Potential hotel buyer expected to get tax deal

Posted Sunday, Mar. 17, 2013  comments  Print Reprints



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FORT WORTH -- The City Council on Tuesday is expected to assign an economic development agreement potentially worth millions of dollars to a group including some former owners trying to buy the Sheraton Hotel and Spa in downtown Fort Worth out of bankruptcy.

According to a staff report, the council is required by the original agreement to consent to the assignment, but the new owners must continue to operate the hotel under a top-tier brand and as a three-star hotel or better to receive the tax rebate.

1701 Commerce Acquisition, Llc., an investor group of the Presidio Cos. in Sacramento, Calif., is under contract the buy the 431-room hotel for $49 million. Dallas-based Prism Hotels & Resorts backed away from a purchase earlier this year.

1701 Commerce Acquisition is composed of some of the hotel's former owners, Presidio Hotel Group, and new investors. Presidio bought the struggling hotel in 2006 and redeveloped it into a Sheraton. At that time, the City Council voted to rebate the city's 7 percent hotel tax collected at the property, an incentive worth up to $21 million over 20 years.

1701 Commerce, Llc., an entity of Vestin Originations in Las Vegas, is selling the hotel as part of its Chapter 11 reorganization. Presidio deeded the property to Vestin in lieu of foreclosure in late 2011.

Vestin filed for bankruptcy protection in 2012 after a series of lawsuits in state district court with Dougherty Funding in Minnesota. The two loaned money to Presidio to buy and renovate the hotel. In 2011, Dougherty and Vestin became embroiled in lawsuits over who had the right to foreclose after Presidio defaulted on more than $56 million in notes. Vestin was the junior lender behind Dougherty, sparking the legal filings.

Dougherty has had bankruptcy court approval to foreclose on the property, but agreed to give the Presidio group until March 26 to close its deal. The property is posted for the April 2 foreclosure auction.

Presidio, Vestin and Dougherty also sought a bankruptcy court ruling over who was entitled to a $495,028 tax rebate from 2011. The city gave the money to Presidio, but it was subsequently awarded to Dougherty by the bankruptcy judge. The city paid Presidio a $300,000 rebate for 2010.

The new economic development agreement will specify that future payments can only be made to the hotel's owner and will make limited provisions for future assignments to lenders for collateral purposes, the report said. 1701 Commerce Acquisition has said it will make a collateral assignment to its new lender, ARK Realty Capital, of Los Angeles, the report said.

Sandra Baker, (817) 390-7727

Twitter: @SandraBakerFWST

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