Red Lion Hotel conversion project taken over by lender
Developer in plan to build apartments defaults on loan
HARTFORD – A New York lender, who helped finance the troubled rental conversion of the top floors of downtown Hartford’s Red Lion Hotel, has taken control of the building and the project, after the original developer defaulted on its loan.
DWPartners of New York has told the Capital Region Development Authority it intends to complete the long-stalled conversion of guest rooms on top nine floors into 96 apartments. CRDA has approved state taxpayer-backed loans of up to $7 million for the project.
The conversion’s initial cost of $19.8 million was pushed up by at least $3.2 million in cost overruns. The higher costs stalled the project for nearly two years under the previous owner and developer, Inner Circle US.
Michael W. Freimuth, CRDA’s executive director, said DWPartners has said it wants to complete the project and would likely eventually seek a buyer. There also have been some preliminary discussions about whether it makes sense to convert the entire hotel — on the edge of the Downtown North area — into rentals and if CRDA might play a role in funding, Freimuth said.
At the same time, however, another entity managed by DW Partners, DW Commercial Finance, has filed a notice with the city that it intends to foreclose on the property. It wasn’t clear Tuesday how such a foreclosure would unfold.
A foreclosure could place CRDA’s loan — and money that is owed to some project subcontractors — at risk.
Freimuth said CRDA will not invest more in the property until DW Partners’ plans for the property are clearer. CRDA also wants to know how the foreclosure could affect the repayment of financing CRDA has already put into the project.
CRDA has also asked DW Partners to resolve subcontractor claims that they are owed money.
The foreclosure complaint has yet to be filed with the courts. But a copy of the complaint obtained by The Courant shows l i ens from subcontractors totaling nearly $1.5 million, plus another $1.7 million from the former general contractor, Excel Hotel Services.
The complaint also includes CRDA’s loan and a total of $1.3 million in unpaid taxes owed to the city of Hartford.
“As far as I am aware, the original property owner does not dispute that my client is owed more than $350,000 for electrical work it performed on the project,” said Paul Fitzgerald, a Hartford attorney representing one of t he subcontractors, Electrical Contractors Inc. of Hartford.
The complaint lists $17.4 million in loans from DWCommercial.
DW Partners declined to comment for this story. Inner Circle did not respond to an email and texts seeking comment.
So far, CRDA has invested $5.25 million of the $6.5 million loan it initially approved in 2016. But CRDA has not made another payment since July 2017 when the project stalled amid a shortfall in financing. Inner Circle changed contractors, revised architectural plans and discovered code compliance upgrades that were more extensive than previously anticipated.
CRDA approved another $500,000 this spring, which also hasn’t been invested in the development.
The conversion project was seen as attractive for reducing the number of guest rooms from 388 to 188 at the Red Lion, the former Radisson, on Morgan Street. The hotel has had weaker bookings compared with other hotels downtown, primarily because of its somewhat isolated location.
Inner Circle’s ownership came on the heels of a previous foreclosure of the hotel.
Inner Circle came to town with big plans for the hotel, including a rooftop deck that would overlook Dunkin’ Donuts Park. But almost from the start of the project in 2016 there were legal skirmishes. Inner Circle sued its first general contractor, Excel Hotel Services, in 2017 for breach of contract. Then, subcontractors slapped liens on the property because they hadn’t been paid.
DW Partners took control of the property in late June, and renovations have resumed, and it is possible the top two floors could be ready for lease in August with the remainder following in September, one industry source familiar with DWPartner’s plans said.
While the project was technically valued at $19.8 million initially, the figure included $13.3 million associated with Inner Circle’s move to gradually acquire full ownership of the hotel, beginning in 2013.
Inner Circle’s troubles apparently are not limited to just the Red Lion project in Hartford. An offering notice advertising a Sept. 12 foreclosure sale lists eight Inner Circle hotels, including the Red Lion in Cromwell.
And last week, local media reports questioned whether another Inner Circle Red Lion Hotel in Missouri would close, noting it had stopped accepting bookings.