W Hotel owners stave off lender's foreclosure effort

Casey Ross, Globe Staff

A US Bankruptcy Court judge rebuffed Prudential Insurance Co.'s efforts to foreclose on the developer of the W Hotel & Residences, which filed bankruptcy protection last spring after being unable to sell most of its Theatre District condos.

Judge Joan Feeney ruled that the developer, SW Boston Hotel Venture, is making progress stabilizing its finances and should be allowed to continue to do so without the threat of foreclosure by Prudential. The insurance company had provided a $192 million loan for the development of the W Hotel and 123 condominiums on Stuart Street in Boston, and is the primary creditor in bankruptcy proceedings.

SW Hotel Venture "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 50-page ruling issued today.

Despite a $10.5 million loan from the city of Boston, SW Boston Hotel Venture, a subsidiary of Sawyer Enterprises, ran out of money while finishing the W last winter. The developer sold only a few of its luxury condominiums after 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.

The judge also ruled today the developers still owe Boston about $6 million.