|By George Avalos, Contra Costa Times,
Walnut Creek, Calif.McClatchy-Tribune Regional News
Feb. 03, 2012--An East Bay hotel that closed its doors without notice last May, leaving guests stranded without rooms and employees out of work, is poised to reopen under new owners.
Since halting operations, the former Red Lion Hotel in Concord languished behind a cyclone fence and was a stark reminder of the brutal economy around much of the nation.
Now, a new group has bought the 189-room hotel on Burnett Avenue for what industry insiders estimate to be about $5 million.. Contra Costa County property records indicate that Fremont-based Leisure Hotel Group paid cash.
"We are working hard to upgrade the hotel," said Sanjiv Patel, one of the principals with Leisure Hotel. "We hope to open the hotel in three or four months."
A survey this week by this newspaper of the hotel property showed that a considerable amount of work has been completed at the site, with indications of much more work to be done.
"The hotel will definitely be redesigned," said Alexandra Hristova, an interior designer who is heading up the design of the hotel's revamp. "We're excited about this."
The $5 million price tag for the hotel is a reminder of the plunge in commercial real estate values. The prior owners paid $11.2 million for the property in 2007, which was the prior peak for commercial real estate.
The hotel went into default on a $7.4 million loan last spring. Eventually, Kearney FE I seized the hotel through a foreclosure that valued it at $4.1
"The new owners paid a good price for the hotel," said Oliver Shah, an executive vice president with Atlas Hospitality Group, which tracks the lodging market in California.
To replace the hotel with an identical building would cost about $15 million. Because the new owners paid a fraction of that for the hotel, they have a lot of potential leeway to put money into the renovation.
Leisure Hotel also appears to have timed its investment well.
"The hotel closed during one of the worst years for the hotel market, and it's probably going to re-open during one of the better years for hotels," Shah said.
A number of prominent hotels in the Bay Area have tumbled into mortgage defaults.
Among them: the 335-room Fremont Marriott Silicon Valley, in default on a $38 million note; the Homestead Village in San Ramon; and the Park Plaza Hotel in Oakland, which has been struggling with a mortgage default of $14 million. In addition, the The Doubletree Berkeley Marina hotel became mired in a $160 million mortgage in mid-2010.
In San Francisco, the iconic Renaissance Stanford Court and Four Seasons hotels went into default on their property loans.
"When the economy started to drag, so did room occupancies and their revenue stream," said John Montagh, Concord's redevelopment manager. "That precluded Elite Hospitality (the previous owner of the Red Lion) from reinvesting and doing what was needed to operate the hotel."
City officials are pleased the hotel could reopen as an attractive operation this year.
"For that property to be under new ownership and to reopen as a brand that is supported in this market is a good sign for Concord and that business district," Montagh said.
The hotel has yet to land a new brand. But the Red Lion flag is a possibility for the hotel.
"One of the benefits of being in that market is there is a lack of hotel rooms in that area," Shah said. "You have some big companies located in that area that do produce some room nights."
Contact George Avalos at 925-977-8477. Follow him at twitter.com/george_avalos.
(c)2012 the Contra Costa Times (Walnut Creek, Calif.)
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