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Oh, the irony. The St. Regis resort made famous as the spot where AIG staged a blowout, $440,000 party for its salespeople just two weeks after receiving $85 billion in federal bailout money has been foreclosed upon. And who is stuck with the property? None other than wobbly, taxpayer bailed-out Citigroup.
The resort is located on the coast in Dana Point, California just south of the resort town of Laguna Beach. It is in Orange County, which was home to a lot of subprime mortgage lenders during the boom. The property, which features a beautiful pool overlooking the ocean, is described as a “an irresistibly seductive resort hotel and spa” on its Web site. AIG’s corporate event in late September of last year included $23,000 worth of spa treatments and $1,400 spent at the salon. There’s an invoice published at www.thesmokinggun.com.
According to the Los Angeles Times the resort may be worth less than one-third of the $300 million in debt on its books. As one investment banker told the paper: “The property has already been nearly catastrophically damaged, through no fault of its own or the previous ownership, by the unwanted media exposure going back to when AIG held their conference.”
The resort will no doubt be remembered as a symbol of the very activity that AIG and Citigroup are accused of encouraging – risky bets on bubble real estate. Coincidently the Watergate Hotel, scene of the famous break-in that brought down President Richard Nixon, was also foreclosed on this week.
Neither hotels’ problems are really related to their respective scandals. In the case of the St. Regis, it’s got too much debt to ride out an awful market for high-end properties. The Watergate needed a make over that it’s owners didn’t want to pay for. There’s a big debate in all luxury product circles these days about when, and if, consumers will ever spend like they used to. The owners of the St. Regis and the Watergate decided they couldn’t afford to wait and find out the answer.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.