Terranea Resort Gets City-Sponsored Bailout
Given the hard times facing the travel industry I'm surprised that more resorts haven't asked for a little help. The Los Angeles Times reports that the Terranea Resort in Rancho Palos Verdes, California recently got what amounts to an $8 million loan from the city by allowing Lowe Enterprises to defer payment of its hotel tax for several years.
We first heard about this resort way back in 2005. The lavish compound located on the spot of the old Marineland of the Pacific oceanarium will open later this month with three restaurants, a nine-hole golf course, a 360-room hotel and 20 bungalows. The complex also includes some pretty expensive real estate, 82 casitas and villas that range in price from $2 million to $4 million.
Terranea will be allowed to keep the 10 percent hotel tax customers pay in a deal that will allow the resort to receive $8 million or collect the taxes for 27 months, whichever comes first. The loan will be repaid by 2013 at the London interbank offered rate plus 8 percentage points. The city council made its decision Wednesday morning at a special meeting. Robert Lowe, chairman and chief executive of Lowe Enterprises, says that once the resort is up and running at full strength in a couple of years it should provide the city with $7 million to $8 million in taxes every year.
This isn't the first time we've seen a city step in to help a hotel in trouble, Portland, Oregon's Portland Development Commission agreed to accept delayed payments on taxpayer-funded loans to keep the developer of the Nines Hotel from defaulting on loans. The developer is still planning to repay its $16.9 million in city loans at the original interest rates once The Nines' business improves. The current expectation is that loan payments should start up again in 2011 if the economy improves along the current predicted trajectory.