|By Jenny Kincaid Boone, The Roanoke
Times, Va.McClatchy-Tribune Regional News
August 6, 2009 - --Ownership of the Patrick Henry Hotel changed hands on Wednesday, but the historic downtown structure likely will reappear on the sales market.
Kristen Duffy, who represented Potomac Realty Capital of Boston, bought the Patrick Henry for $2 million at a morning auction on the steps of the Roanoke City Courthouse. The sale is pending the close of the contract in 30 days.
Potomac Realty is the lender for the former hotel owners, Affirmative Equities Co. of New York. The hotel was sold to pay down Affirmative Equities' mounting debt after the company's Chapter 11 bankruptcy was converted to a Chapter 7 bankruptcy in February.
Typically when lenders buy properties, they resell them. They often buy properties to protect themselves and ensure that they have necessary funds to pay down debt.
"Most lenders have no desire to keep the property," said Bill Mason, a Roanoke attorney and substitute trustee who conducted the auction.
Duffy would not comment on her company's plans for the Patrick Henry.
A crowd of at least 60 people gathered on the steps and on the sidewalk in front of the downtown courthouse, but Duffy was the only person to shout out a bid.
Mason began the sale by asking for a starting bid of $3.5 million. No one said a word.
"Who wants to buy it?" he asked.
Duffy spoke up with $2 million.
"She can have it," shouted Roanoke attorney, Cooper Youell, who signed up to bid on the property for one of his clients. He would not divulge the name of his client.
There are others interested in purchasing the 89-year-old hotel building, but they may have not been comfortable making a major purchase without knowing the renovation work required and any other challenges at the 11-story structure on South Jefferson Street, said Jake Copty, a broker at Thalhimer commercial real estate in Roanoke.
A potential buyer likely would want the time to have an inspection of the property, estimate renovation costs and determine what could be done at the site, he said.
It's not clear who is interested in purchasing the Patrick Henry. The tight credit market could limit the number of potential buyers, but whoever ultimately makes the purchase likely will have strong financial backing, Copty said.
In the past 16 months, Copty has represented several potential buyers for the Patrick Henry property. At least one of the buyers is based in Roanoke, but Copty would not reveal the name.
One buyer submitted a contract for about $5 million after Affirmative Equities filed for Chapter 11 bankruptcy in December. But the bankruptcy process hampered efforts to move forward with the contract, and it expired, Copty said.
Though Potomac Realty Capital's bid on Wednesday was higher than the amount that most people at the auction may have wanted to bid, "I expect that the property will go for significantly more" once it's back on the market, Copty said. He would not disclose his estimate.
The Patrick Henry and its land on Jefferson Street and Bullitt Avenue are assessed at about $3.7 million, according to city real estate records.
When Affirmative Equities bought the Patrick Henry in 1990, the company envisioned converting the property into senior housing. Those plans never materialized, and the owners ran into various financial troubles, including averting foreclosure on the hotel four other times.
The company also owes Roanoke about $113,000 in unpaid real estate taxes. The city would be paid through the auction sale, Mason said.
From 2003 to 2005, Avis Construction Co. was the general contractor for Affirmative Equities' hotel renovation job. Avis found a variety of problems inside the Patrick Henry, including a roof in need of replacement and asbestos on the 10th floor, said Barry Baird, president and CEO of Avis.
Last year, the Virginia Department of Labor and Industry investigated evidence of asbestos at the hotel based on complaints from former employees. The department was not able to provide the results of the investigation on Wednesday.
"Someone who went in there would have to go in there with their eyes open," Baird said.
Affirmative Equities priced its conversion project at $28.8 million, based on past interviews.
The Patrick Henry closed in 2007, when its occupancy permit expired. Since then the city fire marshal has required Affirmative Equities to conduct regular fire watches for safety purposes inside the hotel, said Roanoke Fire-EMS spokeswoman Tiffany Bradbury.
City officials have said that the Patrick Henry's revival is integral to the livelihood of the Jefferson Street corridor. The hotel sits across from the newly constructed Social Security Administration building and near other large offices and businesses.
"It's a hugely public project," Copty said. "I would like to see a development that is beneficial to Roanoke and incredibly profitable for the developer."
To see more of The Roanoke Times, or to subscribe to the newspaper, go to http://www.roanoke.com/.
Copyright (c) 2009, The Roanoke Times, Va.
Distributed by McClatchy-Tribune Information Services. For reprints, email firstname.lastname@example.org, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.