|By Bryan McKenzie, The Daily Progress,
Charlottesville, Va.McClatchy-Tribune Regional News
Jan. 24, 2012--A Milwaukee businessman has agreed to purchase for $2.8 million the skeletal Landmark Hotel, which has loomed unfinished over downtown Charlottesville since November 2008, if a federal bankruptcy court approves a plan submitted to the court by attorneys for current Landmark owner Halsey Minor.
The plan was submitted to the court on Jan. 13 and is scheduled for a March 19 hearing.
If approved, Virginia Hotel Fund LLC, lead by Timothy J. Dixon, who has experience developing hotels including the Iron Horse Hotel in Milwaukee, would buy the structure from Minor Family Hotels and take over its development.
The $2.8 million would be used by Minor to pay liens on the building. A separate fund of about $200,000 would be established by the purchaser to help pay claims by unsecured debtors, according to court documents.
"What we hope to do is have a March hearing on the disclosure statement regarding the sale," said Rich Maxwell, an attorney representing Minor Family Hotels. "The idea is to get [the hotel] out of bankruptcy and get work going on it again."
The proposed sale price is close to the $2.1 million valuation assessed by Hotel and Club Appraisal and Consulting service in March 2011, done on behalf of the Federal Deposit Insurance Corporation.
Minor would be liquidating the hotel under his Chapter 11 bankruptcy filing, which means creditors would be paid out of the money generated by the sale.
A December ruling by Charlottesville Circuit Court Judge H. Thomas Padrick ruled that the city of Charlottesville's $128,183 tax lien would be first to be paid from the proceeds, then general contractor Clancy & Theys Construction Co. would receive its more than $2 million mechanic's lien, with other contractors to follow.
That would likely leave many creditors getting paid less than what they are owed as the city court ruling listed more than $17 million in liens against the property, including more than $13 million from Specialty Finance Group of Georgia, which was involved in financing the hotel.
In September Dixon told the bankruptcy court that finishing the Landmark Hotel would likely cost about $15 million to $18 million. He expected that, within three years of finishing the hotel and getting operations running, the property could be worth between $30 million and $42 as an enterprise.
It is up to Virginia Hotel Fund to secure financing to kick start the project, which Dixon said would be a "boutique hotel" and destination.
Dixon told the bankruptcy court financing is available, some of it in what he termed "funky money," including tax incremental financing and special federal government financing programs. He told the court he would look into new market tax credits, industrial revenue bonds and outside investors "from the Pacific rim."
"My obligation is to be the complete and absolute developer responsible for everything from the financing to the creation of the equity to the redesign to the operations to the finish," Dixon told the court.
Construction on the Landmark began in 2007, but stopped in November 2008 over financing issues. In December of the same year, Minor fired the hotel's original developer, Lee Danielson, who was responsible for the Charlottesville Ice Park and Regal Cinema on the Downtown Mall.
Since the project ended, Minor has become embroiled in lawsuits with Danielson and the FDIC, which took over the Atlanta-based Specialty Financial Group, which had originally funded the project.
Specialty Financial won a $13,364,298.77 judgment against Minor in a Georgia court, which Minor has appealed.
According to the court filing, the plan will place creditors' claims in various classes and determines how each class of claim is to be handled and how it would be paid. Under the plan, administrative expenses of $11,000 to the U.S. Treasury, $165,000 to Dixon Development and $35,000 in legal fees would be paid first.
The next paid would be the city's tax bill; Clancy & Theys Construction; R.D. Jones Construction for $136,654; Specialty Finance's claim and Core Group, PC's $287,652.
The creditors will be allowed to vote on whether to allow the sale of the hotel structure and development to Virginia Hotel Fund.
It's an ignominious result for what many believed would be a jewel for the Downtown Mall -- a nine-story luxury hotel to draw tourists, diners and businesses needing a place to meet -- when Minor and Danielson first dug dirt at the site of the former Boxer Learning in March 2008 with an expected July 4, 2009 opening.
Eight months later, with accusations flying, the construction stopped. Minor accused Specialty Finance Group of missing a $1.1 million payment on the $23.7 million construction loan. Danielson told the media that construction would continue but Minor contradicted and then fired him.
Danielson and Minor sued each other. Minor and the bank sued each other. Contractors and subcontractors filed liens.
Specialty Finance Group failed during the 2008 recession and the FDIC took over the Atlanta-based bank in May 2009. Minor Family Hotels filed for bankruptcy in September 2010.
"We think the liquidation plan and sale is a way to get this thing going," Maxwell said. "It's a way for people to get a little something back and the project to move forward."
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