By GWEN MURANAKA
RAFU ENGLISH EDITOR
The Kyoto Grand Hotel and Garden and Weller Court, two major Little Tokyo landmarks, are currently in default on a loan of $33.8 million. The lender, First Citizens Bank and Trust, sent a default notification to Little Tokyo Partners LP on March 15. Default notification is the first step in a foreclosure proceeding.
The complex, which includes a shopping center and 21-story hotel was purchased by Century City-based real estate firm 3D Investments from East West Development Corporation for $54 million in August 2007. In 2006, 3D Investments purchased two hotels and malls in San Francisco’s Japantown from Kintetsu Enterprises of America. Those properties are not in default.
At the time, the sale of the buildings as well as Japanese Village Plaza caused shock and concern in the Japanese American community and a call to preserve the cultural identity of Little Tokyo. A representative from 3D Investment did not return requests for comment.
Under California law, the borrower has 90 days, which would be June 15, 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.
Renamed in 2007, the Kyoto Grand opened in 1977 and was operated by the Tokyo-based New Otani Hotel chain as a luxury hotel for visitors to downtown Los Angeles. Since its opening, the hotel has hosted many events in the Little Tokyo community including New Year’s oshogatsu festivities and the Nisei Week coronation banquet. Weller Court shopping mall is the site of popular restaurants and stores, including a Marukai supermarket.
The hotel has made significant renovations since 2007, including the lobby and rooms; however the recession has hit the hotel industry particularly hard. The signature Japanese restaurant Thousand Cranes, which overlooked the hotel’s rooftop garden, recently closed.
Richard Gaines, general manager of the Kyoto Grand, said the restaurant was operated by a third party that decided to shut down the business.
“It was an institution that was sad to see go. We’re currently weighing our options what to do up there,” said Gaines.
A report issued on May 7 by Atlanta-based PKF Hospitality Research indicated that the domestic hotel industry suffered a record 35.4 percent decline in profits last year – its worst drop-off since the 1930s.
“Declines in revenues make the headlines, but the bottom line is where the rubber meets the road for owners,” said R. Mark Woodworth, president of PKF-HR. “The 35.4 percent decline in profits realized in 2009 has severely stressed borrower/lender relationships throughout the country as delinquencies, defaults, foreclosures, and bankruptcies continue to escalate.”
Gaines acknowledged that 2009 was a difficult year, but said the hotel has rebounded considerably in 2010. He noted that last week, the hotel was sold out four nights in a row.
“Revenues are much better than last year. We’re all excited and enthusiastic to be here. The owners are very happy with our performance,” said Gaines.