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With Downtown Fort Wayne, Indiana Hotels in Receivership,
Can the Area Support Three Hotels?

By Kevin Leininger, The News-Sentinel, Fort Wayne, Ind.McClatchy-Tribune Regional News

Aug. 15, 2009--When a Miami company bought what was then the downtown Holiday Inn three years ago, the new owners promised great things -- and failed to deliver so completely that the deal's investors foreclosed on the property in May and sought to recover nearly $3.7 million in unpaid loans and other expenses.

But it appears likely that something good will soon rise from the ashes, illustrating the resiliency of a risk-and-reward free market too often overshadowed by federal bailouts and taxpayer-subsidized downtown improvement projects.

"We're very bullish on Fort Wayne," said Michael Cohen, senior vice president of the Illinois hotel-management firm Bricton Group, which was appointed receiver of the property at 300 E. Washington Blvd. by Allen Superior Judge David Avery. If New York-based BRT Realty Trust maintains ownership after a sheriff's sale scheduled for Sept. 17 as expected, Cohen said the hotel should receive more than $1 million in improvements to its conference facilities, public areas and 208 guest rooms -- an investment he hopes will help attract a nationally known franchise to the facility now known as the Fort Wayne Hotel and Conference Center.

"We're going to do as much to the building as we possibly can. We obviously think the hotel has potential; we invested in it in the first place. We're going to try to change its image," said BRT Senior Underwriter William O'Hagan.

A face-lift is crucial to the hotel's success, according to Bob Lister, general manager for the Grand Wayne Convention Center, who said many organizations have been reluctant to book rooms there in recent years because of its outdated features. Having three viable downtown hotels with a total of about 700 rooms could help the Grand Wayne attract larger events, he said.

But consider the diverse histories of the three facilities.

Built as a Sheraton in 1967, bankrupt by 1972 and gutted by a one-fatality fire in 1975, the Washington Boulevard hotel became a Holiday Inn after a $4.5 million renovation in 1980. Atlanta-based Lodgian Inc. sold it as part of a corporate downsizing three years ago to Fort Wayne Hospitality LLC, which renamed the property the Fort Wayne Inn but failed to deliver on most of its promised improvements or an affiliation with Clarion hotels.

"Maybe they just didn't have enough finances," said Cohen, whose company manages at least 11 hotels in Illinois, Indiana, Michigan and Wisconsin and specializes in turning around troubled properties.

By contrast, the 25-year-old Hilton Hotel and the Courtyard by Marriott now under construction -- both connected by walkways to the Grand Wayne Convention Center -- have been heavily subsidized by city government.

When the Hilton in 1987 defaulted on its $10 million city-issued construction bond, the city repaid the money with income from its Summit industrial park on Cook Road. And the Courtyard, although privately developed by White Lodging Services of Merrillville, has received tax breaks and will benefit from the city's investment in the $125 million Harrison Square project.

What's more, the city has a financial stake in the new hotel's success, since the taxes it generates are counted on to help pay the city's Harrison Square debt.

In fact, Cohen expects White's need to pay off construction debts to give his hotel a competitive advantage, despite being a few blocks from the Grand Wayne Convention Center.

"(The Hilton and Courtyard) are more upscale. We'll be more 'business class,' " he said, referring to lower room rates. If the hotel secures a profitable niche, its current 70-member work force could grow. Despite the hotel's previous financial problems, its property taxes are not delinquent, County Treasurer Sue Orth said.

I don't want to make too much out of the relative merits of public vs. private financing. In fact, Cohen and O'Hagan indicated that Harrison Square and other recent downtown improvements -- many of them government-induced -- make operating in Fort Wayne more attractive. But if the Fort Wayne Hotel can successfully reinvent itself, it will represent not a failure of private enterprise, but proof that a little savvy, hard work and a willingness to accept and overcome risk can still pay off.

That's not to say the hotel wouldn't accept some kind of help from the city, Cohen said, noting its current occupancy hovers around 50 percent.

Given what's already been done for his competitors, I suppose you can't blame him for asking.

Either way, we may finally learn whether that city-funded 2004 study used to justify construction of the Courtyard by Marriott was right when it concluded there was room for not one, not two, but three hotels in downtown Fort Wayne.

This column is the commentary of the writer and does not necessarily reflect the views or opinions of The News-Sentinel. E-mail Kevin Leininger at kleininger@news-sentinel.com, or call him at 461-8355.

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To see more of The News-Sentinel, or to subscribe to the newspaper, go to http://www.FortWayne.com.

Copyright (c) 2009, The News-Sentinel, Fort Wayne, Ind.

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