If you were thinking about buying the Beverly Hilton, your time is up.
The iconic hotel’s owner, Oasis West Realty LLC, is no longer planning to sell the property, but instead will seek an equity partner while restructuring a $300 million debt that will mature in August, several sources told the Business Journal.
The company has received many offers for the 9-acre property, but none has been amenable to management. After six months on the market, the company has begun negotiations with undisclosed sources that could provide some kind of capital infusion.
Oasis West Chief Executive Beny Alagem, who made his wealth as the co-founder of Packard Bell Electronics, purchased the hotel from Merv Griffin in 2003 for $130 million.
The lot is entitled for an additional 12-story hotel and two condominium buildings near the corner of Santa Monica and Wilshire boulevards, a plan that drew such stringent objections from Beverly Hills locals that they placed a measure on a 2008 ballot to stop it; the measure failed. The five-star luxury Waldorf-Astoria, also a Hilton Hotels Corp. brand, has signed on to place a flag once that hotel is built.
In November, Alagem began exploring selling the Beverly Hills property shortly after a neighboring 9900 Wilshire Blvd. building, the former Robinsons-May, sold for $148 million to a group of Asian investors.
Representatives for Oasis West said that the company had only been testing the waters for a buyer and was always open to alternatives. The property remains on the market officially, but sources said that Oasis West would not be considering any offers.
It’s not clear what type of investor Oasis West is looking for.
“We continue to explore all our options and will be making our decision in the coming months,” said Beverly Hilton spokeswoman Marie Garvey.
Opened in 1955 by Conrad Hilton, the Beverly Hilton was made famous by the rich and famous who wandered its grounds. Pictures of legendary figures such as President Kennedy line the hallways as reminders that they once stayed in the building. The hotel is the site of about 175 red-carpet events each year, including the Golden Globe Awards, and serves as home away from home for heads of state, with President Obama staying there on his recent trip to Los Angeles.
It’s surrounded by other high-profile hotels including the Peninsula, Montage and Beverly Wilshire.
Since purchasing the hotel, Alagem has worked to revitalize it as a stronger competitor with its neighbors. He immediately launched an $80 million renovation as he worked to update the 570-room hotel’s image and amenities.
In 2006, the Beverly Hilton received $300 million in nonrecourse refinancing from Column Financial, a subsidiary of Credit Suisse, a financial services company headquartered in Zurich, Switzerland. It would help to fund the proposed hotel and condo project on the Hilton’s grounds. But the project stalled and that loan will mature in August, leaving Alagem with a decision to make: sell or find a partner.
James Sinclair, principal at OnSite Consulting, an L.A.-based hospitality consultancy, said it won’t be too much of a challenge for Alagem to find a partner, so it’s not a desperation play. The owner has connections to many international financiers.
“Beny’s not going anywhere,” Sinclair said. “It’s not a dire situation. You have to remember who you are dealing with. We’re not dealing with someone who’s just fiddling around in business. He could pick up the phone to anyone in the world.”
The 12-story hotel that Alagem plans will have 170 rooms; the two condo buildings will have 36 and 74 units, respectively, as well as more than 2,000 parking spaces. In order to build the Waldorf-Astoria, which will be four stories taller than the existing Hilton, Alagem will raze more than 200 existing hotel rooms at the Hilton outside the main building.
Peter C. Anderson, founder of Santa Monica-based hospitality consultancy Anderson & Associates, said that a smart hotelier would take a long view on how to finance the property and its proposed expansion.
“Hospitality is cyclical. So in order to play the game for the long haul, you have to be able to appreciate downturns and recovery periods, and you have to look at your behavior and investments over a long time,” he said. “You can’t look at this as if is this is the right decision for today. In the next generation or two, that’s when we’ll decide what the right decisions were.”
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