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Mortgage Holder forecloses on Crowne Plaza Five Seasons Hotel in Cedar Rapids, Iowa;
Foreclosure Seen as good News by Local Leaders
By Dave DeWitte, The Gazette, Cedar Rapids, IowaMcClatchy-Tribune Regional News

Oct. 16, 2008 - CEDAR RAPIDS -- The primary lenders for the Crowne Plaza Five Seasons Hotel in Cedar Rapids have foreclosed, asking that the city's largest hotel be placed in receivership.

The lawsuit against Portfolio Cedar Rapids, controlled by Kronos Hotels LLC of Atlanta, says the borrower went into default Sept. 8. The debt totals $48.5 million, an amount secured by mortgages on the Crowne Plaza Five Seasons and 10 other hotels.

If the lenders get their way, a state court judge will appoint Prism Hotels and Resorts of Dallas to operate the downtown hotel at least until the foreclosure action is decided.

A hearing on the request is expected next month, said Joe H. Harris, the Cedar Rapids attorney who filed the foreclosure action.

A receiver serves as a courtappointed operator for a property that is the subject of a legal dispute in certain instances, safeguarding it against loss in value.

After a drumbeat of news about the Crowne Plaza Five Seasons failing to pay employees, make needed improvements or pay suppliers over the last few months, even a foreclosure was seen as good news by local leaders.

"Certainly, having Prism Hotels as a management company is a step forward," said Patrick DePalma, chairman of the
city's Five Seasons Commission, which oversees the U.S. Cellular Center that is attached to the Crowne Plaza.

DePalma said Prism Hotels appears to be a quality operator and has revitalized many troubled hotels so that they could be sold. He said receivership could give some structure and stability to the hotel.

"It is better for us than having to go on not knowing if they are going to make payroll this week," DePalma said.

Kronos spokesman Peter Mathon declined to comment on specifics of the lawsuit, saying only that "We plan to continue operating the hotel on a long-term basis." The Crowne Plaza Five Seasons has seen a succession of managers leave or be fired. One of them, Dave Hockenberry, said Kronos often refused to disburse funds to suppliers when needed, resulting in a situation in which many vendors refused to supply the hotel or would supply it only on a cash basis.

John McLaughlin of Palo was a front office manager at the Crowne Plaza until Tuesday, when he was fired for talking to the media, he said.

He scolded the City Council last night for not responding to reports of stalled renovations and bounced paychecks.

"Why have we not heard from you?" McLaughlin asked. "There's been no empathy or word of encouragement for employees." He told the council that Kronos officials haven't paid withholding taxes to the state. And McLaughlin -- who filed a lawsuit Sept. 29 demanding $13,380 in actual wages and liquidated damages from Crowne Plaza and Kronos -- charged that hotel officials are violating the city code by scheduling only one person at the front desk at night.

"The place will erupt in cheers tomorrow," McLaughlin said with a grin after learning about the foreclosure.

The foreclosure stems from a loan made to Portfolio Cedar Rapids and 10 affiliated borrowers, apparently other hotel ownership entities controlled by Kronos, in June 2007. The lead plaintiff is CW Capital Asset Management, a loan servicer for Wells Fargo Bank. Wells Fargo is the trustee for the registered holders of the debt obligations.

"My client appreciates the importance of this facility to the city of Cedar Rapids," said Harris, CW Capital's attorney. "They have a strong interest in seeing the property being well-maintained and managed without interruption, as does the city of Cedar Rapids." Liens totaling more than $407,000 have been placed on the hotel property by the state of Iowa for unpaid taxes.

Erika Binegar of The Gazette contributed to this story.

– Contact the writer: (319) 398-8317 or david.dewitte@gazcomm.com

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To see more of The Gazette, or to subscribe to the newspaper, go to http://www.gazetteonline.com.

Copyright (c) 2008, The Gazette, Cedar Rapids, Iowa

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