Going On The Block
Bankruptcy proceedings for the Warren Holiday Inn have reached the end stages.
On Wednesday, the owners, Warren Motel Associates and 210 Ludlow Street Corp., both controlled by John McGraw, filed documents in Federal District Bankruptcy Court that, if approved, would make the arrangements for an auction of the property.
The owners owe Wells Fargo Bank more than $6,388,000 on the 110-room property at 210 Ludlow St.
In 2006, the owners took out a $5.1 million mortgage on the property through LaSalle Bank National Association. Wells Fargo subsequently took over and now holds the loan.
According to the documents, “debtors failed to make their monthly-installment payments under the loan… commencing on Jan. 1, 2010.”
Wells Fargo took two steps in response, first accelerating the loan then filing for judicial foreclosure.
The owners filed for Chapter 11 Bankruptcy on Oct. 10, 2010, and were authorized to continue managing the property.
In September 2012, Wells Fargo filed for a judgment against McGraw.
The sides then entered mediation, and they came to a settlement agreement on March 28, 2013.
According to that agreement, the owners would continue to operate the hotel and make monthly payments of $13,000 to Wells Fargo. They would also employ a broker who would “diligently” market the property for six months at a listing price of $3 million.
According to the document, the value of the property is $2.7 million.
That agreement was approved by the court on July 29, 2013, and the six-month marketing period ran through Jan. 29, 2014.
“Despite the broker’s best efforts, only one offer was submitted for $2.2 million,” according to the documents. “That offer was later reduced to $1.7 million.”
The potential buyer was eventually determined to be not a qualified buyer.
Lacking a sale, the settlement agreement calls for an auction to be held within 30 days – “on or before Feb. 28, 2014” – at the Bankruptcy Courtroom of the U.S. Courthouse, 17 South Park Row, Erie.
The minimum bid increment for the sale will be $50,000.
If approved, a sale resulting from the auction would leave the debtors free and clear of the property.
McGraw could not be reached for comment on Thursday.
The owners’ attorney, Michael Kaminski, of Blumling & Gusky, of Pittsburgh, said he could not comment on the case.