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Delayed Leased Payments Authorized by the City of San Jose
for City-Owned 135 room Hayes Mansion Conference Center
By Rodney Foo, San Jose Mercury News, Calif.
Knight Ridder/Tribune Business News 

Jun. 25, 2003 - The San Jose City Council agreed Tuesday to allow the corporation hired to run the Hayes Mansion, a city-owned hotel and executive conference center whose profits have plummeted along with the economy, to delay making lease payments for at least another 60 days. 

In September, council members decided to let Hayes Renaissance defer monthly payments after learning of the renovated, 214-room facility's mounting debts. At that time, the council also extended the company a $3 million line of credit out of a reserve fund. 

The council originally set a June 30 deadline for repayment. But Tuesday, council members decided to let Hayes Renaissance, which now owes the city $4.68 million, continue accessing the line of credit and forgo lease payments until Aug. 24. At that point, the lease could be terminated or renewed on a month-to-month basis until the end of the year. 

Next month, the city will begin seeking offers for a new operator. Councilman Dave Cortese also asked city staff to return Aug. 19 to provide an analysis of the city's cost of taking over management of the 98-year-old mansion. 

Keeping the facility's Edenvale Avenue hotel open is crucial because its revenue is paying off a $64.5 million loan that is financing renovation of the mansion. 

The two-month extension gives Hayes Renaissance a bit more time to find a business partner with deep pockets. Jeff Davenport, president of Hayes Renaissance and the network of investors behind the corporation, said he is talking to other firms in the hospitality industry. 

Occupancy at the hotel has been running at 20 percent to 25 percent in recent weeks, below the 57 percent needed to break even, Davenport said. However, reservations indicate bookings will rise in the fall and into the first quarter of 2004, he said. 

-----To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com. 

(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. 


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