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Foreclosure Stops a Planned $10 million Renovation of the
 Former Delavan House Hotel in Delavan, Wisconsin

By Ann Marie Ames, The Janesville Gazette, Wis.McClatchy-Tribune Regional News

May 24, 2009--DELAVAN -- It looks like another summer season will come and go without a hotel in downtown Delavan.

Midwest Hotels, Inc., last week foreclosed on the mortgage for the former Delavan House Hotel, 215 W. Walworth Ave., Delavan. The company owed $4.7 million on a $5 million mortgage, according to court documents.

Failed plans for a new hotel are not good news. But the announcement's not a surprise, said Jackie Busch, executive director of the Delavan-Delavan Lake Area Chamber of Commerce.

"It's a disappointment," Busch said. "But because it's been vacant for so long, obviously nothing's going to change."

The 54-room hotel has been vacant since about 2004.

The hotel had been a popular spot until it was gutted by fire in 1978. Since then, it's had several owners.

It's an eyesore in an otherwise pretty downtown, Busch said. The planters are overgrown and the windows are dirty, she said.

From time to time, a new owner comes to the city with new plans for the building, and "everyone gets excited," Busch said.

But, for whatever reason, things never have worked out, she said.

"Of course, if it was redone the right way by the right owners, it would bring a huge amount of tourism," Busch said.

City officials this week were not sure when they would get new information about the hotel's future.

The property is in the hands of Rock River Bank of Oregon, Ill. The former hotel will be sold at the sheriff's sale, said Carl Berg, spokesman for the bank. He did not know when the sale would take place.

Online court documents listed Katuna Gugua as the agent for the hotel and president of Midwest Hotels. The company took out a $5 million loan in July 2007, according to court records.

In 2005 and 2006, tax records indicate the property was owned by BV Hotels, Inc.

Robert Slomczewski of the Chicago area told The Janesville Gazette in 2007 that he and his partner, Victor Osinski, bought the building in 2005 and planned to open it in the summer of 2008.

The two had plans for $10 million in renovations. Plans included a bar, restaurant, meeting and banquet halls and maybe a pool, Slomczewski told the Gazette in 2007.

The project was slated as a Holiday Inn and Suites franchise.

In the fall of 2007, Slomczewski said demolition inside the building was 80 percent complete.

Slomczewski still is the contact for the project, City Clerk Sue Kitzman said. In May 2009, he applied for a liquor license for the hotel under the name Robert Sobczak-Slomczewski, regional manager of BV Hotels, Kitzman said.

Sobczak-Slomczewski is connected to Erie Hospitality, a company that in January defaulted on a loan in Midland, Mich., the Midland Daily News reported.

Erie Hospitality defaulted on a $10.55 million mortgage payment owed to an Illinois bank. Sobczak-Slomczewski, the agent for Erie, said the company failed to make one payment owed in early December, the Daily News reported.

In Walworth County, Judge Robert Kennedy in March appointed Capstone Management Group of Dixon, Ill., as the receiver for the former Delavan House.

The receiver's job is to assess the situation and report back to the bank, Delavan Administrator Joe Salitros said.

Capstone has contacted the city to learn about building permits and other permits issued to the hotel, Salitros said.

But Capstone is not required to keep the city in the loop when it reports to the bank, he said.

"We are hopeful," Salitros said.

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

Copyright (c) 2009, The Janesville Gazette, Wis.

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