Sep. 1, 2008 - The developers of a 98-room hotel near the National Sports Center in Blaine are facing foreclosure after defaulting on $5 million in construction financing.

Home Federal Savings Bank of Rochester is suing Blaine Hospitality of Bemidji, Minn., its partners and several subcontractors who have mechanics liens against the hotel property. Michelle Jester, a Minneapolis attorney representing Home Federal, last week declined to comment about the complaint.

The lawsuit originally was filed in Anoka County District Court in April, but a notice of removal to federal court in Minneapolis was filed Aug. 21. According to the lawsuit, Blaine Hospitality got a loan from Home Federal in July 2005 to build a Comfort Suites Hotel at 10580 NE. Baltimore St., but stopped making payments in March 2008. The loan agreement allowed Home Federal to increase the interest rate on the loan and accelerate the repayment schedule, the suit said.

Home Federal claims in the suit that it now is owed more than $5 million in principal and interest. It has ordered its attorneys to begin foreclosure proceedings.

Tom Wilka, an attorney representing Blaine Hospitality, said last week that foreclosure proceedings have been delayed, but because of issues connected to a second mortgage obtained by the developers.

That mortgage is held by First Integrity Bank of Staples, which in May was closed by the Office of the Comptroller of the Currency. The Federal Deposit Insurance Corp. has been named receiver for the bank.

Wilka said his clients fell behind in repaying the loan to Home Federal because of problems with the general contractor, which delayed completion of the hotel by more than a year. As a result, Wilka said, the hotel didn't generate expected revenue, hurting the developers' ability to repay the loan.

Hotel's new look

The Country Inn & Suites near the Mall of America in Bloomington recently completed an $8 million renovation, the first major makeover since the hotel was built in 1994.

Jodie Grannes, general manager, said last week that it's the most ambitious work done at the hotel since it was expanded to 234 rooms in 1997. Work began in April and was completed in July.

"In the past we've changed our carpet and furniture, but [in this renovation] we gutted every room, including the bathrooms, and replaced every finish," Grannes said.

"This renovation was particularly extensive because we not only renovated the rooms and public areas, we also expanded our breakfast room and lobby, adding about 800 square feet."

The hotel also added computers and printers for guests to use in the lobby, and expanded and enhanced the fitness center.

The renovation is part of a larger program by Country Inns & Suites, which has about 440 hotels worldwide. The chain, which is part of Minnetonka-based Carlson Companies, expects its hotels to have the new look within the next three years.

Susan Feyder --612-673-1723

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