A rendering of what the finished Landmark could look like, courtesy of court documents detailing the future costs and timeline of the revived project. (njb Architecture)
Get ready for a resurrection.
The terms of a court-ordered auction are set, and the Landmark Hotel goes on the block June 18, according to a final order approving the sale signed by a bankruptcy judge here on Friday, April 6. The terms say anybody willing to meet the starting bid of $3 million and able to bare all when it comes to financial backing can join the party, which creditors hope will mean a new life for troubled investor Halsey Minor’s money-pit property on the Downtown Mall.
One attorney said there’s interest among several prospective buyers, each apparently with plans to see through to completion something akin to the original vision of a 100-room boutique hotel.
“Viewed at that level of $3 million, it’s a heck of a bargain,” said Bill Schmidheiser, who represents interior design and architecture firm R.D. Jones & Associates, one of Minor’s creditors.
Minor, a local entrepreneur who made millions co-founding tech website CNET.com, started the project in early 2008 with then-partner Lee Danielson, the developer behind the Main Street Arena. The first whiff of trouble came four years ago this month, when Specialty Finance Group, the Atlanta bank that put up $23.7 million for the project, informed investors that the loan was already out of balance.
The cost estimate for the project was scaled down and the timeline pushed back, but by September 2008, the project was $3 million over budget, according to the bank.
Construction slowed that November when contractors stopped getting paid, then ground toa total stop in late 2009. The Landmark never regained consciousness.
Which isn’t to say nobody’s tried to revive it. Even as Minor sued Danielson and SFG for colluding against him and the bank filed suit in return demanding repayment, the principal investors insisted they wanted to see the project completed. Minor Family Hotels, LLC filed for bankruptcy in September 2010, but a year later, Minor announced he was hiring Tim Dixon, whose success with his Iron Horse Hotel in Milwaukee won him accolades. At the time, Minor and Dixon promised the bankruptcy court that they’d have new plans for the Landmark by mid-January 2012.
Instead, Dixon proposed buying the property and the hulking steel-and-concrete skeleton for $2.8 million. Creditors cried foul.
“The offer Mr. Dixon made did not feel to us like a genuine, enforceable offer, because it wasn’t accompanied by a deposit,” said Schmidheiser. The company Dixon formed to buy the project, Virginia Hotel Fund LLC, had no assets, Schmidheiser said, and the contract put forward by Minor and Dixon promised Dixon a payout if somebody ultimately outbid him for the property—a win-win for him, it seemed, but not the slam dunk the creditors wanted.
Dixon’s offer was surprisingly low, said Schmidheiser, considering he estimated Minor had sunk $13 million or more into the failed hotel. That got other potential buyers sniffing around, he said.
“People who had been kind of vaguely looking at it said, ‘Really?’” Schmidheiser said. “They had no notion it might possibly go that low.” The interest delighted creditors, but they demanded an even playing field to harness the most competitive bid possible.
On March 19, Robert Maxwell, attorney for Minor, was back in court with counsel for SFG and the host of creditors still owed money on the project to argue the details of the sale contract. Federal bankruptcy judge William E. Anderson called for an auction, and told the parties to come together and agree on terms, or they’d end up in another hearing.
Ultimately, they found some common ground. After contractor Clancy & Theys offered details on what was needed to finally finish the Landmark—nine months of work and another $16 million—Anderson signed the order approving a sale by live auction at 11 a.m. Monday, June 18 in the Charlottesville bankruptcy court.
According to the order, to join the party, potential buyers must agree to a starting bid of $3 million, accompanied by proof of financial backing and a deposit of $200,000 by June 8.
Richard Maxwell, Minor’s attorney, said there’s interest, “but until they put the deposit down, you never know.” Whether the pending auction is a good or bad thing depends on who you ask, Maxwell said, “but it’s movement in a case that hasn’t seen any in a long time.”
Schmidheiser said creditors are confident at least three prospective purchasers will step up. One is likely to be Minor’s initial partner, Danielson, who was named in court last month as a potential bidder and who claims to have the backing of billionaire investor Alexander von Furstenberg. If he’s successful, it would be the third time Danielson has bought the property in 12 years. Omni Hotels has also expressed interest.
And there’s Dixon, whose initial offer drummed up the renewed interest in the property. The Boutique & Lifestyle Lodging Association named his Iron Horse Boutique Hotel of the Year in 2011, and awarded Dixon the title of Hotelier of the Year. He’s received praise within the industry for a concept that ties the community to the property with a well-loved restaurant, and has touted his own creative financing method, which involves seeking out what he calls “funky money”—federal and state tax credits for everything from building in historic districts to new-market construction.
So will the so-called stalking horse in the sale pony up?
“I hope he will,” said Schmidheiser. “The more the merrier.”
Whether one bidder shows or 10, the long-stalled hotel will likely have a new owner by lunch. “I think the whole thing will take five minutes,” said Schmidheiser.
The interest makes sense now, he said, even considering whatever’s required to revive a skeleton that’s been exposed to the elements for four years. And while the project was born at the wrong moment, just before the markets crashed and dragged the country into recession, it could be that the time is right for the long-neglected hotel to come back from the dead.
“We’re in—and I’m crossing myself as I speak—a better economy,” Schmidheiser said. “Now is the time for bold entrepreneurs.”
Meanwhile, bold enterpreneur Halsey Minor is mired in yet another Virginia bankruptcy saga. His purchase of the historic Carter’s Grove plantation from Colonial Williamsburg has gone south, the Virginia Gazette reported, and another judge rejected a proposed settlement last month and steered the property toward foreclosure.
There’s hope of a future for his Charlottesville hotel, even if Minor’s out of the picture. But just how much more an investor will slap down for the right to breathe life into the Landmark at long last is anybody’s guess, Schmidheiser said. “That’s why they play the game, as it were.”