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The Redevelopment of the President Hotel in
 Downtown Kansas City Hits Snag, a Lawsuit
 Brought by Former Partner
By Dan Margolies, The Kansas City Star, Mo.
Knight Ridder/Tribune Business News

Mar. 17, 2004 - KANSAS CITY, Mo. -- The redevelopment of the President Hotel downtown has hit another snag, this time a lawsuit brought by a former partner.

Urban Hotel Development Company Inc. of Franklin, Tenn., said it was booted out as a 20 percent member of the project in May 2003, about the time the development encountered financing snags.

The developers later acquired new financing, and renovation on the historic structure resumed. Urban Hotel now wants its stake in the project restored.

"The others viewed it as expedient to get rid of their minority partner," said Urban Hotel's attorney, Anthony Gosserand.

The lawsuit, which was filed Tuesday in federal court in Kansas City, is not expected to slow the project. The lawsuit names as defendants the various entities set up to redevelop, own and lease the hotel, including the President Development Group and President Hotel Investors. The groups are led by developer Ron Jury, who did not return calls Wednesday seeking comment on the lawsuit.

Jury began his quest to convert the long-vacant structure at 14th Street and Baltimore Avenue into a 214-room boutique hotel three years ago but ran into trouble when financing fell through.

He persevered, despite criticism that the project would add to the glut of vacant hotel space downtown, and now he is poised to take advantage of redevelopment activity in the area, including the new H&R Block Inc. headquarters under construction and the proposed downtown arena and entertainment district projects.

The hotel, which will operate under the Hilton flag, is expected to open later this year.

In its lawsuit, Urban Hotel says that it got interested in acquiring and developing the President Hotel in 2000 and that Jury approached it in 2001 about taking part in the project. The two worked out a deal under which Urban Hotel agreed to a 25 percent ownership stake in the hotel, later reduced to 20 percent, according to the suit.

Among other things, Urban Hotel claims that it negotiated the purchase of the hotel from Majestic Hotels & Inns Inc.; obtained funding, tax increment financing and tax credits for the project; and engaged its contractors, managers and interior designers.

Urban Hotel says that it obtained new financing for the project from Marshall Investments Corp. after the original financing deal fell through. Marshall provided a $12.9 million construction loan, the last piece of funding for the $45.4 million project.

Then, Urban Hotel says, it got a letter from Jury on May 2, 2003, informing it that it was being removed as a member of the development entities.

"I think the defendants are taking the position that Urban Hotel's role was possibly different from that of a stakeholder and that it was acting more as a consultant," Gosserand said.

The lawsuit alleges that in February 2002, the "as is" market value of the hotel was appraised at $6 million and that its redevelopment value was appraised at $25 million.

Urban Hotel is asking the court to restore its 20 percent interest. It also wants unspecified damages for breach of contract and breach of fiduciary duty and unspecified payments for the services and expertise it says it provided.


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