Rafu Staff Reports
The Kyoto Grand Hotel, as well as its adjoining shopping area, Weller Court, are possibly close to being sold, according to a published report.
In a story dated Oct. 29, a downtown Los Angeles news website said the bank that holds the loans to the Little Tokyo landmarks has agreed to sell the properties to a Torrance-based firm for $44 million. The sale would be pending court approval.
The Rafu has been unable to obtain confirmation of any such deal, however. Century City-based 3D Investments, which created Little Tokyo Partners LP to purchase the properties in 2006, has made no comment about the sale other than to say the published report is not entirely accurate and that a court filing is expected very soon.
Little Tokyo Partners filed for Chapter 11 bankruptcy reorganization on July 15, a day before the properties were facing foreclosure, citing a “precipitous drop in revenue starting in the last quarter of 2008,” in their filing.
The online report stated that Seville Gateway Investments, the investment arm of Torrance furniture maker Seville Classics, filed a purchase agreement on Oct. 18 and deposited $5 million in an escrow account set up for the sale.
Richard Gaines, the general manager of the Kyoto Grand, said he has not been informed of any pending change of ownership, and that the news may have arisen from a continuing dispute between the current owner and the lender, North Carolina-based First-Citizens Bank and Trust.
“We fully anticipate continuing all of our operations as usual,” said Gaines, referring all questions to 3D Investments.
One local businessman, who has been following the developments over the properties and spoke on condition of anonymity, wondered if any announcement of a sale may be premature. He cited Section 363 of the U.S. bankruptcy code, which provides for competing bids on any property in trustee sale. Recent court documents show bidding for the Kyoto Grand and Weller Court would start at approximately $44.5 million, the total of the delinquent loans on both properties. Another hearing on the matter is expected to take place in late November or early December.
On March 15, a notice of default was sent to Little Tokyo Partners, informing them that payment on the $33.8 million loan on the hotel and shopping center was past due. Such notice is normally the first step in a foreclosure. Under California law, the borrower has 90 days from the time the default notice is filed to cure any past payment delinquency. After that, the lender can file a Notice of Trustee Sale and the entire loan amount, including past interest payments and legal expenses become due and payable.
Martin Taylor, an attorney who was representing Little Tokyo Partners in June, said at the time that there were no plans to sell the complex. Calls to Taylor concerning the latest sale report were not immediately returned.
3D Investments purchased the 21-story hotel–one of Little Tokyo’s most defining landmarks–and Weller Court from Kajima Corp. subsidiary East West Development Corporation for $54 million in 2006. The hotel originally opened in 1977 as the New Otani Hotel and Gardens, operated by the Tokyo-based New Otani Hotel chain and designed to be a luxury destination for visitors to Los Angeles.
The investment firm also owns hotels and shopping areas in San Francisco’s Japantown. Sales of historic sites there and in Little Tokyo stirred fears that the non-Japanese buyers may fail to preserve the cultural heritage of those locations.
As the influence of Japanese-based business declined toward the end of the 20th century–as well as in the recent economic downturn–the hotel has been forced to make substantial changes recently. In May, Gaines acknowledged the effects of financial hard times, but said that 2010 had seen a rebound from 2009 sales figures.
Thousand Cranes, the signature Japanese restaurant at the Kyoto Grand, closed prior to the notice of default. It had been taken over by a non-Japanese third party operator and there had been complaints within the local community that the quality of food and service had declined considerably.