|By Melissa Pamer, Daily Breeze, Torrance,
Calif.McClatchy-Tribune Regional News
Aug. 27, 2009 - The troubled bank that loaned Terranea Resort money to transform the former site of Marineland of the Pacific into a luxury hotel has initiated foreclosure proceedings against the newly opened Rancho Palos Verdes property.
Corus Bank, a Chicago-based institution the Federal Deposit Insurance Corp. has put up for bids reportedly due next week, filed a notice of default earlier this month on its $180 million loan to Terranea.
The notice was filed with Los Angeles County just three days after the resort's secondary lender -- led by Microsoft billionaire Bill Gates' Cascade Investment -- had made a similar filing Aug. 11 on its $110 million loan to the project.
The default notices come two months after Terranea opened with a 360-room hotel, 82 ownership units, several restaurants and a nine-hole golf course amid economic conditions that have dealt a crippling blow to the hospitality industry.
The two filings set the resort on parallel but staggered timelines of about 125 days toward separate foreclosure sales.
It remains unclear what might happen in the meantime, particularly due to the uncertain fate of Corus Bank, which may be forced by the federal government to sell off individual commercial real estate loans or be bought in its entirety by another bank or investment firm.
Because Cascade filed a notice of default first, it may be able to take and maintain ownership of the resort property, which cost $480 million to build.
"It's very hard to figure out ... what's going to happen," said real estate attorney Bruce Galloway, who advised the city of Rancho Palos Verdes on a now-defunct plan to rebate hotel tax revenue to the resort.
"It does appear there's going to be a change in ownership here unless something magical happens."
Bob Lowe, founder and chief executive of Los Angeles-based Terranea developer Lowe Enterprises, was unavailable to comment.
He has previously said that his company has an "excellent relationship" with Cascade but had struggled with Corus and had been unable to get nearly $13 million in remaining loan funds from the bank.
City Councilman Steve Wolowicz said the news of the second filing added validity to municipal officials' concern that unforeseen actions related to the resort's financing could potentially affect the city and its tax rebate deal.
"We're hoping that the property remains open, that it's subject to good management," Wolowicz said.
With the filings, the resort joins some 285 California hotels that are in default or foreclosure, according to a survey from Irvine-based consulting firm Atlas Hospitality Group.
"Typically, it really has a detrimental effect on a resort property to be in default," said Alan Reay, president of Atlas. "If you're looking to get married, do you want to plan a wedding there next year?"
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