Historic Hotel May Be Put Up for Sale : Balboa Inn’s Owners File for Bankruptcy Protection

Owners of the Balboa Inn, a fixture on the sands of Newport Beach since 1929, have filed for bankruptcy protection and say they may put the historic property up for sale later this week.

The 34-room hotel, which remains open, is owned by a group of investors that consists of the general partner, Griswold Development Corp., and 11 limited partners, including basketball stars Kareem Abdul-Jabbar and Ralph Sampson.

In a recent filing in Santa Ana, Griswold asked for protection from creditors under Chapter 11 of the Federal Bankruptcy Code--an action that would keep creditors at bay while Griswold tries to work out a plan to pay its bills.

The filing listed liabilities of $5.7 million and assets between $6.1 million and $6.8 million, depending on the value of the hotel. Secured creditors include Lloyds Bank, holder of a promissory note for $2.6 million, and the Chein Shan Wang family of Anaheim, holders of a $2.6-million second trust deed on the property. The Wangs could not be reached for comment.

Griswold Development was formed in 1985 expressly to purchase and manage the Balboa Inn. Together with the limited partners, it invested about $2 million in a renovation of the

property last year.

As part of the remodeling, the hotel’s restaurant was revamped and adopted a more elegant theme--a decision that quickly proved to be a mistake.

In an area where store and restaurant patrons can very nearly wiggle their toes in the sand, the formal restaurant proved to be a flop and closed Aug. 1.

The hotel had planned to remodel the restaurant again, this time as a casual, Spanish Colonial-themed eatery, but a dispute between the Wang family and the hotel’s bar and restaurant operator has stalled that plan.

While these and other problems are being worked out and lawyers and real estate agents are wrestling with the hotel’s future, the property’s 22 employees are holding the business together with an unusual display of devotion to duty.

Staffers have foregone pay, taken hotel linens home at night to launder them and spent their own money on incidentals such as repairing a vacuum cleaner and providing croissants for guests.

‘A Dedicated Crew’

In addition to taking a pay cut, general manager Karyn Philippsen estimates that she has spent $2,000 of her own money paying the hotel’s bills and has worked a seven-day week since August. “That’s the only way to keep the place running,” she said, pledging to put her “heart and soul” into the hotel. “Until they tell me there are no lights, I will be here,” she said.

“It’s really a dedicated crew,” said George Auger, Griswold’s chief financial officer.

Philippsen clearly is dismayed that the limited partners do not appear to be interested in investing additional funds in the hotel.

Occupancy is running about 40%, typical for winter, she said, but most of the guests come on weekends and there are no funds for an advertising or marketing campaign to attract more business travelers during the week. “We die from Monday to Thursday,” she said.

But difficulties in getting the 11 limited partners to agree on a course of action--or even to get them together in the same meeting--has made it impossible for the hotel to secure additional financing from them.

Leonard Armato, a Los Angeles attorney whose firm is handling Abdul-Jabbar’s legal affairs, said the 11 investors are primarily concerned with preserving their initial investments in the hotel.

Former Agent Being Sued

As reported, Abdul-Jabbar is suing his former agent and business manager, Tom Collins, for $55 million, claiming that the agent’s mismanagement has left him unable to service his investments. The lawsuit seeks $5 million in general damages and $50 million in punitive damages.

Abdul-Jabbar, Sampson and six current and former professional basketball players and three other investors--including Collins--purchased the Balboa Inn for $4.2 million in 1985.

To accommodate the tall investors when they stay at their hotel, the Balboa raised the ceiling and installed an extra-long bed and higher shower head in one of the rooms.

Now a certified national historical site, the Balboa Inn is one of the oldest buildings in Orange County. It was once a place where film stars such as Errol Flynn “swashbuckled on the balcony,” Philippsen said, and for a time in the Depression was a private girls’ school.