe and other properties and loans in Guam and Saipan were acquired as part of large portfolios but the group’s emphasis is acquiring assets in Japan and other countries.
“The owners are very sophisticated. They understand the hospitality industry; they manage other hotel assets and they understand the Guam market. However the hotel sector has changed dramatically over the past 18 months. There has been a surge in activity and a dramatic increase in prospective foreign investors. Now is a good time to exit a market that you may not want to be focused on. It’s an equally good time to sell or buy depending on your motivations. The liquidity in the hotel sector hasn’t been as high as it is now for 15 years or more.”
The property closed for about five months following the acquisition underwent about $1 million in renovations and reopened in December 2004.
The beachfront restaurant at the Santa Fe — the Grill — complimented by an adjacent bar – has regained its popularity with both its tourist and local clientele. Captain said “Historically the food and beverage operation has been a relatively significant portion of the income generated by this property.”
Describing the Santa Fe as a “boutique hotel ” Captain said “It’s an attractive ownership position for the right buyer. I’m sure it will sell at a price that is substantially below replacement cost.”
The hotel appraised for government tax purposes for approximately $12.5 million.
In data released to the Journal through Captain GL said “In the first 12 months of operations the clientele mix was dominated by government 63% FIT — foreign independent travelers 14% with local military and international corporate guests accounting nearly equally for an additional 17%. The first quarter of 2005 has seen a 10-fold increase in wholesaler package and travel agent business.”
Larry Mayo general manager at the hotel is generally credited with improving the hotel’s performance.
GL also said “Since reopening in December 2003 occupancy at the Santa Fe has been trailing the Guam average figures. Offering several rates and promotions the average ADR has generally paralleled the monthly trends of the Guam average ADR with a steadily increasing trend over the last 12 months. Total revenue for the first four months of fiscal 2005 is over 8.4% higher than the comparable period in 2004.”
The 110-room Santa Fe was formerly known as the Santa Fe on the Bay. The 50 000 square-foot hotel on the 9 789 square meter property was constructed at a cost of $11.3 million and opened on Oct. 18 1998. Ownership is split between fee simple and leasehold. Of the seven lots involved two are leasehold. MBJ