Morgan Stanley Maui resort sold to mortgage holders

The Makena Beach & Golf Resort in Hawaii has been sold at a foreclosure auction for a reported $55m, snapped up by the hotel’s mortgage holders led by Wells Fargo. The auction marks a substantial discount on the resort’s 2007 price tag of $575m, when it was acquired by Morgan Stanley Real Estate Fund V and developer The Dowling Company.

A hotel resort acquired by Morgan Stanley Real Estate Investing in 2007 for $575 million has been sold at foreclosure auction for a reported $55 million, snapped up by the mortgage holders led by Wells Fargo, according to Bloomberg.

The auction marks a loss for Morgan Stanley Real Estate Fund V and Maui-based developer the Dowling Company, which purchased the resort at the height of the market in June 2007, but could not come up with a $192.5 million mortgage payment last July, Bloomberg said. MSREF and Dowling together contributed $250 million in equity, the report added.

Last August, MSREI declined to exercise a one-year loan extension option for the resort, formerly known as the Maui Prince Hotel, opting instead to try to restructure the deal, according to data provider Real Capital Analytics.

In addition to the $250 million of equity from MSREF and Dowling, the auction knocks out $227.5 million of mezzanine debt held by a UBS fund, Bloomberg said.

The 1,800-acre Makena resort has 310 rooms, two 18-hole golf courses and 1,317 acres of vacant land, according to RCA.

A spokesperson from Morgan Stanley Real Estate declined to comment and a representative from Wells Fargo was not immediately available at press time.

MSREI last month closed its latest global fund, MSREF VII Global on $4.7 billion. G7, as the fund has been dubbed internally, is the largest private real estate vehicle to close following the collapse of Lehman Brothers. From the start of 2009 to the first quarter of this year, MSREI has managed to sell roughly $10 billion of assets, predominantly in China where it saw an opportunity to take advantage of increasing market liquidity.

In October 2009, the firm sold a 21-storey office building in central Hong Kong for $477 million. The building was originally acquired in August 2006 for $291 million and underwent redevelopment and substantial lease up prior to sale. The firm has also restructured billions of dollars of loans, and where necessary handed back the keys to a few assets, most recently handing over to lender Royal Bank of Scotland a collection of German offices known as the Pegasus portfolio, reportedly worth €2.1 billion. To read more about MSREI in the June issue of PERE – out now – click here.