GDB mulls restructuring Condado Duo building loan
The Puerto Rico government is reviewing a request by one of the island’s main hotel operators to restructure the loan that helped pay for the renovation of two landmark hotels: La Concha Renaissance Resort & Casino, currently in operation, and the Condado Vanderbilt Hotel, which shut down 15 years ago and reopens on Tuesday in a phased manner.
News Is My Business has learned that the Government Development Bank is considering a request by International Hospitality Enterprises Inc. to convert the $165 million construction loan the company obtained from the Puerto Rico Tourism Development Fund, a GDB subsidiary, into a permanent loan.
The construction loan helped pay for more than half of the cost of renovating the two sister hostelries that operate next to each other but are separated by a park. The total development budget for the Condado Duo Project was $276.2 million: $141.1 million for La Concha and $135.1 million for the Vanderbilt. The government lent $165 million and private financing took care of the remaining balance of $111 million.
It is unclear when the GDB will decide on the matter but a government spokesperson said the bank’s private financing division is currently looking into alternatives for the project’s permanent financing. When ready, the division will make its recommendations to the GDB governing board.
The loan came due on September 30.
A construction loan is usually paid off from the proceeds of permanent financing which, in turn, is repaid from the cash flow generated by the finished project, in this case the two hotels. In its evaluation, GDB will probably have to take into account that the duo complex will not be fully operational until possibly late 2013.
When it reopens on Tuesday, the Vanderbilt will only be operating its meeting rooms plus food and beverage facilities.
Rooms not ready yet
The hotel’s rooms will not be available to the public until sometime next year.
Founded by veteran hotelier Hugh Andrews, IHE is among the leading hotel operators in Puerto Rico with seven properties currently in its portfolio: El Convento, a 58-room luxury boutique hotel in Old San Juan; Double Tree by Hilton in Condado (184); Courtyard Marriott in Isla Verde (260); Copamarina Beach Resort, an upscale hosterly in Guánica (106); La Concha; and the Vanderbilt.
Its most recent acquisition is the Diamond Palace, which will reopen as Condado Palm Inn & Suites under the Best Western Inn banner. Between buying the property in federal bankruptcy court and renovating the hotel tower from top to bottom (a project that is currently underway and scheduled for completion early next year), IHE is investing $20 million.
But the jewels in the company’s crown are undoubtedly the Condado Duo, a hotel complex that is much more than just two luxury hotels but also includes three adjoining condo hotel towers, all of which adds up to a grand total of 805 rooms and an overall investment in excess of $400 million. When not in use by their owners,the hotel tower apartments are rented out as regular hotel rooms under a revenue sharing contract between owner and the hotel.
La Concha, a 248-room hotel originally built in the late 1950s and described as a “masterpiece of Tropical Modernism” architecture, reopened in 2007 under Marriott’s Renaissance brand.
A condo hotel tower with 235 studio units and one-bedroom suites that sold for prices ranging from $450,000 to $800,000 flanks the hotel.
Buyers included some of the hundreds of investors who plunked $23 million in limited partnership funds, part of the private capital raised to redevelop the hotels. Making the purchase especially attractive was the fact that buyers received valuable tax concessions under the 1993 Tourism Development Act, including a 90% tax exemption on revenue generated by the residence, a 90 percent tax exemption on property taxes, and a 100 percent exemption on excise and municipal taxes.
A historic property
The 90-room Vanderbilt, Puerto Rico’s first luxury hotel dating to the beginning of the 20th century, reopens Tuesday in a phased manner, two years behind schedule. The building, restored to its former glory in keeping with its 2008 listing in the National Register of Historic Places, is flanked by two towers with a combined total of 232 rooms.
The first phase involves opening the hotel’s banquet rooms and food and drink areas. The hotel has 15,000-square-feet of meeting space; among the larger rooms available for catered affairs are “El Patio del Fauno,” with capacity for 500 people, and the Dorado Room, with space for 120 people.
The hostelry’s drink and food options include a bar named “Vino Veritas Wine Bar” and a restaurant named “1919,” a reference to the date when the hotel opened for business.
Meanwhile, the rooms in the original Vanderbilt won’t open until next spring and the two adjoining towers that connect to the main building via glass enclosed walkways, remain unfinished due to problems stemming from the bankruptcy of R-G (Premier Bank), which granted the construction loan for the project.
After the bank was taken over by Scotiabank, the loan fell into a resolution process that reportedly won’t be settled until next year. If all goes as planned, the towers will open by the end of 2013. IHE management was not available for comment.