1674-1 Ian Schrager 0 mhcur SCHRAGER'S CLIFT HOTEL FILES FOR BANKRUPTCY 08/21/2003
THE MIAMI HERALD
Copyright (c) 2003, The Miami Herald
DATE: Thursday, August 21, 2003 EDITION: State
SECTION: Business PAGE: 1C LENGTH: 64 lines
ILLUSTRATION: color photo: Ian Schrager (a) , the Clift Hotel in San Francisco
(a)
SOURCE/CREDIT LINE: BY DOUGLAS HANKS III, dhanks@herald.com
SCHRAGER'S CLIFT HOTEL FILES FOR BANKRUPTCY
Delano owner Ian Schrager has filed for bankruptcy protection for his plush
Clift Hotel in San Francisco, his latest move to keep creditors at bay.
Just two weeks ago Schrager won a two-year extension on $355 million in
mortgages on four other hotels, including the Delano in South Beach.
He could not win a reprieve on the Clift's $57 million debt, so his lawyers
filed for Chapter 11 bankruptcy protection, a spokesman said.
The bankruptcy is supposed to be brief - Schrager spokesman Michael Sitrick
said Schrager's company has lined up financing to keep the Clift current on
its bills, but that the current lenders would not agree to the plan.
In a release, Clift Holdings said it will use the bankruptcy court to force
creditors into accepting the new arrangements.
"We expect to have this matter behind us in a relatively short period of
time - perhaps 90-120 days, " the company said in a release.
Schrager's moves to financial defense have scuffed some of the shine off
his image as the country's hippest hotelier.
The founder of New York's legendary Studio 54 disco, Schrager transferred
the velvet-rope concept to hotels in the 1990s by creating posh destinations
like the Delano that lure celebrities and exude exclusivity.
His Delano has come to define the South Beach experience, where
$375-a-night rooms overlook a poolside playground of movie-star sightings and
cabanas draped in white linen.
But hotels have suffered through a nationwide travel slump in the midst of
a slow economy and terrorism worries. High-priced hotels are particularly hard
hit, as the pool of flush, free-spending guests has shrunk, said hotel
consultant Alan Reay, president of Cosa Mesa, Calif.-based Atlas Hospitality
Group.
Schrager is saddled with "too much debt and not enough income, " Reay told
The Los Angeles Times.
Schrager bought the Delano in 1993 for $10 million and at the time talked
of a $20 million renovation plan for the 238-room resort. Property records
show his company, Beach Hotel Associates, has borrowed $78 million on the
hotel. Beach Hotel Associates has also guaranteed $177 million in loans to
other Schrager holding companies.
Sitrick said four Schrager hotels - the Delano, the Mondrian in West
Hollywood, Calif. ; and the Royalton and the Morgans in New York - back the
$355 million in loans that Schrager recently refinanced. About $255 million of
that money was used to purchase and renovate the properties, Sitrick said
Wednesday. Another $100 million was made as a corporate loan to Schrager's
companies.
Sitrick said an independent appraiser has concluded the properties are
worth more than the loan amounts, but he declined to provide specific figures.
He said Schrager will continue operating his hotels as usual while company
officials work to refinance the $355 million debt beyond its two-year due date
and bring the Clift out of bankruptcy protection.
Schrager, who controls 10 hotels with more than 3,400 rooms in five cities,
is known for comebacks. He spent 13 months in prison in the early 1980s on a
tax-evasion charge related to Studio 54.
"To me, he's still the best thotell operator in the country, " said Alan
Lieberman, whose boutique hotels compete with Schrager in South Beach. "He
has the smallest rooms, the highest rates and the highest occupancy. "
CAPTION: CHRIS HARDY/THE SAN FRANCISCO CHRONICLE BANKRUPTCY: Ian Schrager
carries $57 million debt on the Clift Hotel in San Francisco.