Foreclosed LR hotel fetches $5 million

Al Rajabi, a partner at Full Service Hospitality LLC of San Antonio, made the winning bid of $5 million for the Clarion Hotel Medical Center on University Avenue in Little Rock, Steve Sipes, Pulaski County’s circuit court administrator, said Friday.

A foreclosure auction at the Pulaski County Courthouse was held Thursday to sell the hotel.

Centennial Bank of Conway held the mortgage on the former Hilton hotel after its parent company, Home BancShares, bought Liberty Bancshares of Jonesboro last year. Liberty Bank filed a foreclosure case against HLR LLC, the owner of the hotel, in April last year.

HLR LLC was led by Bruce Burrow of Jonesboro.

Centennial Bank began the bidding at $2.5 million, said Bob Birch, a regional president for Centennial.

More than 40 people were at the auction and four bid on the hotel, Sipes said.

“It was a lively [auction],” Sipes said.

Most bids were raised in $100,000 increments, Sipes said.

Rajabi made the down payment on the hotel Friday and has three months to finalize the purchase, Sipes said.

He will decide next week on specific plans for the hotel, including what franchise he plans to affiliate with, Rajabi said.

“All options are on the table at this time,” Rajabi said, although he said he has no desire to sell the hotel quickly.

He plans to keep all the employees at the hotel, Rajabi said.

In 2012, the hotel was appraised at $7,984,800 by the Pulaski County assessor’s office. The three-story hotel at 925 S. University Ave. has 262 rooms and was built in 1976. It has an annual property tax of $111,947.

It also underwent a $24 million renovation in 2004, at which point it was known as the Hilton Little Rock hotel.

In 2002, Little Rock voters approved the issuance of up to $19 million in revenue bonds to renovate the hotel. No public funds were used to secure the bonds.

Only about $3 million in tax exempt bonds were utilized in the renovations, according to a bond trader in 2004.

The hotel was rebranded as a Clarion in January last year.

Rajabi said he was unsure what the occupancy rate is at the hotel, but he acknowledged that it has declined since the change from Hilton.

“We’re pretty excited about this opportunity,” Rajabi said. “Obviously there is a need for a capital injection into the hotel. It’s been a few years since anything was done to it.”

Burrow filed for bankruptcy in 2012 with estimated liabilities between $50 million and $100 million and assets between $10 million and $50 million.

Martin “Marty” Belz of Memphis, who developed real estate with Burrow on properties including the Peabody Little Rock hotel and the Hilton, filed for bankruptcy this year, listing debts of $97.7 million and assets of $60 million.

Business, Pages 31 on 03/01/2014

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