May 29, 2013--VIRGINIA BEACH -- Developer Bruce L. Thompson has signed a contract to buy The Cavalier Hotel and surrounding property for $35.1 million, court papers show. But the very sale of the hotel faces a court challenge.

Cavalier Associates LLC agreed to purchase the property that includes the 86-year-old Cavalier on the Hill and its more modern sister hotel on the Oceanfront from Cavalier Hotel Corp., according to the documents filed Thursday in Circuit Court in Buckingham County. Thompson signed the agreement, dated May 15, as a manager of Cavalier Associates, a limited liability corporation.

No partners of Cavalier Associates other than Thompson are named in the court papers.

In an email to the Pilot Tuesday night, Thompson noted the court must approve the sale and said "this is no done deal."

A Circuit Court hearing is scheduled for June 10 in Buckingham County. If the judge approves the sale, the deal would close 40 days afterward.

Three parcels, including the 86-year-old Cavalier on the Hill and some land around it, went up for sale early this year after a circuit judge ordered the breakup of The Disthene Group Inc., the company that has owned the Cavalier for more than 50 years. A court-appointed receiver took over the hotel to sell it and other Disthene assets, including the world's largest kyanite mine, in Buckingham County.

The order last year was the result of a 2011 lawsuit brought by Virginia Beach resident Curtis Colgate and his sister against their uncle and cousin, who controlled Disthene. The lawsuit alleges that Gene Dixon Jr. and Guy Dixon, Disthene's majority shareholders, tried to deny Colgate and his sister the full value of their shares in the company and mismanaged its assets.

The Supreme Court of Virginia has agreed to hear the Dixons' appeal of the ruling that dissolved the company. The Dixons also have asked Circuit Judge Jane Roush to stop the sale of Disthene's assets until the appeal is decided.

Seven bidders submitted 11 bids to buy The Cavalier by the April 25 deadline, according to the receiver's motion for approval of the sale. The receiver, Charles Goldstein, then negotiated with some of the bidders to drive up the sale price for the 21.2 acres of property, the court papers show.

City officials raised concerns about preservation of the original hotel, built in 1927, and put together a package of incentives to help offset the cost of restoring the property.

Mayor Will Sessoms declined to comment on Thompson as the buyer but said, "I'd be very encouraged if it was him."

Thompson was one of two potential buyers who met with the city before the bid process, Sessoms said. He said Thompson indicated he would preserve the Cavalier.

Pilot writers Gabriella Souza and Aaron Applegate contributed to this report.

Carolyn Shapiro, 757-446-2270, [email protected]

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