FORT WORTH -- The former owner of the Sheraton Fort Worth Hotel on Commerce Street and two lenders, who are embroiled in a legal dispute over ownership of the property, are now battling over a $495,000 tax rebate from the city, according to bankruptcy court filings.
All three sides say they are entitled to the payment, made June 12 to Presidio Hotel Group, the California-based firm that in 2006 bought the struggling hotel on the south end of downtown and redeveloped it into a Sheraton. To help in those efforts, the City Council voted to rebate the city's 7 percent hotel tax collected at the property, an incentive that could be worth up to $21 million over 20 years.Last year, Presidio received a $300,000 rebate for 2010, and about a month ago was paid $495,028 for 2011.Presidio no longer owns the hotel, but because the agreement is with that firm, that's where the money was sent, said Robert Sturns, Fort Worth's economic development manager. Presidio did own the hotel in 2011.Presidio is now asking the bankruptcy court to hold the money until it can decide which party should get it. A hearing is scheduled for this month.Presidio borrowed $45 million from Dougherty Funding in Minneapolis to buy and refurbish the 429-room, two-building property at 1701 Commerce St. Presidio also borrowed $11.8 million from Vestin Realty in Las Vegas. The two lenders operated under an intercreditor agreement that protected lien positions and made Dougherty senior lender and Vestin junior lender. Presidio defaulted on the loans Dec. 31, and both lenders pursued foreclosure.Presidio deeded the property in lieu of foreclosure to Vestin in January, saying it was the first to try to foreclose. Dougherty claims that Vestin violated the intercreditor agreement by setting up an entity, 1701 Commerce L.P., to transfer loan documents and accept title to the property. Dougherty asked a state district judge in Tarrant County to settle the property issue, but the case was never heard because 1701 Commerce filed for Chapter 11 reorganization, which stopped the foreclosure process.In May, a bankruptcy judge in Fort Worth heard arguments over whether to lift the automatic stay and allow Dougherty to foreclose but has not yet ruled.In its reorganization plan, 1701 Commerce said it intends to pay Dougherty over the next five years, or sooner if the property sells, as well as other creditors that are owed millions of dollars.1701 Commerce and Dougherty are demanding the rebate as payment toward their debt, court filings say. Presidio says the money should stay with it.Moreover, 1701 Commerce is asking the court to instruct Presidio to assign the tax incentive agreement to it because it's the current owner.Sturns said that can't happen."Presidio cannot automatically assign the agreement without council approval and at this time have made no request to assign," Sturns said. "It's not an automatic move. Some council action has to occur."Sturns said the city's economic development staff has not made any decisions about the agreement and hasn't discussed the issue with council members. City attorneys are monitoring the bankruptcy proceedings, he said.Sandra Baker, 817-390-7727Twitter: @SandraBakerFWSTHave more to add? News tip? Tell us
