Historic Breakers hotel owner files for bankruptcy to stave off creditors

The developer behind the recent renovation of the historic Breakers Hotel in Downtown Long Beach filed for Chapter 11 bankruptcy last month in order to delay repayment to its creditors for the more than $100 million project.

Long Beach resident and former Molina Healthcare executive John Molina is listed as CEO of Breakers Mezz I, the company that filed for bankruptcy protection on Oct. 2 after X-Caliber Funding, one of the creditors that funded the Breakers upgrades, announced it would auction off Breakers Mezz I’s stake in the hotel to the highest bidder.

Through a series of subsidiaries, Molina and his business partners purchased the rundown historic property in 2017. After years of construction and delays, the hotel reopened last year as the 185-room luxury Fairmont Breakers Long Beach.

“Fairmont Breakers Hotel guests and employees can expect to continue to access and to provide hospitality services, respectively, without disruption during the process,” Breakers Mezz I said in a statement. “This step taken by Breakers Mezz I, is essentially a financial and banking matter that allows the company to use the process to evaluate reorganization options, including the restructuring of its debt with its lenders.”

The project was originally expected to open in 2020 but faced numerous delays due to the historic nature of the building as well as the coronavirus pandemic. In September 2023, Mayor Rex Richardson announced the hotel would open in March 2024. That was pushed to August. And it finally opened in November.

The delays, as well as the pandemic-induced price increases for materials, also ballooned the cost of the project, which was originally expected to cost between $40 to $60 million.

In order to get the project across the finish line, X-Caliber and its affiliate CastleGreen Finance announced a refinance for the project, bringing its total funding to $122 million ($64.45 million in bridge loans and $57.75 million in clean energy financing), according to a February 2024 press release.

The ownership of the hotel is convoluted. Breakers Development technically owns the hotel, according to Molina, which means day-to-day operations will not be impacted by the shakeup at Breakers Mezz I. Breakers Development is wholly owned by Breakers Mezz I, which serves as the “financial vehicle” for the project, Molina told the Watchdog in an October interview.

Breakers Mezz I in turn is owned by Breakers HTC Bridge, which is owned by 6 Founders. The latter two entities share an address at 211 E. Ocean Blvd. (directly across the street from the Breakers) with Pacific6 Enterprises, a development and investment group co-founded by Molina in 2017.

Pacific6 has the refurbished hotel listed as an asset on its website.

Breakers Mezz I has a contract with Fairmont, which is owned by Accor, for management of the hotel and the use of the Fairmont name.

In September, X-Caliber published a notice of its intent to auction off Breakers Mezz I’s shares of Breakers Development. The auction date was set for Sept. 26 and the shares were to be purchased in bulk to the highest bidder, according to the notice.

“We’ve been trying to talk to the lender about avoiding this and, for whatever reason, they put this auction sale out there before we knew it was coming,” Molina said.

On Oct. 2, Breakers Mezz I voluntarily filed for Chapter 11 bankruptcy protection. A judge ultimately ruled in favor of the company, effectively barring the sale by X-Caliber, Molina told the Watchdog.

“We’re not down in the dumps, it’s now ‘oh geez, poor us,’ it’s a finance tool that we had to use in order to get some more time to refi the thing,” Pacific6 co-founder Todd Lemmis said in an interview.

X-Caliber declined to comment on the ruling or broader situation.

By refinancing the existing loan, Lemmis said the company will be able to repay X-Caliber and reset its repayment timetable with a new creditor.

Molina noted that it typically takes hotels a few years to build up to “stabilization.” The extended delay in reopening the hotel has slowed that ramp up, he said, noting that Fairmont, “understandably,” did not pre-book events and rooms for fear of having to cancel if further delays arose.

“So it pushed the ramp up back a couple of months,” Molina said. “But we’re happy to report the ramp up is going very, very well right now: For the next 70 days we’re at about 75% occupancy, the restaurants are buzzing, the jazz club is doing well — people are really enjoying the hotel.”

The Breakers is one of the oldest buildings in Long Beach, with the original hotel opening in 1926. Until it closed in 1988, the hotel was host to countless guests, including stars such as John Wayne, Clark Gable, Carry Grant and Elizabeth Taylor. From 1990 to 2015, the building operated as an assisted living community.

“We all bought into John’s dream,” Lemmis said of Pacific6’s decision to purchase the building eight years ago. “John was chasing the Breakers for 12 years before we actually purchased it. He saw this thing crumbling … and realized that this was the last chance this building had.”

“When we started the whole endeavor, it was in part to have a community benefit,” Molina added. “And I think the community continues to benefit from having a very instinctive hotel. We’re confident we’ll come out the other side.”