10 February 2010

Foreclosure Watch: The Four Seasons Turns Cold in Dallas

The Wall Street Journal

It looks like the gamble taken by commercial-property owner BentleyForbes Holdings LLC last October in defaulting on its mortgage on the Four Seasons Dallas might not pay off. The lenders who hold the 431-room hotel’s mortgage filed this week to foreclose.

BentleyForbes skipped its October payment on the Four Season’s $183 million securitized mortgage in a bid to get the mortgage’s special servicer, CWCapital Asset Management, to revise the loan’s terms. In doing so, BentleyForbes explained that the hotel’s cash flows no longer covered its $10.9 million of annual interest payments.

This week, U.S. Bank, acting on behalf of the mortgage holder, filed a notice with the Dallas County Clerk’s Office to foreclose on the property, according to Foreclosure Listing Service Inc., a foreclosure-research company.  A CWCapital representative didn’t return calls seeking comment.

A lawyer representing BentleyForbes said the owner has “demonstrated its good faith and continued commitment” to the hotel with a $60 million renovation of the property in the past two years.

“The filing of the foreclosure posting is something that BentleyForbes was expecting as it is a standard administrative process required by lenders,” attorney Stephen Meister said in a statement. “Regardless, BentleyForbes remains in proactive discussions with its lenders at the Four Seasons Dallas and is committed to working out a successful financial structure.”

Closely held BentleyForbes, based in Los Angeles, owns several office complexes and hotels across the U.S. It bought the Four Seasons in the Dallas suburb of Irving, Texas, in 2006. The hotel is known nationally as the site of the PGA’s annual EDS Byron Nelson Championship golf tournament.

The Four Seasons Dallas is one of several hotels carrying the Four Seasons brand to run into mortgage difficulty. Millennium Partners LLC, owner of the Four Seasons San Francisco, went delinquent last summer on the hotel’s $90 million securitized mortgage in a bid to get revised terms. Neither Millennium nor the special servicer on the loan, Cerberus Capital Management LP’s LNR Partners Inc., returned calls seeking comment.

Beanie Baby tycoon Ty Warner’s Ty Warner Hotels and Resorts is attempting to get an extension of the due date on its $345 million securitized mortgage on four resorts, including the New York Four Seasons. He had difficulty obtaining an extension beyond the loan’s Jan. 9 due date because the properties weren’t generating enough cash flow to meet the loan’s threshold for qualifying for the extension.

Now, Mr. Warner and the special servicer overseeing the mortgage are in a forbearance pact in which the servicer has pledged not to foreclose as the two sides try to hammer out a long-term extension, according to a person familiar with the talks. A representative of Mr. Warner’s hotel company didn’t return calls seeking comment.

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