The largest hotel in Cedar Rapids sold for $20,000 at a sheriff’s auction Tuesday.
CW Capital Asset Management, the largest secured creditor of the Crowne Plaza Five Seasons, was the sole bidder present in an auction that concluded its own foreclosure action against the hotel.
The $20,000 price wasn’t the deal it appeared. CW Capital — more specifically the noteholders it represented — were already owed $58.4 million by the hotel’s last owner.
That strange auction was over in an instant at the Linn County Sheriff’s Office temporary headquarters in Marion, ending an even stranger ownership era for the downtown hotel at 350 First Ave. NE, Cedar Rapids.
Kronos Hotels LLC of Atlanta acquired the 275-room hotel in May 2007 from longtime owner Lodgian Inc. At the time, Kronos, a young company headed by Malaysian entrepreneur Charles Morais, was on a hotel-buying binge. It soon became apparent that Kronos Hotels had grown too fast, taking on too much debt in the process.
At the Crowne Plaza, staff was slashed, managers came and left after a few months and vendors grew restless as bill payments languished.
By June 2008, when the hotel was badly needed by refugees from the Cedar River flooding, paychecks were bouncing and vendors were refusing to deliver goods. The hotel’s top-floor restaurant and swimming pool closed. Some groups that had been booking events at the hotel ballrooms, located on land leased from the city, began to stay away.
CW Capital, a lender to Kronos, filed a foreclosure lawsuit in October 2008, and finally got full possession of the hotel at Tuesday’s auction.
Joe Harris, an attorney for the asset management company, said the $20,000 sale price doesn’t reflect the market value of the hotel, only the amount his client needed to bid to protect its already sizable interest in the hotel.
Harris said the Crowne Plaza is up for sale, but he does not know specific details.
“My client is aware of the importance of the hotel to the downtown area and the city at large,” Harris said. “It will continue to function as a hotel until a buyer is found.”
The operations and condition of the hotel have largely been restored to their pre-Kronos status by Prism Hotels and Resorts of Dallas, a management company brought in by CW Capital, to oversee operations while the foreclosure was pending. Hotel General Manager Debra Stout said Prism will continue to operate the hotel with current staff during any sale.
Stout said “maybe three” interested parties have inspected the property in the past 60 days.
The hotel could again be vital to the city as a winter snowstorm threatens holiday travelers on I-380 and at The Eastern Iowa Airport.The hotel’s restaurant is back open and it’s swimming pool will reopen as early as Jan. 14.