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Five Points Lodging LLC's Attempts to Finance Purchase of Days Hotel
in New Bern, North Carolina Souring Due to Economy and Poor Location

By Laura Oleniacz, Sun Journal, New Bern, N.C.McClatchy-Tribune Regional News

Apr. 13, 2010--The financing for the purchase of the downtown Days Hotel was hindered by the state of the economy as well as by the perception that the hotel is not located in a "No. 1 area," said the Greenville-based hotel developer who tried to buy the hotel.

Prakash Patel, the managing partner of Five Points Lodging LLC that has been trying to buy the Five Points hotel since July of last year, said the limited liability corporation has tried to get financing from seven or eight banks so they could make the purchase.

"It's just, the market is so tough right now," Patel said. "The banks don't want to give loans, and the second is the neighborhood, the area, Five Points."

One of Patel's partners was the highest bidder at $1.26 million for the hotel at last year's public auction. The hotel was put up for sale after it was closed in May 2009 by order of the U.S. Bankruptcy Court because its previous owner, Connecticut Avenue Partners LLC, was unable to pay its creditors.

Connecticut Avenue Partners had filed for Chapter 11 bankruptcy more than two years ago, which would have allowed for the limited liability corporation's reorganization.

But New Bern attorney John Bircher, who is handling the hotel's sale, said the corporation did not complete its reorganization plan, and the bankruptcy was converted to a Chapter 7 case. Bircher was appointed the Chapter 7 trustee.

In bidding for the hotel, Patel said he and his partners believed they were getting the property at a good price, and that they could profit from the traffic through the city from beach tourism and the city's 300th anniversary, as well as from the city's location near Cherry Point air station.

Patel said he and his partners have between 20 and 25 hotels all over the country. He added that he is the developer behind the construction of the Best Western hotel off U.S. 70 in James City that he said should be completed later this summer.

If the Five Points Lodging LLC partners had been able to buy the Days Hotel, Patel said they would have given it a "total face-lift."

They had plans to place wrought-iron fencing around the property to mimic the fencing at Tryon Palace Historic Sites & Gardens, as well as to build a new parking lot and canopy.

"We could have done something, some wonders for that property, you know," he said.

But he said that trying to buy the property has been "more like a nightmare to us." The economy, the previous closure of the hotel, and the economic state of the Five Points area were factors that hindered their ability to get financing to buy the hotel, he said.

"It's closed down, and the neighborhood is not that great," he said. "And what is the city doing to improve that?"

The city of New Bern Planning and Inspections Department provided a letter detailing improvements to Five Points that the limited liability corporation could present to potential lenders, said Michael Avery, the city's director of planning and inspections.

Avery said the letter, written by the city planner, noted improvements to Broad Street, the activities of the Uptown Business and Professional Organization, an application for a grant for housing rehabilitation around Third Avenue, as well as the city's 2000 Urban Design Plan.

"(The Days Hotel is) really there at a gateway location coming into older downtown area of the city," Avery said.

But because of the corporation's financing problems, Bircher recently filed a motion in U.S. Bankruptcy Court to cancel the contract with the buyers to allow for another sale.

Bircher said the buyers did not file a response to his motion, and he is expecting the order will be entered at the end of April to allow for another auction.

"I believe the purchasers have done everything they can to make this happen -- I just can't keep the case open indefinitely," Bircher said Monday by e-mail.

Patel said the partners are still "working on it," but he expressed doubts about their ability to moving forward with the purchase. He said they believe it's not "wise" to put $3 million of their own money into the project, and are now "more likely to back off."

"If we cannot buy it, there are many people who cannot buy it," he said. "We are not somebody who just started the hotel business. Among our partnership, we have over 100 years of experience in the hotel industry."

Laura Oleniacz can be reached at 252-635-5675 or at loleniacz@freedomenc.com.

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Copyright (c) 2010, Sun Journal, New Bern, N.C.

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