|By Kerry Singe, The Charlotte
ObserverMcClatchy-Tribune Regional News
Sept. 19, 2012--The complaints by California delegates about poor conditions at Charlotte's Blake Hotel during the Democratic National Convention aren't the only dispute surrounding the 39-year-old landmark, once the state's largest hotel.
The Blake's current and previous owners are locked in a two-year fight over the South McDowell Street hotel, which at one point was losing $4 million a year, a review of court filings shows.
The dispute involves some of New York's most prolific and powerful real estate moguls -- including an owner of the Willis Tower in Chicago and two brothers accused decades ago of participating in a "routine of terror" involving tenants in a residential hotel.
Two years ago, the Blake's investors met in New York to talk about selling the property.
Shortly after, one owner sued his ex-associates, saying they wrongly excluded him when they sold the property for $24 million, which he thinks is too low.
Moreover, this investor, Charles Dayan, claims in court papers that the group that bought the hotel hid its identity from him, refusing to turn over documents or appear in court as ordered by the judge. The group that bought the hotel includes two of his former partners in the Blake, he says in court papers.
Those former associates say in court filings they had the right to sell the property. They say Dayan "may now regret his decision" to sell the hotel but made the choice "freely and with eyes wide open."
"It's sour grapes," said David Satnick, the New York-based attorney representing the hotel owners, two brothers who are members of a group called Carolina Hospitality Group 2010 LLC. He says neither the group nor its members were hiding anything and that Dayan is "having sellers' remorse."
A 'private tiff'
"These are well-heeled developers that are having their private tiff," Satnick said.
The infighting made it difficult to operate and improve the hotel, according to documents and interviews.
It also may have contributed to problems guests found earlier this month. California delegates staying at the hotel complained of scalding water, mold, cockroaches and broken elevators, drawing media attention as one of the few missteps that occurred while Charlotte hosted the DNC.
Calls by the Observer to the hotel's general manager have not been returned, and a man who identified himself as the secretary for one of the hotel's New York-based owners and operators said: "There is no comment from New York. There are ongoing issues we can't talk about."
Satnick, the owners' attorney, described the new owners, brothers Jay and Stuart Podolsky, as "first class," saying they are involved in the Blake for "the long haul" and believe the hotel is going to be "one of the top tier" in Charlotte.
The hotel languished while the owners fought in court, he said, but his clients "really broke their backs to whip that place into shape."
"It was only when we got it away from those other people that we turned the hotel around and made it operable," he said.
Once city's largest hotel
Built as a Sheraton Center in 1973, the hotel had 310 rooms, 10,500 square feet of convention and banquet space, and an auditorium and restaurant, making it the largest hotel built at one time in Charlotte.
HBE Corp., best known for developing hospitals, bought the Sheraton three years later for $7.5 million, updating and expanding the restaurant, named The Marker.
By 1984, the Sheraton had added a second tower, eventually expanding to 613 rooms, and became the largest hotel in the state. That same year, HBE changed the hotel's name to Adam's Mark, HBE's line of upscale hotels.
During the next two decades, the Adam's Mark became a popular spot for African-American professionals, among others. In its heyday, the cozy and laid-back nightclub, CJ's, drew a well-dressed over-30 crowd. Promoters threw parties in the Adam's Mark ballrooms on weekends.
The Adam's Mark was Charlotte's biggest hotel and ballroom until 2003, when the sleek Westin Charlotte opened roughly four blocks away.
When HBE put the hotel on the market that same year, some experts thought it could sell for as high as $90 million, according to media reports.
Instead, it struggled to attract buyers.
In summer 2005, an investor group led by New York real estate tycoon Joseph Chetrit bought the property, which included the neighboring Cameron Brown Building, an office midrise, for $47 million.
That December, the new owners announced plans to turn one of the Adam's Mark's two towers into a boutique hotel and rename it the Blake. Rooms, they said, would be geared toward "a hip, professional clientele."
Within four years of buying the Blake, the owners wanted to end their relationship, court records show.
As often occurs when investors buy commercial real estate, the hotel's ownership was made up of multiple layers of holding companies. The property's primary owners and operators, as identified in court records, included some of New York's most prolific real estate investors.
Among them: Joseph Chetrit and his brother Jacob, part of a Moroccan family that made its money in textiles before buying trophy properties such as the Willis Tower in Chicago (formerly the Sears Tower) and the iconic Chelsea Hotel in New York. A holding company controlled by the Chetrits owned about a third of the Charlotte property. Attempts to reach the Chetrits were unsuccessful.
Charles Dayan, principal of Bonjour Charlotte, made the purchase with the Chetrits and owned a third of the holdings. Described in court records as a real estate investor with billions of dollars in holdings, Dayan's Bon Jour Group is one of the largest brand-licensing firms and created the Faded Glory clothing brand sold at Wal-Mart. Dayan's attorney declined comment, saying she couldn't reach her client.
The remaining equity stake was held by JS Charlotte, a holding company whose members were brothers Jay and Stuart Podolsky, according to court papers. The Podolskys also own Amsterdam Hospitality, which operates eight hotels, including the Blake.
Chetrit and Dayan brought in JS Charlotte in 2006 as a co-owner of the Blake so it could help with financing and hotel operations, court filings say.
Satnick, the Podolskys' attorney, told the Observer that prior to the Blake's sale in 2010 the Podolskys "did not have any equity stake in the Blake -- not in their personal capacities, no...They didn't personally own an interest in the hotel."
More than 25 years ago, Jay and Stuart Podolsky, along with their father, Zenek, were among a group of landlords who pleaded guilty in New York to charges including grand larceny and coercion.
The Manhattan District Attorney said the men had engaged in a "routine of terror" to drive tenants out of a single-room-occupancy hotel, according to newspaper reports. The Podolskys and another landlord moved in thieves, drug addicts and prostitutes, who would then rob tenants, start floods and fires, and do drug and sex deals in the hallway, those news accounts say.
A judge sentenced the landlords to give up three buildings to a nonprofit that helps the homeless. Stuart and Jay Podolsky were ordered to perform 250 hours of community service.
Satnick said the brothers pleaded guilty in 1986 to shield their father from possible prison time.
"They were literally babes in the wood. They had no direct involvement. The father was running the hotel," Satnick said. He described the father as "an older man" from "another time."
More recently, the brothers have been active in New York charities, including donating hotel rooms and money to various causes, according to websites and a 2009 press release from their company.
A deteriorating relationship
Renovations at the Charlotte hotel began in 2006, according to Mecklenburg County permit data.
Plans at one point included turning the second tower into condominiums, but economic declines and the glut of new condo supply in the Charlotte market killed them, according to a 2010 appraisal done by Jones Lang LaSalle and included in court papers.
Jay Podolsky also says in court filings that Dayan and Chetrit stopped making their share of capital contributions. Podolsky said between $6 million and $8 million was needed to renovate the second tower, but that "I simply did not want to invest any more money in the Hotel only to be stonewalled by other members."
By 2010, relations between Dayan and Joseph Chetrit had deteriorated, and Jay Podolsky felt Dayan's behavior had become "increasingly uncooperative," court records say.
"Bonjour's stonewalling has already made it difficult for JS to operate the Hotel," Podolsky says in an affidavit.
"...Members were at an impasse and the situation was becoming increasingly hostile," Podolsky said. "We agreed to meet in an attempt to salvage the venture... The Hotel was hemorrhaging millions of dollars and we sought to stop the bleeding immediately."
On June 24, 2010, Dayan, Jay Podolsky and another man met at Joseph Chetrit's New York office, where they discussed selling the hotel, court records say.
Dayan says in court filings the group set a price floor of $24 million and he expected to be consulted if there was a suitor for the property. Podolsky and Chetrit say they agreed any one of the parties could sell the property for a minimum of $24 million.
Two months later, Dayan learned there was a buyer for roughly that price, court documents show. The buyer, Carolina Hospitality, is owned by Jay and Stuart Podolsky, according to court documents and Satnick, the attorney.
Dayan claims in his lawsuit no one would tell him who the buyer was. He also considered the price "suboptimal," referencing an April 2008 appraisal he says estimated the hotel's "as is" market value at $44.3 million, and a value upon market stabilization in 2012 as $77.8 million.
'May regret decision'
Jay Podolsky says in court documents that Dayan "may now regret his decision..." but knew what he was doing.
Dayan asked the court to stop the sale, which ultimately proceeded. The sale closed in December 2010, according to Satnick and court records, shortly before the Democratic Party named Charlotte as host for its 2012 convention.
Renovations began in earnest soon afterward, according to Mecklenburg County permit data. The new owners applied for $1.65 million worth of construction permits beginning in March 2011, records show.
Satnick, meanwhile, said his client told him the hotel has resolved all of the delegates' concerns, some of which, he said, may have been overblown.
The California Democratic Party couldn't be reached for comment.
Scott Dick, a DNC delegate from Carmel Valley, said he hasn't heard that issues have been resolved. He disagreed that complainers may have overspoken.
"That's a lie, and it's a damn lie," said Dick, who on his weekly radio show provided a 10-minute account of what went wrong at the Charlotte hotel. His room, which cost $310 a night plus tax, included a clogged sink and fixtures coming off the walls, and an outside landing that looked as though it hadn't been vacuumed in days, he said.
Satnick said the brothers worked hard to get the hotel ready for the DNC.
"In an ideal world, would (the Podolskys) have liked to have had more time (for hotel renovations)? Yes," Satnick said. "But this isn't an ideal world. You have to open with what you have."
Staff researchers Maria David and Marion Paynter and staff reporter Gavin Off and David Perlmutt contributed.
Singe: 704-358-5085 On Twitter: @kerrysinge
(c)2012 The Charlotte Observer (Charlotte, N.C.)
Visit The Charlotte Observer (Charlotte, N.C.) at www.charlotteobserver.com
Distributed by MCT Information Services NASDAQ:TWGP,