|By David Bracken, The News &
Observer, Raleigh, N.C.McClatchy-Tribune Regional News
Dec. 09, 2010--When a real estate auction notice includes a reminder to prospective buyers that the property is being sold "as is, where is, with all faults," you can be fairly certain it's a fixer-upper.
Or a tear-down.
That is the case for the 272-room Capital Plaza Hotel in North Raleigh, which will be auctioned by its lender Wednesday.
The auction will almost certainly bring an end to the latest chapter in the hotel's tortured history.
It will also be another sign of how lenders, after years of waiting for the market to improve, are increasingly moving to deal with the distressed property they own.
The owner of the Capital Plaza, National Financial Lending, is determined to rid itself of the property no matter how large the write-off.
"If they just get a halfway decent bid, they plan to sell the property," said Frank Coker, president of J.L. Todd Auction Co., the Georgia firm handling the auction. "They understand the market is what it is these days and that it's not going to bring anywhere near what was owed on it at the time they foreclosed on it."
Built as a Holiday Inn in the 1970s, the hotel has gone through numerous incarnations.
Between 1982 and 2006 the hotel was owned by Govind Chandak and Sanjay Mundra. Mundra is one of the developers behind the stalled Soleil Center project near Crabtree Valley Mall.
The property was a Double Tree Hotel before closing in 2000.
It didn't reopen again until 2004 when, after a $1 million renovation, it was rechristened Hotel Europa.
Hotel Europa lasted less than a year. It closed after Chandak filed a lawsuit accusing the hotel's manager of owing $360,000 in rent.
The manager later pleaded guilty to tax evasion.
In January 2006, Chandak sold the hotel to Accredited Medical for $6 million.
Accredited Medical, a California group that was incorporated in Nevada, borrowed $6.4 million from National Financial Lending, according to Wake County property records.
Accredited Medical signed a license agreement with Ramada Worldwide and planned to renovate the property and turn it into a four-star hotel.
The renovations were never completed, and by 2007 Accredited Medical had closed the hotel and filed for bankruptcy.
Last month, Ramada International filed a lawsuit against Accredited Medical and its owners, Muhammed Khan and Jennifer Burkner, alleging that they owed more than $200,000 for terminating the license agreement prematurely.
After foreclosing on the property, National Financial Lending bid $8.2 million -- yes, $2.2 million more than Accredited Medical paid -- to reclaim the hotel at a public auction in May 2007.
National Financial Lending is a loan pool created by Point Center Financial, a California lender that specializes in so-called hard-money loans.
Hard-money loans are short-term, high-interest loans typically made to developers who can't obtain financing from banks. Default rates on such loans have skyrocketed as the commercial and residential real estate markets have deteriorated.
Coker said J.L. Todd is holding auctions for a number of Point Center Financial properties around the country.
Point Center Financial didn't return a call seeking comment.
The company had been using CB Richard Ellis to market the property. Two months ago it brought in John McAllister, a consultant from Columbia, S.C. McAllister specializes in selling properties quickly.
"When they come to the realization that they want the property sold, they pick up the phone and they call John McAllister and they say, 'Johnny, come in and sell the property,'" McAllister said. "And that's what I do."
McAllister advised holding an "open outcry" auction with an auctioneer who accepts oral bids.
There will be no minimum bid at the auction , which will be held at 10 a.m. Wednesday at the hotel.
To be recognized as a bidder a person must come with a $100,000 cashier's check and be willing to put 15 percent down on the day of the sale.
The auction will take place in front of a hotel that has seen much better days.
Capital Plaza has been boarded up for more than three years and has been vandalized a fair amount over that period. The eight-acre site includes a Knights Inn Hotel that was used for storage.
As for how much the property might fetch, McAllister said that is one thing he doesn't know.
"We recognize that we don't know what the highest and best use for this property is," he said. "We're going to let the market determine that."
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