The management company appointed to run The Hotel Hot Springs & Spa said it will remain open while its creditor attempts to foreclose on the property.
Division III Garland County Circuit Judge Lynn Williams issued an emergency order Thursday appointing KPartners Hotel Management of San Antonio as the receiver pending the foreclosure action also filed Thursday by the Denver private equity firm that acquired the hotel's mortgage at an auction last year.
Summit Investment Management is seeking a $23,374,719 judgment against the property for two nonperforming loans secured by the hotel at 305 Malvern Ave. and its parking garage at the intersection of Malvern and Church Street.
The complaint said the plaintiffs, Gary R. Gibbs and the two companies he incorporated for the purposes of owning the hotel, have been delinquent on the two loans since April and are in default on the terms of the second loan. Areas of default include being more than $50,000 in arrears on county property taxes, owing the Hot Springs Advertising and Promotion Commission $61,444 in unpaid hospitality taxes and failing to make the $65,000 minimum payment on the loan by the Sept. 30 due date.
The complaint also said as of last week the hotel had not made its Oct. 12 payroll. The Sentinel-Record reported last month that four claims for unpaid wages had been filed against the hotel with the Arkansas Department of Labor in the last two years.
KPartners took control of the property Friday morning, Shawn Kvernen, the company's chief operating officer, said Monday.
"The employees our are biggest concern," he said. "We want to make sure they're paid and treated with respect."
Charles Coleman, the attorney for Summit Investment Management, told the court during Monday's emergency hearing that Summit has put more than $30,000 into the hotel since it went into receivership.
"The hotel is operating," he told the court. "It's a fine hotel, but it needs some help. Without that help, the property is at further risk of damage to the collateral of my client. We are investing money in the property. We've spent $30,000 to prepare it for 150 guests that are coming in."
Gibbs is challenging the receivership, but his attorney told the court Monday that Gibbs wasn't prepared to present his case. He said Gibbs, who wasn't present for the hearing, lives in Florida and has been affected by Hurricane Michael. The complaint said Gibbs is a citizen of Mississippi.
Williams granted Gibbs' request for a continuance and rescheduled the hearing for Nov. 2. He also ordered Gibbs to give KPartners access to all of the hotel's bank and credit accounts.
Jeff Deines, senior asset manager for Summit Investment, said the company did not want to comment on the receivership until after next month's hearing. It purchased the hotel's mortgage at an auction after original creditor, First NBC Bank of New Orleans, was put into receivership last year by the Federal Deposit Insurance Corp.
According to an FDIC report, closing the bank resulted in an almost $1 billion loss to the government's Deposit Insurance Fund. Gibbs' debt was one of many nonperforming loans on the bank's balance sheet, according to the report.
The Hot Springs Advertising and Promotion Commission, which is suing the hotel for unpaid remittances of the 3-percent sales tax levied on prepared food and lodging inside the city, issued a statement Monday praising the court's decision.
"Although we are not a direct party to the issues that are being raised with regard to placing the hotel in receivership, we nevertheless have a direct interest in the efficient operation of the hotel, which is adjacent to the Hot Springs Convention Center and which serves many of our valued customers," the statement said.
"We have been told that the hotel is now under the management of KPartners Hotel Management, which has an excellent reputation and which we are confident will restore the Hotel Hot Springs to a stable and efficiently run property that will serve our meetings and conventions customers very well."
Local on 10/23/2018