Delaware Gazette

Thursday, March 19, 2009

By ANDREW TOBIAS
Staff Writer

The bank that foreclosed on the Delaware Hotel's previous owners is still looking for a buyer after Wednesday's sheriff's auction failed to yield any third-party bidders for the property.

An attorney for New York lender Ciena Capital LLC bought the 5.4-acre property and four-story hotel located at 351 S. Sandusky St. for $860,000 - two-thirds of the property's $1.3 million appraised value and the minimum possible bid allowed by law in a sheriff's sale.

Ciena, which in October declared bankruptcy as a result of the recent economic downturn, had hired Lewis Center-based Gryphon Realty Advisors to try and promote the property.

"The bank didn't really want to own it," said Richard Kruse, president of Gryphon. But, if the bank didn't place a bid, then the foreclosure process would continue to recycle until a bidder was found.

Six interested parties that had toured the property attended the sheriff sale, but none were willing to pay the $860,000 asking price (with a required $129,000 cash deposit.)

Kruse said Gryphon would likely begin fielding lower offers over the course of the next several days. Alternatively, a party may come forward who doesn't mind the $860,000 asking price but was unwilling to front the cash deposit, he said.

"We did get a very healthy response but it wasn't at or above $860,000," Kruse said. "So, we'll have to go to plan B."

The property may be a ‘plan B' for the county's efforts to build a new courthouse, if Delaware County Commissioner Todd Hanks gets his way.

Hanks, who attended the sale, said that he has informally made contact with Gryphon to explore the possibility of the county using the site for a new courts facility, as well as a new home for the Delaware Area Transit Authority (DATA).

For the last decade, the county has been exploring building a new courthouse to help alleviate crowding and security concerns with the county's current facilities. Hanks, who was then county auditor, blocked the previous commission board's efforts to move forward with at $51 million facility last year, noting budget shortfall projections.

Hanks said using the Delaware Hotel site would not only address the need for a new courts facility, but would also stimulate economic development in the southern part of the city, something officials have long attempted to do.

"It would create an anchor in the southern area of the city, which would receive an economic stimulus boost, and create basically bookends to make growth go to the center of the city," Hanks said.

Hanks hopes that the proposed project would qualify for federal stimulus money earmarked for community revitalization.

"What could be more revitalizing than tearing it (the Delaware Hotel) down and putting up a substantial economic building such as the courthouse?" Hanks said.

Hanks has not discussed the plan with commissioners Ken O'Brien and Tommy Thompson, but he said he expects to broach the topic with them during today's commissioner meeting.

Reached Wednesday, the other two commissioners confirmed they were not aware of Hanks' plans and said they would need to learn more before offering specific comments on the project's merits.

"Before we look at anything, we need to see how that might affect our budget situation," Thompson said, referring to the county's current operating deficit in excess of $9 million.

Hanks was not the only local government official who attended Wednesday's sheriff's sale - representatives from the city were there as well. City spokesman Lee Yoakum said they were keeping an eye on the auction "just out of old-fashioned curiosity."

The hotel has been closed since September, when inspectors with Delaware City, the Delaware General Health Department and the state fire marshal's office found an extensive number of code violations.

Among the violations: the smoke detectors in about 95 percent of the rooms were inoperable or without batteries, some rooms had exposed wiring, faulty air-conditioning units, food scraps left in uncleaned rooms, mold and water leaks.

Inspectors also found the hotel allowed guests to stay much longer than the 15 days allowed by code.

The hotel, which first opened in 1974, previously failed inspection and was closed in November 2007. The violations were remedied and the building re-opened for business. It remained operating until the 2008 code violations.

Pragat Prayosha LLC, the hotel's previous owner, was foreclosed upon after it defaulted on a $1.65 million loan it took out from Ciena to buy the property in 2007.