WORLD PROPERTY CHANNEL ®

(WASHINGTON, D.C.) -- Ten corporate entrepreneurs from around the globe each wrote a check for $1.1 million to bid on a non-operating hotel in the Capital.

But none showed up at the auction yesterday.  Each lost the million-dollar deposit.

It marked another bizarre twist in the 42-year-old saga of the shuttered 251-room Watergate Hotel in northwest Washington, DC.

The property's owner of record, New York City-based PB Capital Corp., had scheduled the auction instead of going through with a conventional foreclosure action against the borrower, Monument Realty of Washington, DC.

PB Capital is owed $40 million, its stake in a $70 million acquisition loan to Monument Realty in 2004. Monument has defaulted on the loan and has been served with a foreclosure notice.

PB had gambled it might have recouped its $40 million from strong auction bidding, since it had been told there was intense interest from global investors in the property.

However, when the auction drew a blank response yesterday, PB Capital took back the property, as independent  realty and investment sources had previously predicted would happen.

(Please see previous articles posted by Real Estate Channel July 20, "Saudi Arabian Investor Could be New Owner of Shuttered Watergate Hotel" and July 6, "Landmark Watergate Hotel, Vacant for 5 Years, Faces Foreclosure.")

Now most of those 10 bidders and possibly others will make private offers for the hotel directly to PB Capital, sources in a position to know tell REC.  At least one offer is expected to come from a prominent Saudi Arabian investment house.

The intriguing guesswork in DC commercial realty circles after yesterday's no-show at the auction, is how much will PB Capital ultimately accept for the property, sources tell REC.

"Say it receives a $40 million offer that would recoup its loan amount, would it still be cost-effective for the buyer to place another $100 million into the property to bring it into the 21st Century?" the source wonders.

"At a total $140 million, that would equate to about $558,000 per room - twice the replacement cost, even at today's sky-high construction costs."

Stay tuned.  

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