Mar. 28, 2006 - The fate of a downtown Lexington hotel is in the hands of a federal court as the hotel's landlord and its owners fight over what the landlord says are shoddy conditions at the Hyatt Regency.

Lexington Center Corp., which owns the land that the Hyatt Regency is on, sent W2005 WYN Hotels, the hotel's owner, a letter on Feb. 24, saying it was terminating the hotel's lease because the hotel was in poor condition and improvements had not been made.

Lexington Center Corp. is a non-profit whose board is appointed by the Lexington-Fayette Urban County Government. It also manages the Lexington Opera House and Rupp Arena, which is connected to the hotel, the Lexington Convention Center, the Shops at Lexington Center.

Now WYN Hotels is suing Lexington Center in U.S. District Court in Lexington, saying Lexington Center committed breach of contract by trying to revoke the lease. The suit also accuses the Lexington Center of trying to sabotage an impending sale of the hotel by revoking the lease so it could be sold to a group of unnamed local investors.

A lot is at stake.

In coming years, Lexington will host a series of high-profile sporting events and needs premium hotel rooms, especially downtown. In March 2007, Rupp Arena will host the first and second rounds of the NCAA Division I men's basketball tournament. In 2010, the World Equestrian Games, which are expected to bring in hundreds of thousands of well-heeled spectators from around the world, will be held at the nearby Kentucky Horse Park.

But the hotel needs a face lift, Lexington Center says.

The 365-room hotel, built in 1976, still has some of its original furniture, the public elevators frequently break down, the wall coverings are sometimes dirty and there is mildew in some guest rooms, Lexington Center executive director Bill Owen wrote in a letter to the hotel's owners in December 2005.

According to the lease, the hotel, its furniture and its services, "shall be of good quality, taking into consideration its use in connection with the adjacent civic facilities."

But in its lawsuit filed last week in U.S. District Court in Lexington, WYN Hotels said the hotel has been in disrepair for some time. WYN Hotels, a consortium of investors, purchased the hotel, at High Street and Broadway, in January 2005 from Wyndham International.

According to the lawsuit, WYN Hotels has spent more than $750,000 in capital improvements at the hotel, and it is committed to spend an additional $375,000 within the next month. The hotel was not in any worse condition than when it was under previous owners and no default was issued then, WYN Hotels said in court papers.

WYN Hotels argues it never broke the lease. It also wants the judge to issue an injunction, stopping Lexington Center from taking any further action. No court date has been set yet.

Owen said that, after the center planned its own $52 million renovation -- including an upgrade in convention facilities, improvements at Rupp Arena and a facelift for the civic center's exterior -- it became apparent that the hotel also needed repairs.

Convention business has been affected by the poor conditions at the Hyatt, Owen said in letters to the owners included in court documents. When the hotel was sold in 2005 to its current owner, Lexington Center agreed to the change of ownership with the understanding that the new owners would make substantial improvements.

"LCC believes that insufficient steps to keep the commitment have occurred and as such, are again pursuing options available under the hotel lease to require the owner to comply with its responsibilities under the lease agreement," Owen said in a written statement.

Charles S. Cassis, a Louisville lawyer who represents WYN Hotels Inc., said he could not comment.

Owen declined to comment on the charges that Lexington Center was trying to thwart the pending sale of the hotel. WYN Hotels did not say who the potential buyer was, nor did it identify in court papers the group of local investors allegedly interested in purchasing the property.

In the written statement, Owen said he hoped the situation between the hotel and Lexington Center is resolved quickly.

"We hope the current situation with respect to the lease agreement will be short-lived and will work hard to eliminate any disruption for visitors to the (Convention) center and to hotel guests," Owen said.

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Copyright (c) 2006, The Lexington Herald-Leader, Ky.

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