Inn at Whittier for sale:
Assets being liquidated under Chapter 7

Ken Smith/Turnagain Times The Inn at Whittier opened its doors to the public in 2004 (above). On Aug. 18 it went into Chapter 7 liquidation and the building and its assets are being sold. The asking price is $2.7 million, and it is expected to be sold within the month.

By Ken Smith
Turnagain Times

The Inn at Whittier opened four years ago. It was a dream realized by several people who invested a great deal of money and time to build a luxury hotel in Whittier—the only one in the city. But what started out as a grand idea full of hope, fell quickly on hard times with construction cost overruns and other building overhead.
The original investors eventually sold out to the Hernandez family. The debt load however, was too heavy to bear, and two years ago the family filed for Chapter 11 under the Bankruptcy code as the business tried to reorganize and pay back creditors.
In the end, the debt obligations mounted and could not be paid back. On Aug. 18 of this year the owners filed for Chapter 7, ceasing operations. A trustee has now been hired to sell the Inn and its remaining assets.
Construction of the Inn at Whittier started in 2000 by principle owners Kirk Loeffler and Ed Cronick. The Hernandez family stepped in as investors in 2003 owning 33 percent. The family up to that point had no experience owning or managing a hotel, but operated a highly successful retail business, the Alaska Fur Gallery in Anchorage.
The Inn at Whittier finally opened its doors to the public in July of 2004. For several years the business struggled to make a profit and pay off debts.
“It was a real muddled mess,” said Kathy Lancaster who works for the Hernandez family and was the office manager and events planner for the Inn at Whittier. “Eventually there was just too much debt against it that actually never went into the building of the facility.”
Lancaster admitted that when the Hernandez family took over they didn’t know much about the hotel and hospitality business.
“We didn’t have a clue what we were doing the first two seasons,” she said. “We relied on people we hired and in certain situations didn’t make the best choices.”
Yet despite it’s current standing in Chapter 7, the Inn has grown financially and was profitable last season. It also had a strong September posting its best earnings in four years in business taking in $70,000, said Larry Compton the Bankruptcy Trustee hired by the U.S. Attorney General’s office to oversee the sale of the business.
However, one profitable year is not enough to offset seven years of accumulated debt.
“It did make a profit last season, but not enough to carry it all the way through the year,” said Lancaster. “You’ve got to understand, the debt load was huge.”
Lancaster said the Hernandez family knew it would be difficult to turn a profit and that selling the property was inevitable, but she said they remained open this past summer to fulfill obligations.
“Our main goal this summer was to stay open for the season,” she said. “We wanted to honor our obligation to the people running it, but we definitely didn’t expect to make a profit.”
There is also an obligation to pay the creditors, and first on the list is the First National Bank of Alaska, which is owed approximately $2 million. Next in line is the Small Business Association, owed $1.8 million.
“On top of that, the building is on land leased by the city of Whittier,” said Compton. “So the property would never support $4 million dollars in debt.”
Compton is putting the Inn on the fast track to sell at a price of $2.7 million, and he’s hopeful there will be a buyer by the end of the month.
“If you invest $2.7 million, you should be able to run that business and make a profit,” Compton said. “The property should give you a decent return.”
Both Compton and Lancaster were in agreement that the Inn is a great investment if it is bought by a company with experience in the hotel industry. They also said the future of the business and its profitability is not so much in tourism but in marketing the Inn for business and management retreats, small business conferences, and weddings.
As an example, Compton cited the Coast Guard, which booked 19 rooms for five nights in September during a week when they were conducting drills in Whittier.
In the end, Compton does not blame the Hernandez family entirely for the failure of the Inn at Whittier.
“I don’t like to blame the Hernandez on anything because they didn’t realize everything they had to invest to make it a finished product,” he said. “It’s going to take someone with experience in the hospitality industry with good marketing skills.”
Compton said he is talking to several prospective buyers both in and out of state.
“My only criteria is to get money for the creditors,” he said.