Maui Prince Hotel's Demise Greatly Exaggerated

The Maui Prince Hotel, faced with foreclosure, was in trouble. In the last few days, several sources reported that its parent Makena Hotel LLC planned to close the hotel and lay off 380 employees while its lenders looked for a new management company. (Everett Dowling and partner Morgan Stanley bought the 1,800-acre Makena Resort, which includes the hotel and a golf course, from Seibu Group of Japan in 2007 for $575 million.)

The lenders, led by Wells Fargo, are now reporting there will be no closure. Yes, the property is being foreclosed upon, but an attorney for the lenders says there's a new management company in place for an easy transition.

Prince Hotels Hawaii said it was ending their management agreement on Sept. 16 for the resort, and it was likely it would close. Previously Wells Fargo, who filed a lawsuit against the resort owners for defaulting on their $192.5 million mortgage, asked to appoint a receiver to run the hotel. Their lawyer, Barry Sullivan, said his clients have already found a ready and willing hotel operator and there will be no closure. There was no word on whether the new management company would rehire all 380 workers.

Lenders foreclosing on a hotel or commercial building isn't unheard of, but I would think few want the responsibility of running and operating hotels. However, they may not have any choice when that property is so crippled with debt that vulture capitalists don't even want it. I expect many of these situations to crop up in the coming year. Do you think they will make up signs that say Wells Fargo Makena Resort or Bank of America Fontainebleau?