Adoba Hotel in Dearborn headed into foreclosure; management firm to leave Friday

[MSUguy]

The future operation of the Adoba Hotel Dearborn/Detroit, formerly the Hyatt Regency Dearborn and one of the region’s largest hotels and conference centers, is once again in question.

The hotel is headed into foreclosure proceedings as Wayne County seeks to collect nearly $857,000 in back property taxes, interest and fees from 2012. The owner of the property is overseas-based Royal Realties LLC.

And the hotel’s management company, South Dakota-based Atmosphere Hospitality Management Services LLC, has given notice of its intent to vacate the property — citing the foreclosure proceedings and the city of Dearborn’s decision not to renew several operating licenses for the hotel.

Atmosphere, which has operated the 772-room hotel for the past two years, said it plans to end its management as of 11:59 p.m. Friday, at which time it no longer will employ the hotel’s 235 workers. As of Wednesday evening, the hotel was still operating.

Didn't see this coming, this is the second largest hotel in Metro Detroit. I checked the reviews to get idea what were saying people it. I remember Pontch in its Sheraton days getting terrible reviews, before it's closing. But the reviews are pretty good. Although one recent person, while they enjoyed the stay, noted how "spooky" hotel was because it was so empty

http://www.crainsdetroit.com/article...anagement-firm

http://www.tripadvisor.com/Hotel_Rev...n.html#REVIEWS

[animatedmartian]

Had nothing to do with the quality of the hotel.

Royal Realties did not learn of the tax foreclosure until Wednesday morning, said Steven Cohen, senior partner at Cohen, Lerner & Rabinovitz PC in Royal Oak, who is representing the ownership group. He alleges that Atmosphere and its president and CEO, Jim Henderson, had that notice a week ago.

Royal only learned of Atmosphere’s plans to end its management of the Adoba on Wednesday afternoon when Henderson addressed the hotel’s employees about the plans, Cohen said.

...

When Royal tried to discharge Atmosphere from its management contract, Atmosphere — which said it planned to buy the hotel — filed the January lawsuit alleging breach of contract.

....

Royal is in conversations with undisclosed parties about taking over management of the hotel, Cohen said.

Update: Royal found a new management company.

Longview, Texas-based Lodging Host Hotel Corp.’s CEO Kevin Hilchey was flying into town today to begin transitioning management at the 772-room hotel, said Steven Cohen, senior partner at Cohen, Lerner & Rabinovitz PC in Royal Oak, who is representing the hotel’s overseas ownership group Royal Royalties LLC.

The hotel’s existing 235 employees will be retained, he said, adding that he has spoken with the unions representing them. The current general manager, David French, will also remain in place.

http://www.crainsdetroit.com/article...el-in-dearborn


As far as the foreclosure, Royal is asking the judge to release money held in an escrow account from a insurance settlement from a burst pipe last winter. That money will be used to pay the city and county in back taxes.

[MSUguy]

Had nothing to do with the quality of the hotel.



Update: Royal found a new management company.



http://www.crainsdetroit.com/article...el-in-dearborn


As far as the foreclosure, Royal is asking the judge to release money held in an escrow account from a insurance settlement from a burst pipe last winter. That money will be used to pay the city and county in back taxes.

Looks they're going to stay open, but taking another looks at those reviews [[some reason date isn't the default view). They're really not that good lots of complaints about maintenance and decor, that new company has its work cut out for it.



And I gotta question putting in charge someone that has 8 hotels, only TX and NM and none of them close to this size.

http://www.lodginghost.com/hotels-nm.asp

[Packman41]

And I gotta question putting in charge someone that has 8 hotels just only TX and NM and none of them close to this size.

And you did not see this coming??

Exactly 2 years ago on this very same date I made two postings regarding the Hyatt and the selection of Adoba - the property management company.

See my post here:
http://www.detroityes.com/mb/showthr...355#post347355

And here:
http://www.detroityes.com/mb/showthr...415#post347415

At the time Adoba received the management assignment they had ONE other property in their management portfolio and that was a 177 unit motel in Rapid City, South Dakota. Now they have

As I said back then, “Shows the level of desperation with the current ownership. You can just smell it now.”

[DetroitPlanner]

At the time Adoba received the management assignment they had ONE other property in their management portfolio and that was a 177 unit motel in Rapid City, South Dakota. Now they have

As I said back then, “Shows the level of desperation with the current ownership. You can just smell it now.”

I was in Rapid City last year and saw the Adoba, while I would not categorize it as a motel, it is nowhere near the size of the Hyatt. I thought the same thing that the company was biiting off more than it could chew.

[Wesley Mouch]

I was in Rapid City last year and saw the Adoba, while I would not categorize it as a motel, it is nowhere near the size of the Hyatt. I thought the same thing that the company was biiting off more than it could chew.

Now I know NOTHING about hotel management, but I would caution you against making any assumptions about Adoba.

You might want to look at hotel tax laws in various states. Perhaps there's a tax advantage to holding a smaller hotel at the same time you hold a larger urban hotel. One politician writes a law granting a tax advantage to a friend -- and then others figure out how to mirror the activity to get the tax break. Might not be the case here. But I wouldn't be surprised to find out that hotel holding companies are mostly setup to take advantage of tax breaks, deductions, and tradeoffs more than for management efficiency.

[DetroitPlanner]

Now I know NOTHING about hotel management, but I would caution you against making any assumptions about Adoba.

You might want to look at hotel tax laws in various states. Perhaps there's a tax advantage to holding a smaller hotel at the same time you hold a larger urban hotel. One politician writes a law granting a tax advantage to a friend -- and then others figure out how to mirror the activity to get the tax break. Might not be the case here. But I wouldn't be surprised to find out that hotel holding companies are mostly setup to take advantage of tax breaks, deductions, and tradeoffs more than for management efficiency.

Sorry, but how does this relate to my comment? All I said was that the original Adoba Hotel was at a smaller scale.

[Wesley Mouch]

Sorry, but how does this relate to my comment? All I said was that the original Adoba Hotel was at a smaller scale.

The connection was this... I don't think the size of the original Adoba Hotel tells you anything about the powers/money behind Adoba. Good change they own 30 companies like Adoba and rearrange them in clever ways to legally minimize taxes or to gain other benefits.

This foreclosure probably means nothing new. Hotel owners and hotel operators are two very different groups. The relationships are complex. And we can't ever hope to understand what they are doing.

I suggest that foreclosure to a hotel owner is not a much bigger problem than crab grass on their lawn.

What does this tell us about Fairlane Hotels? Nothing.

[SWMAP]

Adoba did not own the hotel at all. Adobe managed the hotel for the owners, Royal something, who are in another country- believe Israel. Adoba does not remit taxes, get tax credits- nothing like that. The owners do that - if they do it.Royal originally hired Adoba because no national flag like Hyatt or Marriott would put name on it unless about $50 million in renovations would be contracted. Royal not about to pay, so it devolved down and down.

[Bham1982]

Hotel is a dump, Fairlane district is probably done, only things keeping Ford there are inertia, legacy, and sunk costs.

[SpartanDawg]

Hotel is a dump, Fairlane district is probably done, only things keeping Ford there are inertia, legacy, and sunk costs.

b-b-but nothing in the suburbs surrounded by vast parking lots to park my oversized SUV in would ever fail, right??

[softailrider]

My sister used to work for Marriott. She said most people want suites, not just rooms anymore.

[Honky Tonk]

b-b-but nothing in the suburbs surrounded by vast parking lots to park my oversized SUV in would ever fail, right??

Probably someone got gunned down in their parking lot because they dis'respected someone.

[Danny]

This is Fairlane's first blighted structure ever. It least there is no monorail there.

[DetroitPlanner]

The area does have a lot going for it. The area still has quite a few stores even though it has long been surpassed as the go to mall. It still is very close to Greenfield Village/Henry Ford, Colleges, and is surrounded by dense walking areas. What it lacks are walkways. Lets face it, when the people mover was abandoned they should have started to put in attractive walkways to link things. No one wants to walk across a empty parking lot.

[401don]

They should probably mothball several floors. I've seen this work successfully in a couple other large hotels. It can help to make the hotel economically viable until another solution is worked out and wouldn't be noticeable with the dark glass exterior.

[Don K]

When I interviewed in 78 Ford put me up at the then recently-completed Hyatt. I had never stayed in a business hotel before and was duly impressed. I wouldn't be surprised if it' kind of a dump now because day-to-day maintenance is the first thing to go for hotels in financial trouble. Considering the size of the market for Ford travel this hotel was always way overbuilt. As far back as I can remember they had dirt-cheap employee rates for weekend stays.

[Lowell]

The area does have a lot going for it. The area still has quite a few stores even though it has long been surpassed as the go to mall. It still is very close to Greenfield Village/Henry Ford, Colleges, and is surrounded by dense walking areas. What it lacks are walkways. Lets face it, when the people mover was abandoned they should have started to put in attractive walkways to link things. No one wants to walk across a empty parking lot.

Good observation and I agree. Add to that is downtown Eastborn and Westborn nearby that have pleasant blend of old and new, like a Royal Oak, with downtown Detroit a short drive away.

I wonder about the possibility of upper floor residential conversion. With grand unobstructed views and hotel amenities, pool, restaurants, walkable shopping it would seem prime for luxury apartments and/or condos.

[Packman41]

This whole Hyatt thing has been a rolling train wreck for the last 4 years.

Back in August 2010 HREC Investment [[the then current owners) announced they would be selling the hotel to an unidentified buyer for $20 million. HREC paid $40 million for it a few years earlier, but were now in foreclosure. Yes the price was $20 million, but in the sale announcement HREC said, “The final sale price actually will be $12.5 million due to undisclosed structural issues that will be addressed by the new owners…”

That sale soon fell through and Royal then purchased the Hyatt for $10 million in 2011. No mention whatsoever of fixing the $7.5 million of undisclosed structural issues.

Royal then announced a plan to hire the Carlson Co. of Minneapolis [[well-respected hotel management company) and keep the Hyatt name. That all fell through in short order. You have to imagine that Carlson reviewed a long list of deferred maintenance items and the alleged structural issues and found out that Royal lacked the money to fix things up and decided to pass.

The only property management company that Royal could find was Adoba and they only had ONE other hotel in their management portfolio. This is not good.

Last winter when the occupancy is low the management company “mothballs” several floors to cut back on expenses and some pipes freeze and burst. So a claim is made to the insurance company for between $4 and $6 million, but the money is held in escrow to make sure the work is done properly. But that money is now frozen.

As for plans for another use – that could occur. But, IMHO that will not happen with Royal as the owner. They are in WAY over their head and probably don’t have the money.

[MSUguy]

You mentioned structural issues, that would definitely explain the $50 million estimated renovation cost. Marriott is redoing the RenCen rooms and public spaces this year, that is costing them $30 million and it has 500 more rooms. Doesn't sound like the future is very bright for this place

But beyond the back taxes or operating license issues, industry experts are questioning the long-term viability of the hotel and conference center without tens of millions of dollars of needed investment.

"To take halfway measures in terms of renovations just doesn't cut it," said Ann Arbor-based hospitality consultant Charles Skelton. "You're still odd man out because you've got newer, more competitive hotels in other locations and just can't break back in."
......
The needed capital improvements — which Ron Wilson, CEO of Troy-based Hotel Investment Services, has estimated at $50 million or more to bring a well-known, full-service flag back to the hotel — bring into question whether such an investment would ever produce a return on investment.

"The cost to bring a hotel like this back online is staggering, [[and) the market and price points for it have passed," Wilson said in an email. "Design, location and its age are working against this hotel from ever being financially viable."

Said Skelton: "Obviously, [[the Adoba's owners) weren't willing to spend the money to remain a Hyatt" because they didn't see a return on their investment. So they've sought brands that would accept lesser quality and lost some of the hotel's competitive edge in the process.

Operating as the Adoba, the hotel has averaged just under 50 percent occupancy the past year, "which is better than Hyatt was doing before it left," said Ed Lennon, managing member of the Edward G. Lennon PLLC law firm in Birmingham, speaking on behalf of Atmosphere, the departing management company.

http://www.crainsdetroit.com/article...-make-comeback

[EastsideAl]

It might have better prospects if it wasn't in such an awkward place. I always wondered who would want to stay in a "luxury" hotel marooned at the edge of a giant mall parking lot. Other than Ford execs/visitors it's hard to see what the continuing market would be for that place. Particularly after hotels downtown have seen such a revival, and the people mover that connected it to the mall and something, anything, to do was eliminated.

I'm also not surprised by the "structural issues" since it was built on marshy land that was once part of the Rouge floodplain [[before the Corps of Engineers turned it into a concrete ditch). I foresee it becoming yet another glitzy, but cheaply built, concrete and glass 1970s ruin.

[piczka]

If it has the proper Qibla there I still hope!

[iheartthed]

Tear that schitt down.

[BankruptcyGuy]

Now I know NOTHING about hotel management, but I would caution you against making any assumptions about Adoba.

You might want to look at hotel tax laws in various states. Perhaps there's a tax advantage to holding a smaller hotel at the same time you hold a larger urban hotel. One politician writes a law granting a tax advantage to a friend -- and then others figure out how to mirror the activity to get the tax break. Might not be the case here. But I wouldn't be surprised to find out that hotel holding companies are mostly setup to take advantage of tax breaks, deductions, and tradeoffs more than for management efficiency.

There is no tax advantage similar to what you're discussing.

[BankruptcyGuy]

Good observation and I agree. Add to that is downtown Eastborn and Westborn nearby that have pleasant blend of old and new, like a Royal Oak, with downtown Detroit a short drive away.

I wonder about the possibility of upper floor residential conversion. With grand unobstructed views and hotel amenities, pool, restaurants, walkable shopping it would seem prime for luxury apartments and/or condos.

Is that really walkable? If I recall correctly, you have to pass through the giant parking lot to get to the giant parking lot surrounding Fairlane. I'm not positive, though.

This happens with hotels more frequently than you think. Franchisors are keeping very close track of the physical status of their franchises. On transfer, the new owners need to complete a Property Improvement Program [[PIP), and those can be expensive.

I'm also guessing that this hotel was positioned as a "luxury" brand/cost, and most business travel is shying away from that. In one of my previous lifetimes, I had to go through a computer program to book car, flight and hotel. And that program sought the lowest cost, even if that meant Enterprise rental [[smokers allowed, eech), layovers, and budget hotel brands.