|The W Boston Hotel and Residences has seen an uptick in condo sales since its bankruptcy. (Wendy Maeda/Globe Staff/File 2010)|
Ruling staves off foreclosure for W hotel developer
Clears way for firm to offer plan to repay creditors
A Bankruptcy Court judge yesterday rebuffed Prudential Insurance Co.’s efforts to foreclose on the developer of the W Boston Hotel and Residences, which filed for bankruptcy protection last spring after being unable to sell most of its condominiums in Boston’s Theatre District.
Judge Joan N. Feeney ruled that the finances of SW Boston Hotel Venture LLC are improving and that the developer should be able to continue operating without the threat of foreclosure by Prudential.
The insurance giant provided a $192 million loan for development of the W hotel and 123 condominiums on Stuart Street in Boston and is the primary creditor in bankruptcy proceedings.
SW Boston “has shown sufficient progress during this Chapter 11 case to support the conclusion that there is a reasonable possibility of a reorganization within a reasonable time,’’ Feeney wrote in a 51-page decision.
A spokesman for Prudential declined to comment.
The ruling clears the way for SW Boston, a subsidiary of Sawyer Enterprises, to present a formal plan this spring to pay off its creditors. The developer ran into financial trouble even before finishing construction of the striking 26-story tower at Tremont and Stuart streets. It struggled to pay for furnishings and high-end finishes guests expect from the W brand, which emphasizes luxury amenities. Eventually the City of Boston stepped in with $10.5 million loan that allowed SW Boston to finish a spa and restaurant on the property, along with a theme bar that still has not opened, according to Feeney’s ruling.
The company’s cash-flow problems worsened after the W’s October 2009 opening, with SW Boston selling only a handful of its condominiums as the recession ate into the demand for expensive housing and hotel rooms. Typically, developers of large, luxury hotels rely on the quick sale of condominium units to help support the early operations of the hotel.
But business has picked up during the past several months. SW Boston has now sold 29 condominiums, up from 12 at the time of the bankruptcy, and has another seven under purchase-and-sale agreements, said Kevin Ahearn of Otis & Ahearn, which is marketing the W units.
“The timing was difficult for this project, but it’s sort of all coming together now,’’ Ahearn said. “The hotel and the restaurant are doing great, and that really drives the value of the residences.’’
Sawyer Enterprises is run by Carol Sawyer Parks, daughter of taxi magnate Frank Sawyer, former owner of Checker Taxi Co. of Boston. Sawyer had been trying to develop a hotel complex on the Stuart property since the 1990s, but the project suffered through several false starts before finally moving forward in 2008.
Feeney found that SW Boston owes about $154 million to Prudential and another $6 million to the City of Boston.
During testimony in the bankruptcy case, real estate specialists estimated the W will be able to sell its condominiums over the next three years and provide payments to Prudential of between $116 million and $118 million. Another $2.5 million will be raised from renting 25 percent of the units in the complex.
“This is an important decision that lays the foundation for the company’s emergence from Chapter 11 in the spring,’’ said attorney Harold Murphy of Murphy & King, which represented SW Boston. “We couldn’t ask for a better result.’’
Casey Ross can be reached at firstname.lastname@example.org.