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March 18, 2013

Oronoco couple signs for $145 million loan to buy Kahler hotels

Here's some from my piece today that pulls back the cloak of secrecy from the mysterious new ownership of the Kahler portfolio of hotels:
Loan documents filed with the U.S. Securities and Exchange Commission indicate that Javon Bea, a Wisconsin hospital executive who lives in Oronoco, is the driving force behind the $230 million purchase of four Rochester hotels, anchored by the Kahler Grand Hotel.
Bea, along with his wife Vita Bea, signed as "sponsors" to borrow $145 million from Deutsche Mortgage & Asset Receiving Corp., part of the German banking giant Deutsche Bank, to finance the deal to buy the hotels from Sunstone Hotel Investors, according to the documents, which are public information and available online. The deal, which was announced in February, also included the Textile Care Services laundry business.

The hotels are the Kahler Grand, the Kahler Inn & Suites, the Marriott Rochester at Mayo Clinic and the Residence Inn.

Bea also is listed as sole owner of RochesterBevFlow, which holds the liquor license for the Kahler hotels. The transfer of the liquor license is on the agenda for the Rochester City Council meeting tonight.

Bea, a former vice president of operations for Saint Marys Hospital, has been chief executive officer of Mercy Health System in Janesville, Wis., since 1989. He has not responded to repeated interview requests in recent months.

Bea previously has been identified as an investor in the Kahler purchase as well as a consultant to the ownership group by Merl GrKahler_grand_hotel_0_rochester_minnesota_unitedstatesoteboer, the Rochester Realtor who represented both sides of the deal.

The financing for the Kahler purchase was outlined in Deutsche Bank's SEC filings:

• Three Deutsche Bank loan components  — $110 million, $10 million and $25 million, totaling $145 million — provided the bulk of the financing, at an interest rate of 7.4 percent.

• "The Borrower" provided $45.8 million in equity. Javon R. Bea and Vita E. Bea are identified as the sponsors of the borrowers and the guarantors.

• Sunstone, a real estate investment firm based in Aliso Viejo, Calif., and owned the Kahler properties for 16 years, retains a $25 million equity investment in the hotels.

SEC documents filed by Sunstone also show that the California company retained $14 million in "liability related to the Portfolio's pension plan." Sunstone also provided "a $3.7 million working cash advance to the Buyer that will repaid from the Portfolio's available cash flow."

According to insiders, one of Bea's plans for the hotels is to offer transitional medical care for people recovering from treatment at Mayo on one or two floors of the 660-room Kahler Grand. The hotel is across Second Avenue Southwest from Mayo's Gonda Building and south of Rochester Methodist Hospital.

Industry experts say such a blending of hotel and hospital has been discussed in other markets, but no one has tried it in Minnesota.


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