The revival of the historical Greenbrier hotel was supposed to be a done deal. Upon filing for Chapter 11 bankruptcy in March, owner Greenbrier Hotel Corporation unveiled a plan to sell the iconic West Virginia property to Marriott.
But then a crafty local businessman swept in, bought the asset, and threw this blogger for a loop. How was a bidder with no experience in the industry able to sidestep an established hotel giant? How did he bypass the normal bankruptcy proceedings? And how would Marriott react?
For answers, I sought the counsel of HotelNewsNow.com columnist and hotel bankruptcy expert David Neff of the law firm Perkins Coie.
Neff hypothesized that James Justice, that crafty West Virginia businessman who now owns the hotel, skirted Marriott’s agreement and the usual bankruptcy proceedings by purchasing stock from the holding company that owns the Greenbrier Hotel Corporation, which in turn owns The Greenbrier. After some digging, I discovered he was right.
Justice, through the Justice Family Group, purchased the shares of the bankrupt company, the Greenbrier Hotel Corporation, for US$20 million from holding company CSX. By going straight to the top, he essentially cut the Greenbrier Hotel Corporation out of the dealing, thus thwarting Marriott’s existing agreement.
Justice then asked the bankruptcy judge to dismiss the case, arguing alongside The Greenbrier’s CFO that doing so would benefit workers and the local community. More importantly, a dismissal would ensure the hotel’s creditors would be paid immediately from a US$17-million escrow fund. The judge agreed and dismissed the case 14 May.
“I thought Justice’s strategy to go straight to the owner of the equity was a very smart strategy—one that doesn’t occur frequently,” Neff told me. “It appears he was able to succeed because he assured the judge all the creditors were going to get paid.”
So how does Marriott fit into the picture?
While Neff suspected Justice was probably willing to pay more and take on much more risk than Marriott, I can’t imagine the hotel giant is pleased with the way things played out—and it won’t be leaving empty handed.
As part of an agreement to withdraw its opposition to the deal, Marriott wants to market the hotel as part of its family of brands while collecting a commission from any bookings resulting in their efforts. Justice has 30 days to accept some form of that deal. If the two parties don’t reach an agreement, he must pay Marriott a US$7.5-million break-up fee.
In a statement released by Marriott, Richard S. Hoffman, the company’s executive VP for business development, said:
“We had a very productive meeting with Jim Justice, and we were pleased to reach an agreement to avoid a legal dispute. The Justice Family will be great owners for the Greenbrier. It was never our desire to own the Greenbrier for the long term. Our goal is to make the Greenbrier available to our customers as part of our family of hotels, and we hope to be able to accomplish that objective in the next 30 days.”
Whether or not The Greenbrier joins the Marriott family is anyone’s guess. What’s important now is that The Greenbrier, once a casualty of this unprecedented economic downturn and one of the country’s last great independents, will live to see another day and many more guests.