They call it jingle mail. That’s when a property owner stops paying on a mortgage and simply sends the keys jingling back to the lender. With Sausalito’s venerable Casa Madrona Hotel
, it was a little more complicated than that, since the lender, Integrity Bank of Georgia, had failed. So when Guy Mitchell let his almost $25 million loan on the hotel just ride, Uncle Sam became the Casa’s owner—giving a whole new meaning to the term “turn down service.” But we’re getting ahead of ourselves.
The bed and breakfast-turned-resort perches on a hillside overlooking Richardson Bay, Angel Island, Belvedere and Tiburon. It’s long been a haunt of Hollywood types, rock stars, honeymooners and those who just want to honeymoon like rock stars.
Full disclosure: Before becoming a full-time journalist here in the North Bay, I was a full-time hotel manager at the Casa and a part-time writer and shit disturber. Many a night, I was found working the desk, checking in guests or schlepping bags. One minute, I might be making restaurant reservations for frequent guest Robert Redford
, the next I was blowing off a guest complaint about a spirited rainstorm. “But sir,” I reasoned, “If we could truly control the weather, we would charge more for the rooms.”
A little background
The Casa started out as a mansion built in 1885 for the Barrett family of San Francisco as a summer retreat. It sold near the turn of the century and has remained a hotel of sorts ever since. During WWII, it was a rooming house for workers at the Marin Shipyards, a boat yard that turned out ships at near light speed. In the 1960s, it fell into disrepair as it became something of a crash pad.
In the 1970s, a lawyer named John Mays bought the property from the Deschamps family. One very wet winter, the hill below the two-story Victorian began to give way, threatening to close the city’s main drag. Mays offered to secure the hill out of his own pocket, but as he explained to the city council, he’d need to recoup the mud-stop money, and to do that, he wanted to add 16 rooms to the hotel on the newly secured hillside. The city fathers and mothers saw the wisdom of the trade-off, especially since the city benefited from the extra hotel tax the new rooms would generate.
In the late 1990s, Mays again looked to expand the hotel by buying the Village Fair, an oversized building next to the hotel that, at one time, was a parking garage for the Sausalito ferry as well as a pedestrian mall. The building required extensive seismic upgrades, however, and Mays took on an equity partner, selling a majority interest in the hotel to Dallas-based Olympus Real Estate Corp.
Olympus and Mays added 31 rooms, a spa and a new restaurant before selling the hotel in May 2005 to MHG Casa Madrona LLC, a joint venture involving the Falor Companies and the Mitchell Companies
. The sale price was $20 million according to Hospitium.com
, a hospitality consulting company.
That was then, this is now
This is where it gets interesting. Developer Robert Falor, founder of the Falor Companies, hails from the Windy City and is a pioneer in something called hotel-condos, a hybrid property type, where condo owners can make their units available to the hotel when the owner is elsewhere and share in the hotel revenues generated by the condo. Operationally, hotel-condos have proven to be akin to the old joke about Communism: In theory, it sounds pretty good. But in practice, you run out of toilet paper.
In 2005, Falor acquired Hotel 71 in his hometown for $92 million, financing the acquisition and conversion via a $101 million loan from Column Financial
and a $27 million mezzanine loan from Oaktree Capital Management
, a hedge fund. But the hotel-condo proved a bust, and Falor and his Chicago H&S Senior Investors LLC investment vehicle filed for bankruptcy protection while Oaktree made its foreclosure moves. One of Falor’s partners in Chicago H&S was Guy Mitchell.
Soon after, Falor lost another hotel-condo project in Chicago and failed to close on the purchase of a third. His luck wasn’t much better in Florida, as he and Mitchell lost control of the Royal Palm Hotel
in Miami Beach after paying $128 million for the property and falling behind on $134 million in debt. In February of this year, a Dade County Circuit Court awarded control of the hotel to minority owners after finding Mitchell committed “willful misconduct, fraud or breach of fiduciary duty.” Seems the court felt Mitchell shipping $3.8 million in hotel cash to an offshore account in the Cook Islands was a problem.
Mitchell was listed as the owner of Casa Madrona before defaulting on the loan from Integrity Bank in Georgia. For Mitchell, defaulting on the loan wasn’t a wise move, since he had a particularly personal relationship with the lender. When the bank failed in August 2008, Mitchell had 14 loans outstanding worth a total of $83 million. That concentration of loans to one borrower was enough to get the FDIC and the FBI interested in a sit-down with Mitchell to discuss his role in the bank’s failure as well as possible fraud problems.
Georgia banking laws state a lender can’t loan more than 25 percent of its available capital to any one borrower. But according to filings by the bank, the $83 million loaned to Mitchell was equal to all
the capital the bank had on hand.
So what does the future hold for the Casa? Mitchell has fought to hold on to the hotel, delaying a foreclosure auction until October 6 by filing for Chapter 11 bankruptcy. The opening bid at the cancelled August 11 auction was $13.1 million, and a crowd of 60 people were sent home. Larkspur Hotels
Chairman Karl Hoagland was quoted in the Marin IJ
as saying the Casa would make a nice addition to his growing hotel company, which includes The Lodge at Tiburon
. But the price tag may not fit for Hoagland and company.
Regardless of the financial shenanigans wrought by Mitchell or whether Larkspur wants to pony up for the landmark Sausalito hotel, the Casa will not go away. This is just another chapter in the tale of the hotel on the hill.