Kauai Resort in Default on Mortgage

When Gaylord Entertainment Co. and Deutsche Bank AG’s RREEF asset-management business teamed up to buy the ResortQuest Kauai in Hawaii in 2006 for $85 million, they were probably hoping the investment would be like a walk on the beach.

resortquest

Alas, a fire, started by a smoldering prop left over from a performance destroyed the resorts luau facility, which had brought in up to $2 million a year in revenue, according to debt-rating company Fitch Inc. The 32-year-old resort now hosts luaus in a tent, according to Fitch.

The struggling, 311-room resort on Kauai is in default on its mortgage and on the verge of going into receivership or being sold. It has lost significant business as air travel to Hawaii has plummeted. Occupancy has fallen from 79% in 2006 to 51% last September, according to Fitch.

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