September 16, 2009 - A lender quietly acquired The Fairmont Orchid Hawaii in lieu of foreclosure earlier this year, giving the luxury hotel at Mauna Lani Resort on the Big Island its fourth different owner in seven years.

An affiliate of New York-based lender Barclays Capital in June repossessed the 540-room hotel from Westbrook Partners LLC, a Boston-based real estate investment firm that bought the 32-acre oceanfront property for $250 million in 2005, property records show.

A spokesman for Barclays Capital declined to comment. The company is expected to keep the property at least until the local hotel and real estate markets improve.

The deal hasn't affected the operation of the hotel, which is managed under a long-term contract by Fairmont Hotels & Resorts Inc. But it adds to a growing number of Hawai'i hotels being taken over by lenders amid the economic downturn that has hurt the state's tourism industry and investors that paid hefty prices for hotels in the past few years.

"I expect there's going to be more of that," said Joseph Toy, president of local tourism industry consulting firm Hospitality Advisors LLC. "Clearly the distressed hotel market is very active."

Toy said the economic downturn was so sharp that even sophisticated hotel buyers who had significant capital reserves are having problems keeping their mortgages out of default.

Westbrook bought the Orchid in December 2005, and 18 months later had listed the property for sale through brokerage firm Eastdil Secured LLC. The offer attracted significant interest, but didn't result in a sale.

The $250 million paid by Westbrook was a record price for the hotel, and was almost twice what the previous owner paid.

Westbrook bought the hotel from Fairmont, which had paid $140 million in 2002 to acquire the hotel from Los Angeles-based investment firm Colony Capital LLC, which in 1995 paid $75 million for the hotel then known as the Ritz-Carlton Mauna Lani.

Ritz-Carlton Hotels and a Japanese partner, ONKD Inc., spent $175 million to develop the property, which opened in 1990.

Other Hawai'i hotels that have faced mortgage trouble recently include the Ilikai in Waikiki, which was acquired by a lender through foreclosure in July, and the Maui Prince Hotel, which is under receivership after a consortium of lenders sued to foreclose on the property last month.

Reach Andrew Gomes at [email protected].

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