GIC Offers $1.5 Billion for Paulson-Owned Resorts Amid Rebound

Singapore Government Offers to Buy Paulson Resorts
The Grand Wailea Resort Hotel & Spa in Maui, Hawaii. Source: Grand Wailea via Bloomberg

Government of Singapore Investment Corp., which has a stake in Hyatt Hotels Corp., offered to pay $1.5 billion for a group of bankrupt resorts owned by investors including the hedge fund Paulson & Co.

The Singapore sovereign wealth fund seeks to buy five resorts, one of GIC’s lawyers, Michael Sage of Dechert LLP, said in an interview after unveiling the offer at a bankruptcy court hearing yesterday in New York. The properties include Grand Wailea Resort Hotel & Spa in Maui, Hawaii, and the Doral Golf Resort & Spa in Miami.

GIC, which manages more than $100 billion of Singapore’s foreign reserves, may be betting on a rebound in travel demand that is helping the U.S. lodging industry recover after the recession sent occupancies to a 30-year low. Occupancy in the top 25 U.S. markets climbed to 64 percent last year from 60 percent in 2009, according to Smith Travel Research Inc.

“Anyone who has done well historically have bought in the down cycle in the U.S. -- as long as they can finance it,” said Nigel Summers, Hong Kong-based director at Horwath Asia Pacific, which tracks the hospitality industry. “Hotels can be one of last things banks want to touch; if GIC can arrange that, this would be an opportunity for them.”

The resorts filed for bankruptcy on Feb. 1 after Paulson and other investors took ownership of them through a foreclosure, according to a court filing. Doral, which opened in 1962, hosted Florida’s first PGA event and guests included Tiger Woods, Joe DiMaggio and Greg Norman, it said on its website. The Grand Wailea, was on the Conde Nast Traveler’s Gold List last year, according to the resort.

Higher Worth

Edward Sassower, a lawyer for the resorts, declined to comment after the hearing about the offer from GIC. The fund, a creditor in the bankruptcy case that owns junior debt, also declined further comment in an e-mailed statement.

A person familiar with the business said Paulson believes the assets are worth more than GIC’s offer. Paulson has also received other expressions of interest in the properties, including offers, said the person, who didn’t want to be identified because the deliberations are private.

The Singapore fund and Paulson have each offered bankruptcy loans for the company, which will seek approval for the financing by the end of the month, the person said.

GIC, ranked the world’s seventh-largest state investment company by Sovereign Wealth Fund Institute, has invested in the Westin Tokyo hotel, Hyatt Hotels and a venture with Host Hotels & Resorts Inc., the owner of properties managed by Marriott International Inc., Hilton Worldwide Inc. and Starwood Hotels & Resorts Worldwide Inc.

Citigroup, UBS

GIC bought stakes in New York-based Citigroup Inc. and UBS AG, Switzerland’s biggest bank, three years ago as the collapse in the U.S. subprime-mortgage market in 2007 froze credit markets and led to almost $2 trillion in losses and writedowns at financial institutions.

Blackstone Group LP agreed earlier this month to buy a majority stake in Strategic Hotels & Resorts Inc.’s Hotel del Coronado to help restructure the debt on the Southern California resort that was the backdrop of the film “Some Like it Hot.”

The U.S. will remain GIC’s biggest area for investments for years, even as emerging markets grow faster, Tony Tan, deputy chairman of the fund, said in January. GIC’s holdings in the U.S. fell to 36 percent of its portfolio in the year ended March 31 from 38 percent the previous year, according to its September annual report.

‘Need More Time’

At yesterday’s court hearing, U.S. Bankruptcy Judge Sean Lane approved an order allowing the properties to use the cash collateral of lenders until Feb. 28. Without access to the cash, the resorts won’t be able to operate and the “entire restructuring may be jeopardized,” lawyers said in court papers.

Sassower told Lane that negotiations continue with lenders for a “comprehensive” cash collateral agreement.

“The parties have made a lot of progress but still need more time,” Sassower said.

The case is In re. MSR Resort Golf Course LLC, 11-10372, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE