After it missed a payment of more than $1.2 million in July, lenders are preparing to put the Hilton Santa Cruz-Scotts Valley up for foreclosure auction this month.
“This (foreclosure) process has been going on since October 2009,” hotel general manager Rich Higdon said. “We fell below the debt ratio test that the owners signed within our contract.”
The unpaid balance and charges stand at nearly $16.78 million, according to documentation filed with the Santa Cruz County Recorder’s office by First American Title Insurance Co.
The hotel is owned by The Inn at Scotts Valley LLC and represented by Derek Smith, a corporate lawyer. The ownership group originally received a $17 million loan from German American Capital Corp. in 2005, and after several transfers, payments have been taken over by Bank of America.
The hotel’s owners are working with lenders to renegotiate the loan contract, Higdon said. He has not changed day-to-day operations during the proceedings.
“The property is still cash-flow positive. It’s doing well,” Higdon said. “They’re just trying to renegotiate the terms of the loan. Hopefully, it all works out.”
The possible foreclosure does not necessarily reflect business at the hotel, where, Higdon said, 2010 was a better year than 2009.
Nonetheless, the auction is scheduled for Jan. 18 at the Santa Cruz County Courthouse, 701 Ocean St., in Santa Cruz.
“The same thing happened to the Hotel Los Gatos,” Higdon said. “At the last moment, the lender pulled out of the foreclosure.”
At the moment, the hotel employs 67 people, though that number rises during the busy season, Higdon said.
“We’re a good full-service property,” Higdon said, noting that if the property is foreclosed on, there are other investors interested in it. “Hilton really likes us.”
The hotel at 6001 La Madrona Drive opened in 1997 as the Inn at Scotts Valley and was converted to a Hilton in 2001.
Along with its 156 guest rooms and 18 suites, the Hilton serves breakfast, lunch and dinner at Café Max and has conference rooms for corporate guests, events and weddings.
The assessed value of the property is $13.32 million, according to the County Assessors Office, and the hotel is up to date after paying $169,287.84 in property taxes for 2010-11.
