The infamous St. Regis Monarch Beach is the latest casualty of the upscale lodging industry. The California luxury resort where American International Group (AIG) sponsored a luxury retreat just days after accepting billions in federal bailout money was seized by Citigroup Inc.
Citigroup's takeover is a sign of how deeply troubled the upscale lodging industry is now, consultant Alan Reay of Atlas Hospitality Group told the LA Times. High-end hotels across the country have been hammered by a cutback in business and leisure travel.
"The acquisition will have no impact on the hotel, golf club or beach club," Citigroup said. "Starwood's St. Regis brand will continue to be responsible for the day-to-day management of the properties.”
Resorts such as the upscale St. Regis have seen some of the steepest declines in revenue, the newspaper said.
Estimates were that the hotel was carrying $300 million worth of debt but is probably not worth much more than $100 million now that property values have fallen in the recession.
One of the loans -- $70 million from a real estate unit of Citigroup -- had gone into default, leading in the takeover. Citigroup said it would sell the 8-year-old property at a foreclosure auction. But when no bidders emerged, the bank and the previous owners agreed to let Citigroup take ownership without that formal step.
The hotel's place in an infamous recession scandal has been ruinous, investment banker Donald Wise said.
The St. Regis became something of an emblem of corporate excess and greed last fall as the global financial system was threatening to melt down.
The taint was associated with AIG, the giant New York insurer that, because of massive wrong-way bets on the mortgage markets became the largest recipient of bailout money from the federal government.
Just weeks after receiving its first $85 billion in federal funds, AIG spent more than $440,000 at the St. Regis for rooms, wining and dining, spa treatments and rounds of golf to reward 100 top salespeople.
"The property has already been nearly catastrophically damaged, through no fault of its own or the previous ownership, by the unwanted media exposure going back to when AIG held their conference," Mr Wise said.
At the same time, POLITICO reported that AIG is selling its properties and keeping nearly half of those deals secret.
Skeptics questioned the practice when 80 percent of the company is owned by the taxpayers, who are owed $85 billion in loans.
Report by David Wilkening
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