The Cornhusker Marriott hotel's ownership has changed hands to satisfy a $3.5 million debt, according to the creditor and documents delivered to interested parties Friday.
But the legal maneuvering may not be over.
LEM Capital, a Philadelphia real estate investment company, faxed notices that said Atul Bisaria's interests in the company that owned the hotel were auctioned to the secured parties, companies affiliated with LEM, for $100,000. The sale took place in a New York law firm's office. The documents said the creditors reserved their rights to pursue the rest of what Bisaria owes.
How a change in ownership would change the operations and franchise affiliation of the hotel at 13th and L streets, if at all, was not clear Friday. Marriott International had given Bisaria notice that its "flag" on the hotel would be pulled Sunday because of his violations of the franchise agreement, including failure to complete renovations.
Late Friday afternoon, a law firm in Philadelphia issued a press release in the name of Cornhusker PREH, LLC, identified as the winning bidder.
"We are pleased to have completed this step to assume ownership of the Marriott Cornhusker hotel in Lincoln," the press release said. "We will now begin the process of restoring its status as the leading hotel in Lincoln.
"Despite the defaults that led to … (the) foreclosure auction, our intention is to ensure a seamless transition of ownership, and that the hotel continues to be well run and positioned to take full advantage of its place in the market."
Island Hospitality, a Florida company, remained manager of the hotel. Given LEM's investment role, its permanent ownership of the hotel appeared unlikely.
If the deal is indeed done, The Cornhusker Marriott is the latest of Bisaria's lodging properties to fall from his control and ownership in the past few years, as the lodging industry suffered more during the recession than it did in the aftermath of the 9/11 terror attacks. Bisaria, a resident of Boca Raton, Fla., earlier lost hotels in Pittsburgh, Cincinnati and Detroit.
He acquired The Cornhusker in 2004 from Castle & Cooke, financier David Murdock's company, which built the hotel in 1983 on the site of its namesake, which was built in 1926. The 10-story hotel, with 287 rooms and 10 suites, is attached to a seven-story office building known as Cornhusker Square,and a conference center formerly owned by the city but later sold to Bisaria.
In January, LEM and Bisaria had agreed that Bisaria had until Thursday afternoon to make payments on an intermediately secured, or mezzanine, loan and square things away with Marriott, according to documents filed in a Florida bankruptcy court.
Another company services a first mortgage on the hotel that is owned by securities investors.
LEM had accused Bisaria of filing Chapter 11 bankruptcy for his Shubh Hotels Lincoln Mezzanine in bad faith to take advantage of the suspension of legal action a Chapter 11 filing offers and to prevent the auction of his interests earlier in January.
LEM's attorney, Leslie Cloyd, had said the company's goal was to take over the hotel and retain the Marriott flag.
Bisaria could not be reached for comment, but his bankruptcy attorney, Sue Lasky, acknowledged he had not met the deadline.
Whether Bisaria has any other legal recourse to retain or restore his interests in the hotel was not clear. Lasky pointed out that another person with "membership" interests in the company that owned the hotel may have been negotiating with LEM.
Geoffrey Todd Hodges, identified as managing member of Shubh Hotels Lincoln Mezzanine, filed what appeared to be a renewed Chapter 11 petition in a Florida bankruptcy court Friday. That's the same company Bisaria took into Chapter 11 before agreeing in January to the deadline for paying LEM.
LEM principal Herbert L. Miller Jr., whose name appears as signing the documents describing the auction, could not be reached for comment. He is described on LEM's website as a founding partner of LEM.
The press release described LEM Capital LLC as a Philadelphia-based series of private equity funds focused on investing in commercial real estate mezzanine loans and other structured debt and equity instruments.
In September 2007, the company acquired the $3.5 million mezzanine loan secured by a pledge of the ownership interests in the entity that owns the Cornhusker Marriott, the press release said.