The Waikiki Edition, a 353 room boutique hotel opperated by Marriot, first opened in September 2010 and was to be the first “Edition” hotel in the Marriott chain. However, during its first year of operation, the hotel had an $8.4 million operating loss and M Waikiki LLC, the owners of the hotel, blamed Marriott for their problems. M Waikiki LLC, maintained that Marriott was unwilling to make cuts or changes, so one night in August 2011, the owner took over the hotel at 2:00 AM and removed all of the Marriott managers and replaced them with managers from another hotel opperator, Aqua Hotels & Resorts. At that time, Marriott still had 29 years remaining on their contract. Marriott immediately filed lawsuit against M Waikiki LLC, and a judge ruled in favor of Marriott and stated that management must be returned. However, M Waikiki LLC filed for bankruptcy in January 2012 in an effort to stall the process.
Now, M Waikiki LLC has agreed to pay Marriott an undisclosed amount of money in return for them to drop their lawsuit. While it is unclear as to the amount that was agreed upon, Bankruptcy Judge Robert Faris ruled in early June that he felt that a reasonable estimate for lost management fees and expense would be $20.7 million. Marriott had filed in court that they were looking for $72 million for the unjust and illegal breaking of their 30 year management contract. With this settlement, M Waikiki will be able to exit bankruptcy and retain control of their hotel and hotel management.
Source: Honolulu Star Advertiser, 7-6-2012, www.staradvertiser.com
Posted by Jeff Uyemura-Reyes, Broker-in-Charge, Realtor®
Global Executive Realty, LLC
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