Thursday, Feb. 1, 2001 | 11:21 a.m.
The newly bankrupt French Quarter Suites, a 96-unit motel owned by Las Vegas developer Ideal Development Inc., said it will become a Ramada Inn property as soon as it secures a $7 million loan to pay off its creditors.
The property filed for bankruptcy protection Tuesday.
Mark Anthony Rua, Ideal's owner, said it will be renamed Ramada Limited Suites once the balance of a franchise fee is paid and it "has improved the property to Ramada's specifications."
"Cendant Corp., (the parent company of the Ramada franchise), reviewed our property in June and the deal was committed on Jan. 12," he said. "We have to upkeep the property to Ramada's standards and pay royalties based on gross revenue sales," he said, declining to reveal further details about the deal.
"We chose to become a Ramada franchise because we needed the national recognition," Rua said. "To attract and maintain an occupancy rate of 80-90 percent, the property must be branded. Once we become a Ramada franchise, we will also become part of its national motel reservation system."
The French Quarter Suites, which is appraised at more than $9 million, opened around Sep. 1 and is located at 4700 Cameron Street next to the Orleans hotel-casino. The motel, which has no gaming operations, offers daily and weekly room rentals to tourists and conventioneers.
The motel was foreclosed on in October by Vestin Mortgage Inc., its largest creditor, after Ideal Development defaulted on loans. The motel expects to receive the $7 million loan from an East Coast lender today to pay its creditors and renovation costs.
"Getting the Ramada franchise was a key factor in securing the $7 million loan. Ideal has also met all the requirements of the loan," Rua said. "We got foreclosed on in October because a bank out of California, which was supposed to loan us $6.7 million by Sep. 30, failed to provide the funding."
Vestin, which said it is owed a $4.738 million on a construction loan and that the deeds of trust provide for an assignment of rents upon default, said it will dismiss a receiver that was appointed in October to collect rents and manage the property once its loan is paid.
Ideal Development, which said its opening was delayed for about three months because of construction delays caused by a severe flood in July 1999, said it filed for Chapter 11 bankruptcy protection on Tuesday to avoid being foreclosed on by its creditors. It listed assets of $9.6 million and liabilities of $6.458 million.
Its creditors include Consolidated Mortgage Corp. of Las Vegas, which is owed $1 million; Aleksander Hadijski, Rua's partner, who is owed $400,000, and the Argier family, who sold Rua the land and are owed $320,000.
"We had to absorb $300,000 in losses, which weren't covered by our builders' risk insurance because the flood was a natural disaster. These added costs for repairs and materials weren't projected costs," Rua said.
But Rua, who said the motel will remain open, said the bankruptcy may be withdrawn over the next few days once Ideal Development receives the new loan and pays its creditors.
Steve Byrne, Vestin's president, said: "The bankruptcy filing doesn't surprise me because he has a lot of equity to protect. The land is worth far more than the debt."
"Typically, the foreclosure process takes 120 days and Jan. 31 was the foreclosure date. That's why they filed Chapter 11 on Jan. 30 to hold off the other creditors until they receive funding for the $7 million loan," he said.
"In the worst case scenario, if Ideal fails to get the $7 million financing, it'll either have to find new lenders or let us foreclose or pay Vestin adequate protection payments," Byrne said. "The subordinate lien holders may be compelled to make payments to Vestin to keep Vestin from foreclosing on the property. (If) Vestin forecloses on the property, the other lien holders may have less of a chance to get their money back."
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