|By Jim Hodges, Daily Press, Newport News,
Va.McClatchy-Tribune Business News
Mar. 2, 2007 - HAMPTON -- The lawyer retained to foreclose on a downtown hotel painted a picture of a city hemorrhaging money because its hands are being tied by a contract written a generation ago.
Even a $12.3 million offer to buy the 159-room Hampton Marina Hotel -- known for 20 years as the Radisson -- might not stop the bleeding, Paul Campsen added.
Campsen told the council at a special meeting Thursday that its plans to foreclose on the facility were put on hold because of a demand by bondholders who loaned money to Olde Hampton Hotel Associates to open it in 1987.
Those bondholders are still owed $6.3 million, and if the hotel is sold, that money must be paid before any of the $7.7 million owed to the city can be collected.
The bondholders also demanded about $600,000 be paid by the city to cover a likely shortfall in the Olde Hampton's next scheduled bond payment, in June. A $65,000 shortfall in December's payment was covered by the city's line of credit with the hotel owners, a partnership led by Hampton businessman Jack H. Shiver and Charlotte, N.C., lawyer J. Edward Watson III.
The $600,000 demand probably will be contested by the city.
Holding up foreclosure is a part of the original agreement with the bondholders, called a "stand-still provision."
In negotiations with the city in December, the bondholders agreed to waive that provision, but now that an offer to buy the property has been received, they want to enforce it.
"Basically, they've put handcuffs on us by stopping us from going forward, by stopping us from enforcing our rights," said Campsen. "But, 'Oh, by the way, we'll take the money.' "
Reaction to the news was quick.
"This deal, agreed to in '85 and added to in '88, has really put a devastating hold on the city of Hampton and its finances," Mayor Ross Kearney II said.
"It absolutely has," Campsen, the city's lawyer in the foreclosure, agreed.
While the bondholders and Hampton work out their differences and their strategy, local hotelier Raj Randeria is going about trying to buy the Hampton Marina Hotel. The facility is only blocks from the old Hampton post office, which Randeria bought to create executive condominiums.
The agreement between Randeria and Olde Hampton Hotel Associates contains 90 days of due diligence, then as long as 90 more to close the deal. It also includes a five-year, no interest promissory note covering $1.4 million of the purchase price, payable to the partnership.
That is money, Campsen said, that the city will seek to have assigned to Hampton.
Olde Hampton Hotel Associates has been trying to sell the hotel for more than a year, and Randeria entered the picture in January.
By that time, the partnership had defaulted on both the bonds and its debt to the city, which has received more than $11 million in tax revenue and more than $4 million in interest from Olde Hampton Hotel Associates over the life of the hotel.
Of the $7.7 million owed the city, $2.5 million involves interest payments and $1.6 million is repayment of a federal grant that was passed through the city to Olde Hampton Hotel Associates as part of a redevelopment package for downtown Hampton.
The agreement required the federal grant to be repaid to Hampton with interest, as a loan.
News of the latest twist in what is still called the "Radisson" came less than 24 hours after the city agreed with XL Development Corp. on a $200 million deal to develop 191/2 acres of the Coliseum Crossroads complex. Hampton's part of the deal is essentially nothing.
Randy Gilliland, the city's vice mayor, pointed out the difference in the times, saying the Coliseum deal "stands in stark contrast to deals done by previous councils."
"I'm not trying to pass the buck," Gilliland added. Or, in this case, about 7.7 million bucks.
Copyright (c) 2007, Daily Press, Newport News, Va.
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