|By Jim Hodges L, Daily Press, Newport
News, Va.McClatchy-Tribune Regional News
May 26, 2007 - HAMPTON -- Fed up with thwarted attempts to stop hemorrhaging money because of a two-decades-old partnership gone bad, the city of Hampton filed suit Friday, seeking $3.335 million from Jack H. Shiver and Buddy Watson.
The two own the Hampton Marina Hotel, which for 20 years was the Radisson and was the focal point of a proposed downtown renaissance. It has since become a symbol of the potential perils of public-private partnerships.
The city alleges that Shiver and Watson tried to borrow $2.5 million from the Hampton Redevelopment and Housing Authority in December, in part "to maintain the Radisson flag," even though the two had agreed six months earlier to surrender the franchise at the end of the year.
In the lawsuit, which was filed in Hampton Circuit Court, the city claims the hotel's assets are worth $12.3 million "if that much" and "liabilities exceed $16 million."
"There is no reason to believe the losses will not continue," Hampton claims, adding that the ownership firm of Shiver and Watson, Olde Hampton Associates, "is hopelessly insolvent."
The hotel is assessed at $12.1 million.
"As a consequence, there is no possible equity in the assets of the owner," the lawsuit says.
Attempts to contact Shiver, a Hampton businessman, and Watson, from Charlotte, N.C., proved futile, and city officials referred inquiries to their attorney, Paul Campsen, who did not return telephone calls Friday.
In the lawsuit, Hampton accuses Shiver and Watson of conspiring to be paid a "ransom" of more than $816,000 "by threatening to kill the sale of the hotel and file bankruptcy," which would cost the city even more money.
The partnership has been troubled since its beginning, and Hampton has threatened foreclosure more than once. The city helped Shiver and Watson obtain $9 million in bonds to refinance the hotel in 1998, and the two businessmen appealed to the owners of those bonds to stop Hampton in February after the city foreclosed on the property.
The reason was that Shiver and Watson had a buyer for the hotel.
But the sale would not have covered the city's investment, which cannot be paid until the bondholders get their money. Still, the bondholders stopped the foreclosure.
In 2002, the city arranged a $1 million line of credit for Shiver and Watson, to be used if they fail to pay interest on the bonds. They did in November of last year, triggering a $65,399.79 payment on the line of credit and the beginning of the end of Hampton's patience.
Since then, the debt to the bondholders has risen to $431,824.98, according to the suit, and they have since demanded the rest of the $1 million line of credit.
Copyright (c) 2007, Daily Press, Newport News, Va.
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