Correction to This Article
An earlier version of this story incorrectly said foreclosure proceedings had concluded; the process is continuing.

St. Regis to be auctioned off

By Jonathan O'Connell
Monday, October 18, 2010

Barclays Capital has begun foreclosure proceedings on the owners of the St. Regis hotel and plans to auction off the iconic property Oct. 22, adding the building to a heap of those purchased in Washington with heavy borrowing during the real estate bubble and that are therefore in danger of being lost by their owners.

Adorned with Italian Renaissance Louis XVI chandeliers and located two blocks from the White House on 16th Street Northwest, the 150-room, 25-suite St. Regis Washington is routinely ranked as one of the most luxurious hotels the region, its reputation further burnished after undergoing two major renovations in the past 23 years.

Claret Capital, a private equity firm based in Ireland, purchased the hotel in 2007 for $170 million, after it went for just $45 million two years earlier.

"This is a unique investment opportunity -- assets of this quality and reputation have a scarcity value as they rarely come to market," Claret Principal Domhnal Slattery said in a statement at the time.

The timing proved otherwise. The value of the property has since come racing back to earth.

Barclays provided two loans totaling $135 million to finance the sale to Claret, according to the New York-based research firm Real Capital Analytics. Barclays foreclosed on Claret in September and plans to sell it through Harvey West Auctioneers, of Towson. A previous auction scheduled for late September was canceled.

Slattery, reached in Ireland, said he could not comment. "There are multiple investors and partners involved, and we just cannot say anything about it," he said.

Amelia Lim, executive vice president for Jones Lang LaSalle Hotels in New York, advised Claret in its purchase of the St. Regis. She said she would not be surprised if Claret was unable to come up with the money to forestall the auction. "Given how the fundamentals are in the economy right now," she said, Claret may not have the money to make debt payments.

Lim said Claret had not owned any hotels in Washington previously and that the company valued the property for its prestige. Ireland's orange, green and white flag flies out front. "Being it is their only hotel asset in the U.S., I think it was viewed as a very trophy asset for them," Lim said.

Other commercial real estate firms that borrowed heavily to purchase hotels during the real estate bubble have also encountered distress. Owners of the Hyatt Regency Bethesda were also foreclosed upon over the summer. An auction was canceled. And Rockwood Capital of San Francisco ran into trouble after purchasing the Renaissance Mayflower Hotel for $260 million in 2007, but was able to work out an extended loan repayment plan with lenders in July.

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