Feb. 27, 2004 - HAMPTON, Va. -- Hampton officials once again are contemplating foreclosing on the waterfront Radisson Hotel as they try to figure how to recoup $7.1 million the hotel's owners still owe the city. 

The hotel has defaulted on three loans, including two issued by Hampton, placing city officials in a complicated legal dance with another lender and the hotel's owner. 

In the mid-1980s the city helped an ownership group led by Hampton businessman Jack H. Shiver and J. Edward Watson III, a Charlotte, N.C., lawyer, build the hotel in an effort to spur other development downtown. 

A $3.5 million loan that had been refinanced once before remains unpaid even though it was due two years ago. After the owners failed to pay it off, the city considered foreclosing on the property. Negotiations continued into last year and both sides were on the verge of extending the loan to 2009 before the deal fell apart. Then the hotel also stopped making payment on another city-backed loan for $1.8 million. 

The owners have paid back more than $3 million, but still owe about $7.1 million, according to city officials. 

In addition, the trustee for the bondholders of the largest loan to the hotel recently informed the city that the hotel has defaulted on that $8.6 million loan as well. The city pledged a $1 million line of credit on that loan, which it could now be forced to pay. 

E.G. Allen, an attorney for the hotel owners, said the owners made payments after missing the deadline for paying off the $3.5 million loan. 

But financial problems, including the loss of $400,000 annual lease payments from the city for the hotel's parking garage, forced the owners to stop making debt payments last October. 

"They just ran into a situation where they didn't have the cash," Allen said. 

Allen said the owners still hope they will be able to rewrite the loans and begin making payments on the debt again. 

The city loans were issued through the Hampton Redevelopment and Housing Authority. Although legally separate from the city, the housing authority's finances are intertwined with the city's budget. City Council also serves as the board that runs the authority. 

Council members Joe Spencer and Randy Gilliland are leading the negotiations for the city. Although the hotel has had financial problems, the councilmen say the financial troubles will not disrupt business at the hotel. 

City officials say the next move depends on the bondholders, because they have the primary lien on the property. 

The city could foreclose or restructure the loan again. City officials acknowledge they could do either but declined to discuss their strategy, saying they have other alternatives as well. 

Hampton City Attorney A. Paul Burton said he plans to ask the housing authority next month "to give us the appropriate legal authority to defend the interest of the housing authority." 

Even though the city has paid the hotel owners another $6 million to keep the parking garage below the building free and open to the public, city leaders say the overall investment has been beneficial. 

"We've got an active, viable, attractive downtown that is a draw," said Councilman Joe Spencer. "A lot of things have occurred in this downtown that could be attributed to Radisson." 

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(c) 2004, Daily Press, Newport News, Va. Distributed by Knight Ridder/Tribune Business News.