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Hutchinson, Kansas' Largest Hotel and Adjacent Convention Center Owes
 Lender More than $16 million; Joseph DePalma Appointed Receiver
By Mary Clarkin, The Hutchinson News, Kan.McClatchy-Tribune Regional News

March 4, 2009 --Hutchinson's largest hotel and adjacent convention center are experiencing financial problems, prompting new management with even more changes envisioned.

The Omaha-based owner of Grand Prairie Hotel and Convention Center, 1400 N. Lorraine St., failed to make monthly loan payments to its lender starting in July 2008. As of Dec. 1, HPA Associates LLC owed the lender, First Westroads Bank Inc., of Omaha, more than $16 million.

First Westroads Bank took legal action against HPA Associates and the city of Hutchinson -- which technically owns the property because of the issuance of industrial revenue bonds -- in Reno County District Court.

All the parties agreed to the appointment of Joseph DePalma as receiver, and the court issued that order Dec. 29.

New management

"Actually, we took it over Nov. 1," said DePalma, president and chief executive officer of DePalma Hotel Corp., in a telephone interview.

DePalma Hotel Corp., Arlington, Texas, was hired to operate the hotel for David Slattery, the Omaha businessman whose HPA Associates retains ownership.

"They had been trying to manage it themselves, and were struggling," DePalma said of Slattery's operation.

Founded in 1983, DePalma Hotel Corp. brings experience to the task, in the view of DePalma. Installed as the on-site general manager is Mark Ahrens, who managed the hotel a decade ago.

"I think it's the right move," Hutchinson City Manager John Deardoff said of the receivership.

Having met DePalma, Deardoff said he had a "high level of confidence" that DePalma "understands the business."

Changes envisioned

Gaining discount points for frequent hotel stays is what the savvy traveler wants, but the Grand Prairie is an independent hotel and that presents an obstacle, from DePalma's perspective.

"I'm actually looking at trying to brand the property," DePalma said, potentially bringing it under the umbrella, for example, of Wyndham or Radisson or Sheraton.

"We're talking to five different companies," he said, not yet settled on one.

The inside water park -- a key component in Slattery's dream -- is not an asset, as DePalma sees it.

A successful indoor water park requires 70,000 to 80,000 square feet of space -- not a 20,000-square-foot extended swimming pool, DePalma said.

"We probably are looking at alternative uses to space," he said, noting that the pool and fountains would remain.

No foreclosure

No foreclosure proceedings are pending or even being looked at, DePalma said.

His role, he explained, is to ensure the hotel goes forward and builds in value instead of deteriorating.

Reno County real estate property tax records show that HPA Associates' delinquent property tax bill for the second half of 2006 and all of 2007, was paid on Dec. 15, 2008. The combined payment totaled approximately $80,979.

The state forbids beneficiaries of industrial revenue bonds from being in arrears in property taxes, and now HPA Associates has a delinquent 2008 tax bill pending totaling $437,554.

DePalma has contacted the State Court of Tax Appeals to get past tax breaks reinstated, and he sounded hopeful.

Slattery's HPA Associates LLC took over a hotel in need of upgrades and entered into an agreement with the city five years ago to build a convention center.

"The outlook for the property is actually excellent," DePalma said.

Revenues in January were up 12 percent from a year ago, and the hotel is booked this month.

A better sales effort, though, is needed, he said.

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To see more of The Hutchinson News or to subscribe to the newspaper, go to http://www.hutchnews.com.

Copyright (c) 2009, The Hutchinson News, Kan.

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