Hotel Operator Still Fighting for Comeback : Won’t Cede Control of Mission Valley Radisson
It has been more than seven months since developer Carroll Davis has been inside the Radisson Hotel that he built two years ago.
But Davis, ousted as operator of the 13-story, 264-room Mission Valley hotel by federal regulators in June, is still intent on regaining control of the posh facility. Moreover, he’s still making plans for a second hotel tower.
The cost of paying off a $29-million debt to the Federal Savings & Loan Insurance Corp. (FSLIC, which is liquidating the construction loans from failed San Marino Savings & Loan) and building the adjacent tower will approach $60 million--no small amount for a man whose company is in Chapter 11 reorganization bankruptcy.
Nonetheless, Davis remains confident that he and his San Diego Diversified Properties can emerge from bankruptcy and resume control of the hotel.
He has even lined up a financial partner from New York, who testified in bankruptcy court last week that he is prepared to guarantee FSLIC “adequate protection” for its investment.
“I hope we’ll be victorious in court and that our proposal will provide adequate protection for (FSLIC’s) security,” Davis said in an interview. His plan will allow his company to “go forward with phase two, bring us out of Chapter 11 and pay off the creditors.”
That is the kind of can-do talk that has come to symbolize Davis and his rocky real estate career in San Diego in the 1980s.
Davis, a former Marine Corps sniper who parlayed his $500 life savings into a multimillion-dollar real estate investment firm, then rebounded from the 1982 bankruptcy of his Playboy Club franchises in San Diego and Dallas to develop the Radisson in 1984.
The hotel project has been a two-year financial struggle, as Davis first defaulted on his construction loans to San Marino Savings & Loan and later went lawyer-to-lawyer with FSLIC officials, who seized control of the failed thrift.
Faced with foreclosure, Davis filed for bankruptcy protection in August. Since then, from his third-floor office that overlooks the hotel from a building next door, Davis has been trying to line up financing.
Even his critics, and there are scores, admire his tenacity.
“Not until the fat lady sings will Davis quit,” said one attorney close to the bankruptcy case.
“I’ve never known anyone who fights as long and as hard,” said another lawyer. “A lot of people are amazed he’s still in there.”
If Davis has his way, the company will emerge from bankruptcy some time this year, thanks primarily to financing arranged by First United Fund Ltd., a New York-based registered broker-dealer that has become a 45% partner in San Diego Diversified Properties.
In a bankruptcy court hearing last week, First United Fund principal Mario Renda testified that his company will guarantee FSLIC “adequate protection” on its investment. That could amount to about $140,000 a month, he said in court.
(FSLIC is actually owed $300,000 a month for its debt. However, the legal concept of “adequate protection” requires the debtor to protect only the creditor’s basic investment, not to meet the debt service.)
Renda submitted audited financial statements that show his company’s net worth at more than $7 million.
“All of the information that we have been able to get makes it look like it’s real,” said one source close to bankruptcy trustee C. Hugh Friedman. “Renda came across as being real and credible. He’s asking the right questions and talking the right language.”
Whether FSLIC officials see things in the same light remains uncertain. Last week’s hearing was called after regulators asked the court to liquidate Davis’ company and not wait for him to reorganize.
Officials of the Palmieri Co., acting as FSLIC’s agent in liquidating San Marino, would not comment on Davis’ new partner or his plans to regain control of the company.
U.S. Bankruptcy Court Judge James Meyers will reconvene the hearing Feb. 25.
The property itself--with an estimated fair market value of $39 million but a liquidation value of only $22.5 million--is operating profitably, except for the $300,000 monthly debt service that hasn’t been paid in two years, according to Friedman.
Friedman has been as much a conciliator as trustee, serving as a buffer between Palmieri Co. and Davis, whose prior dealings have been raucous at best.
“Friedman is charting a tough course,” said one attorney close to the case. “He is maintaining his independence and at the same time trying to be fair and disclose to both sides what he intends and what he’s doing.”
