Federal regulators on Friday replaced developer Carroll Davis as the operator of his Radisson Hotel in Mission Valley, three days before the hotel was scheduled to be sold at a foreclosure sale.
Royal Continental Cos. of California was appointed receiver of the 13-story, 264-room hotel by San Diego Superior Court Judge Sheridan E. Reed. The hotel's operation will be "business as usual," pledged Harvey Joseph, assistant director of operations for Continental Cos., the Miami-based parent of Royal Continental, and the hotel's new manager. He said late Friday that he has no plans to lay off any of the hotel's 240 workers.
The receivership order bars Davis from entering the hotel.
The takeover signals the end of developer Davis' bid to retain control of the Radisson while attempting to refinance $27.5 million in defaulted hotel construction loans. The loans originated with San Marino Savings & Loan, which was seized last December by regulators, who now control the loans.
"I didn't want this to happen," Davis said in an interview Friday night. "But as it worked out it may turn out to be the time we needed to go ahead with our financing. We lost in the court but won in the hall."
Sale Postponed 30 Days
The foreclosure sale has been postponed for 30 days, with an additional three weeks to close escrow on refinancing, Davis said. "It took an eleventh-and-a-half hour (action) to convince them that it was better for us to finance the project than for them to hold a foreclosure sale," he said.
Davis and representatives of the Federal Savings and Loan Insurance Corp. have been negotiating a refinancing for weeks. Davis has secured financing from Siscorp, an Oklahoma-based investment-service firm, but could not agree with regulators on how much up-front money would be required.
A court hearing is scheduled July 1 for Davis and his San Diego Diversified Properties to protest the receivership.
The receivership will "give Davis more time to arrange financing," according to one federal regulator.
Davis' "insolvent" firm "continues to . . . misappropriate and divert" the hotel's revenue by making payments to "unsecured creditors" instead of on the defaulted loans, according to a declaration filed in court by Jack Rubin, vice president of Palmieri Co., which is the FSLIC's agent in the San Marino liquidation.
Davis on Friday said the "unsecured creditors" were the suppliers of the hotel's daily services.
"There's no one to pay at FSLIC; you can't write a check to them," he said.
Rubin claimed in his declaration that Davis "must be aware" that he is going to lose the hotel and so has lost his "incentive to properly maintain the hotel and to promote its business." The market value of the hotel is $25 million, Rubin's filing said.
The receivership was actually ordered last month, but its implementation was delayed pending completion of a refinancing settlement.
The lastest known refinancing proposal called for Davis to make a $17-million cash down payment and give regulators a first trust deed on the existing hotel. Regulators also would receive a second trust deed on a proposed second Radisson Hotel tower and a nine-story parking garage next door.
The second tower is questionable, however, given the possible Mission Valley development moratorium that has been proposed by Mayor Roger Hedgecock.
In an interview last month, Davis acknowledged that losing control of his hotel would mean that a "four-and-one-half-year comeback would have been for naught."
Davis, a former Marine who built a multimillion-dollar real estate investment firm, was the franchise holder of Playboy Clubs in San Diego and Dallas. His real estate firm went bankrupt in 1982 following the real estate market's downturn.
Royal Continental Cos. of California was incorporated in the last month for the express purpose of becoming the receiver of the Radisson, according to company officials.