Seven years ago, a newly formed hotel investment firm in Denver proudly touted its purchase of a Best Western Plus in the Denver Tech Center for $15 million.
“The property has all the characteristics we are looking for in an acquisition – high current yield, excellent location, superior brand image and a variety of healthy demand drivers,” said Phillip Hutchins, co-founder of the Rockies company. Lodging Capital, in a press release.
But on April 28, Hutchins, his co-founder Stephen Mills and RLC were sued in Arapahoe County District Court by DTC Hotel LLC, which claims he was not paid approximately $11.5 million. dollars still owed to him for the sale of the 149-room Best Western at 9231 E. Arapahoe Road.
According to DTC Hotel, which is based in Greenwood Village, RLC signed an $11.5 million promissory note and took out a $200,000 loan for repairs to the hotel in April 2015. DTC says the company owes him $11.3 million on the promissory note and the full $200,000 of the loan, plus interest, late fees and attorney fees.
“The pandemic has had a significant negative impact on our hotel real estate operations, with losses approaching $2 million over the past two years resulting in default,” Mills said in an email. “We are actively working with our lender towards a resolution that includes a repayment of their loan against the property.”
“We expect to close the recapitalization of the property within the next 60 days, which will result in the dismissal of the filing (of the lawsuit) after the loan is repaid,” Mills added.
In its lawsuit, DTC Hotel said it began seizing the property. The company fears that RTC will not be able to pay for maintenance, which could lead to structural damage. In February, RTC was unable to pay the $226,622 it owes in property taxes, according to the lawsuit.
As a result, the DTC asked an Arapahoe County judge to appoint a receiver to oversee the hotel’s day-to-day operations and ensure its bills are paid. District Court Judge Frederick Martinez agreed and named Colorado Hospitality Services, a Denver company.
RLC has five other Colorado hotels — two in Fort Collins and one in Lakewood, Lone Tree and Steamboat Springs — according to its website.
DTC is represented by attorney Neal Dunning of Brown Dunning Walker Fein.
This story was reported by our partner BusinessDen.