Westin Resort & Spa owner may default on bank loan

The owner of The Westin Resort & Spa, one of Hilton Head Island's largest oceanfront hotels, is in danger of defaulting on a multi-million dollar loan it took out to finance improvements at the 412-room property and at another hotel in Arizona, according to Standard & Poor's, the financial services and research firm.

If the hotel owner, TransWest Partners, is unable to make timely payments on the $209 million loan, no interruption in normal hotel operations or job losses are expected, according to officials with the hotel's management company, New York-based Starwood Hotels and Resorts. TransWest is negotiating with the bank that made the loan, JPMorgan Chase, to try to work out more favorable terms, said Mark Spadoni, the hotel's interim general manager.

Except for delaying some improvements that were planned for the hotel, "it's business as usual," said Spadoni. He managed the hotel when it took the Westin name in 1988 and now manages the Westin Savannah Harbor.

"We're continuing regular day-to-day operations and trying to ramp up for the holidays," he said.

Spadoni stressed that Starwood, the company that manages the Westin, is a separate and distinct entity from TransWest, the owner. TransWest officials did not return calls seeking comment.

"Our original plans were to go through a complete renovation starting last month," Spadoni said. "Now the improvements will probably happen sometime in the late spring or early summer of 2009."

A Standard & Poor's report issued this week states TransWest is on the verge of missing payments on the loan after a number of group's canceled bookings at the company's hotels. TransWest bought the Westin in December 2007 and subsequently borrowed the $209 million for improvements from JPMorgan Chase.

So far, in the economic downturn that has chilled the nation's economy, the commercial real estate market has fared better than the residential market, where foreclosures are on the rise. But the TransWest loan, and a string of shopping malls also entering foreclosure, might signal that commercial companies are susceptible to some of the same forces that have hurt the housing market.

That pace of loan problems in the commercial sector is expected to quicken, according to analysts from Fitch Ratings, which evaluates companies' credit. The number of late payments and defaults will double, if not triple, by the end of next year, Fitch has said.

"We're probably in the first inning of the commercial mortgage problem," Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey, told the Associated Press.

TransWest's loan from JPMorgan Chase was based on an estimated 13 percent revenue growth. It was not immediately clear what TransWest's revenue growth has been.

"It's one of those cyclical things that happens in our industry. When we have a recession and business volumes slow down, it makes it tough to generate the normal cash flows," said Spadoni.

"It's disappointing news to hear, but given the economy, I'm not surprised," said Anne-Marie Adams-Arrington, executive director of the Hilton Head Area Hospitality Association.

"In the hotel world, an area like ours might do better than other places," Adams-

Arrington said, "but it doesn't mean we're exempt from what's happening."

The Associated Press contributed to this report