Crowne Plaza Lead Investor Says Bankruptcy Filed To Protect Mortgage
'We Are Here For Full Business. The Hotel Is In Good Shape,' He Says
By MARA LEE
August 31, 2010
The owners of the Crowne Plaza hotel filed for bankruptcy protection as an emergency measure to prevent a "hostile takeover" of the delinquent mortgage, and intend to remain open, the lead investor said.
The investors, a group of Korean Americans who bought the 350-room hotel north of I-84 for $20 million in 2007, owe $13 million on a mortgage that they stopped paying on after January. The mortgage was not listed as a liability in the Aug. 18 filing, which was made in California.
Crowne Plaza will be open for business for the long haul and the debt restructuring doesn't change that, according to Gene Choe, a Los Angeles attorney who is leading the investment group known as CHOA Vision.
"We are here for full business," he said. "The hotel is in good shape and we expect to prevail through this hardship and be a better hotel."
CHOA, which stands for the Christian Hotel Owners Association, had been in negotiations to reduce the principal on the loan. "This is a great environment for us to knock down a good percentage of the mortgage," Choe said.
The property is now assessed by the city at $9.7 million; Choe said the group had offered to buy back the loan at a discount.
Eric Lewis, who leads the appraisal division for hotels and casinos for commercial real estate giant Cushman and Wakefield, said properties in secondary or tertiary markets, like Hartford, have fewer potential buyers than in major cities. "The interest wanes," he said, and because of that, values have fallen 30 to 50 percent since 2007, the market's peak.
"We've fallen behind because of poor management," Choe said. "We ousted Mr. [Chan Soo] Cho as a manager because he wasn't doing a good job. He wasn't really paying attention to anything."
He said he and other investors were impressed by Cho's story that he bought hotels cheap and sold them for a high profit. "None of that was true. He basically conned us," he said.
Choe said that before he took over the management in March, 100 rooms at the Crowne Plaza were decommissioned because they didn't have televisions. It only cost $35,000 to get televisions for the rooms, he said. "That was easy. Anybody could've done it. Nobody was doing their job." A call to Cho for comment was not returned.
"I'm an attorney. I'm not a hotelier," Choe said. "Now I'm becoming one."
Before Choe took over, occupancy was down to 40 percent. Now it's at 60 percent, and revenues are also up 50 percent, he said.
"The most optimal would be 70 percent," he said. "If we get there, it'd be fine."
Reprinted with permission of the Hartford Courant.
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