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Lodgian Inc. Plans to Surrender Ownership of the the Holiday Inns in
 Lawrence and Manhattan, Kansas Rather than Continue to Subsidize
 the $10.1 million Debt Owed
By Mark Fagan, Journal-World, Lawrence, Kan.
Knight Ridder/Tribune Business News

August 6, 2005 - Whoever ends up as the new owner of Lawrence's largest hotel and convention center will be left to figure out which brand it will operate under.

And the company will be working with a new general manager who will expect the bosses to spend up to $3 million sprucing up the place.

"I would hope that it would still be a Holiday Inn -- I can't say that I'd anticipate it -- but any company that's going to come in, whether it's (for) a Holiday Inn or not, would have to spend that amount of money to bring the hotel back to life," said Rob Adams, incoming general manager for the 23-year-old hotel at 200 McDonald Drive.

"Three million dollars for a hotel that's that old is actually, I think, pretty reasonable."

Adams, who starts work Monday, is checking into a hotel facing an inevitable period of uncertainty in the coming weeks. The hotel's owner, Lodgian Inc., has announced plans to walk away from a $10.1 million debt it owes on the Holidome and another in Manhattan, preferring to "surrender" ownership to the hotels' bondholders rather than continue subsidizing debt.

In an earnings statement this week, Lodgian said that the properties' "fair market" values did not add up to the amount of debt owed, especially with millions of dollars of renovations needed to retain the properties' Holiday Inn franchises, which expire later this month.

Earlier this year, Lodgian officials said that the Lawrence Holidome would need $2.5 million to $3 million in upgrades -- ranging from new bed linens to overhauled heating and air-conditioning systems -- to retain its affiliation with Holiday Inn, the only name the 192-room hotel has ever known.

Lodgian said this week that it had worked out a tentative agreement with bondholders, under which it would pay bondholders $500,000 to satisfy the company's responsibilities on the debt. But what happens next remains unclear.

"They're in final negotiations at this point, and in terms of timing I've used a phrase for years: It's never over till the fat lawyer signs," said Jerry Daly, a Lodgian spokesman. "In terms of whether it's tomorrow or next week or the week after, we don't know, but the goal is to get it done in the third quarter."

Lodgian's third quarter ends Sept. 30.

Outside interest Adams said that several companies were interested in buying the two hotels, and that all had acknowledged a need to invest substantially in them to make the properties viable.

"The bank understands that the property needs work," Adams said.

"They're promoting that it can, with the right ownership, be the No. 1 hotel in Lawrence."

The Lawrence Holidome continues to take reservations for guests and events well into 2006, Adams said, and customers shouldn't notice any change in ownership once it occurs.

Adams is taking over as general manager for Stephen Horton, who left the Holidome this week for a job at a Holiday Inn in the St. Louis area. Adams had been serving as interim general manager of Lodgian's Holidome in Manhattan for the past two months, after working for eight years in Lawrence -- first as a part-time banquet server, and for the past two and a half years as food and beverage manager.

"I love Lawrence," Adams said. "That's the property I wanted to run."

The fate of the Holiday Inn flag in Lawrence remains unclear.

Dan Ellis, Lodgian's senior vice president and general counsel, said Friday that no decision had been reached about whether the hotel would retain its affiliation with Holiday Inn.

"It's not up to us at this point," Ellis said. "It doesn't look like we'll be the ones making that decision."

J. Chris Matthews, a vice president for JPMorgan Chase Bank National Assn., acting as trustee for the bond holders, did not return calls seeking comment Friday. Holiday Inn officials were unavailable for comment Friday.

The hotel, with 192 rooms and 17,500 square feet of convention space, has been a Holiday Inn since it opened in 1982. It has about 90 employees.

The Lawrence Holidome, which underwent a $1 million facelift in 2002, needs to be "stripped out" to make way for new carpet, wallcoverings, bedrooms, bathrooms, banquet equipment and virtually everything else at the hotel, Adams said.

The upgrades not only could help the place keep its Holiday Inn affiliation, he said, but also brace for existing and potential future competitors in the Lawrence market.

"We'll give anyone a run for their money," he said.

-----

To see more of the Journal-World, or to subscribe to the newspaper, go to http://www.ljworld.com.

Copyright (c) 2005, Journal-World, Lawrence, Kan.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. LODN, IHG, JPM,

 
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