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The Saga Continues for the Bankrupt Artisan Hotel in Downtown El Paso, Texas; 
Court Converts the Hotel's Chapter 11 Reorganization into a Chapter 7 Liquidation

By Vic Kolenc, El Paso Times, TexasMcClatchy-Tribune Regional News

April 18, 2010 --EL PASO -- The bankrupt Downtown Artisan Hotel has been closed by owner Douglas Da Silva after a rocky few months. Its future will hinge on a possible foreclosure sale in coming weeks, said people tied to the hotel and its bankruptcy case.

Integrated Financial Associates, or IFA, a Las Vegas mortgage broker that put together more than 50 investors to lend the hotel owner almost $6 million, has asked a federal bankruptcy court in Las Vegas for permission to foreclose on the hotel. A hearing on that issue is scheduled for April 28.

Recently, the court converted the hotel's Chapter 11 reorganization bankruptcy into a Chapter 7 liquidation bankruptcy. A Chapter 7 trustee, who will help determine how the hotel's assets should be disposed of, is to be appointed soon.

Da Silva bought the hotel in 2006 for $1.6 million and did extensive renovations, including adding hundreds of art reproductions that replicated another Artisan Hotel he then owned in Las Vegas. That hotel was foreclosed in January and obtained by a hotel operating group.

Da Silva in late March said he temporarily closed the hotel at 325 N. Kansas because of a broken boiler. But a court filing showed the hotel's natural gas had been turned off in March because of unpaid bills. Da Silva said last week that he will not reopen the hotel.

The hotel, in which 73 of about 100 rooms are rentable, opened in October.

<>Artisan employees complained in recent weeks of not being paid or checks bouncing. Some employees in depositions filed in the court case claimed that Da Silva ran a prostitution ring from the hotel and had drug parties there.

Da Silva said he did not have money to pay employees, but he denied the other claims made in depositions, saying the testimony was "bought and paid for" by Gordon Foster. He is property manager for a trust that sold the hotel to Da Silva and owns an adjacent office building.

Da Silva blames Foster for the hotel's demise.

Foster had a tart reply.

"He went out of business because of the market and his business practices," Foster said. "I don't think he had a good, ongoing business," and employees' depositions reinforced that view, he said.

Foster, an officer of Best Real Estate, became Da Silva's nemesis as the Sullivan/Crosby Trust's lawyers filed a steady stream of motions and other documents. They argued that Da Silva's proposed reorganization plan would not work.

The trust became involved because it said Da Silva did not honor a contract for use of parking spaces in the office parking garage operated by the trust.

Da Silva said he did not expect a Chapter 7 trustee to attempt to reopen the hotel, which has "virtually no money" to operate.

"I expect IFA will want to get their investment back in the property. The ball is ultimately in their court," Da Silva said.

Foster said he, too, expects the court to approve a foreclosure sale for the hotel. IFA would have to bid on the hotel in a foreclosure, he said.

A lawyer for IFA and IFA executives could not be reached last week for comment.

Da Silva and Foster believe the hotel will eventually be reopened by whoever ends up owning it.

El Paso Mayor John Cook said he does not want to see the hotel vacant again, as it was for almost 10 years before Da Silva bought it.

Cook said he would ask the City Council to approve having the city bid on the building if that became a way to help keep it as a hotel. He said that he would not want the city to pay more than $1 million, and that he would want the city to keep it only temporarily until it could be sold to an operator.

Da Silva said Cook is dreaming if he thinks IFA will let the building go for $1 million when it has $6 million invested.

Joe Frandina, managing partner for a group that owns the 112-room Holiday Inn Express Downtown, and president of the El Paso Hotel-Motel Association, said he does not see much of a future for the Artisan building. It would need a lot of work to become a franchised hotel, and having access to only valet parking is a detriment, he said.

"I hope the city doesn't buy it. That wouldn't be smart," he said.

Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421.

Information: www.artisanelpaso.com.

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To see more of the El Paso Times, or to subscribe to the newspaper, go to http://www.elpasotimes.com.

Copyright (c) 2010, El Paso Times, Texas

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