Creditor takes ownership of Hotel HS

The Hotel Hot Springs - Photo by Richard Rasmussen of The Sentinel-Record
The Hotel Hot Springs - Photo by Richard Rasmussen of The Sentinel-Record

The Denver-based private equity firm that secured title to The Hotel Hot Springs & Spa at Wednesday's commissioner's sale at the Garland County Court House said the hotel will continue operating.

The special-purpose entity Summit Investment Management formed to foreclose on the 305 Malvern Ave. property and its parking garage at the intersection of Malvern and Church Street last year was the highest bidder, offering $16 million for the property.

Completing the foreclosure allows Summit to sell the hotel and parking garage as credits toward the $128,874,258 judgment Division 3 Circuit Judge Lynn Williams granted it in June against the property and GRGCBHS LLC. Developer Gary R. Gibbs incorporated the latter for the purpose of owning the hotel.

Jeff Deines, senior asset manager for Summit, said Wednesday the firm planned to retain KPartners Hotel Management as hotel operator. The court appointed the San Antonio, Texas, company as the receiver after Summit sued for foreclosure and breach of contract last October.

"We don't anticipate any change," Deines said. "It will be business as usual. KPartners will continue managing the hotel."

Visit Hot Springs CEO Steve Arrison said Wednesday he has heard positive reviews since KPartners took over operations in October 2018. Adjacent to the Hot Springs Convention Center, the hotel is key to the convention business that generates sales tax revenue for local governments and the Hot Springs Advertising and Promotion Commission.

"I'm really excited and looking forward to KPartners continuing to manage the property," Arrison said. "It's good news for the hotel and good news for Hot Springs. It takes Gibbs totally out of the picture. It's great to get the ownership question resolved. The property has been having a great year."

According to a statement of income KPartners provided the court, the hotel had a gross operating profit of more than $1.8 million through September.

Summit acquired the hotel's mortgage at an auction after the original creditor, First NBC Bank of New Orleans, was put into receivership by the Federal Deposit Insurance Corp. in 2017. Mortgages of $6.78 million and $21 million Gibbs' company granted First NBC were some of the many nonperforming loans on the bank's balance sheet, according to an FDIC report.

Garland County Circuit Clerk Jeannie Pike, left, and her Chief Deputy Kristie Womble conduct a commissioner's sale on the Hotel Hot Springs Wednesday, November 20, 2019, at the Garland County Courthouse. - Photo by Richard Rasmussen of The Sentinel-Record
Garland County Circuit Clerk Jeannie Pike, left, and her Chief Deputy Kristie Womble conduct a commissioner's sale on the Hotel Hot Springs Wednesday, November 20, 2019, at the Garland County Courthouse. - Photo by Richard Rasmussen of The Sentinel-Record

According to court records, the hotel defaulted on the obligations and entered into a new security agreement with Summit in April 2018 that required a $65,000 minimum monthly debt service payment. Summit stipulated in its foreclosure complaint that the hotel had defaulted on the obligation by September of last year.

Filings from the bankruptcy protection Gibbs filed for but subsequently withdrew noted the hotel's accounts were in the red despite it grossing more than $7.6 million in 2017. The negative cash flow owed to Gibbs diverting more than $1.6 million in hotel revenue for his personal use, according to court records. In 2018, hotel employees filed numerous claims with the Arkansas Department of Labor for unpaid wages.

The U.S. Bankruptcy Court for the Western District of Arkansas granted Summit and other creditors' involuntary Chapter 7 bankruptcy petition against Gibbs in March. The list of creditors includes the ad commission, which is seeking unpaid remittances of the 3% hospitality tax the hotel collected from guests.

Wednesday's sale concluded Summit's foreclosure action. Several hoteliers were in attendance. A representative of CSK Hotels of Fort Smith made the opening bid of $200,000. Summit's $16 million offer was the only other bid tendered for the property.

Local on 11/21/2019

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