City waits for hotel to start expansion
A representative of The Hotel Hot Springs & Spa told the city Tuesday the property has turned the corner financially and still plans on expanding into the adjacent half acre it leases from the city.
Jeff Simmons, construction manager for Coastal Phoenix Investments, the hotel’s parent company, told the Hot Springs Board
of Directors the hotel is working to pay down its unmet obligations. The Hot Springs Advertising and Promotion Commission filed a claim in Garland County Circuit Court last month for unpaid March, April, May and June collections of the 3-percent sales tax it levies on prepared food and lodging inside the city.
The commission won a $77,279 default judgment against the hotel in December for unpaid sales taxes but is exercising forbearance rather than invoking its authority to close the business.
A tax statement provided by the Garland County tax collector’s office shows the hotel owes
$62,512.57 in 2016 real estate taxes that were due last October. The amount includes interest.
The hotel has yet to pay its
$149,786.56 obligation for 2017 that’s due in October. The tax collector’s office said if the delinquent
2016 assessment isn’t paid by October, the hotel will have to remit the past-due amount and its 2017 obligation by then to avoid referral to the state land commissioner’s office.
“We’ve certainly had some bad press and tough financial times over this past year,” Simmons told the board. “We’re trying to make restitution on a number of things. We’re currently two months behind on our ground lease. We’ll have that current (Wednesday). Water is another issue. I think we can take care of that (Tuesday).
“I think the worst days are behind us. We’re going to try and put on a new face at this point.”
The agenda for the board’s business meeting next week includes a resolution amending the hotel’s lease at 349 Malvern Ave., site of the city’s former utility’s office. The hotel is asking to extend the 30-month term for completing the expansion to 90 months. The term expired in February 2017, or
30 months after the 50-year lease was signed in August 2014.
City Attorney Brian Albright said Wednesday that rather than amending the current lease, the city will probably enter into a new agreement with the hotel, which pays $2,000 a month under the current agreement. The lease also required the hotel to raze the utility’s building.
“My feeling is since they didn’t complete construction within 30 months, they’ve become a monthto-month tenant,” Albright said. “This will be a new lease. They’ve requested 90 months, but I anticipate the new lease will require construction to be completed within 36 months of the lease’s execution. Otherwise, the city will have to consider its options on what to do with the property.”
Albright said the city wants to see the vacant lot developed.
“Part of the initial consideration was that they would demo the (utility’s) building and bring the property back into good use in
30 months, not just leave it sitting there with a fence around it like it is now,” he said. “We didn’t’ want it to just sit there and not be used for any productive purpose.”
Simmons attributed the delay to its lender going into receivership last year. A Federal Deposit Insurance Corp. report said the Louisiana Office of Financial Institutions closed First NBC Bank of New Orleans last year, resulting in an almost $1 billion loss to the government’s Deposit Insurance Fund.
“I can tell you right at a year ago, our single lender and credit provider was taken over by the FDIC,” he told the board. “Then overnight, they stopped operations. Our credit was stopped on all of our projects we had underway.”
Simmons said the hotel’s new creditor, a Denver-based private equity firm that purchased the hotel’s mortgage at an auction last year, asked him to inquire about extending the construction term.
“They encouraged us to extend the building period on the ground lease for the spa addition, and they’d also like to see an additional 100 rooms,” he said, telling the board the hotel hopes to partner with Wyndham Hotels & Resorts. “A hotel management company is one of their arms, and they can help tremendously in that regard.”
The private equity firm amended the hotel’s mortgage in June. According to Garland County property records, the hotel property now secures $35 million of debt. It secured $7 million when the mortgage was filed in 2015. First NBC Bank approved a modification the following year that increased the loan to $21 million.