Kronos forfeits Crowne Plaza control

CEDAR RAPIDS, Nov 21, 2008 (The Gazette - McClatchy-Tribune Information Services via COMTEX) -- WFC | Quote | Chart | News | PowerRating -- The owner of the Crowne Plaza Five Seasons in Cedar Rapids forfeited control of the hotel to a court-appointed receiver at a hearing this week.

Dallas-based Hospitality Receiver LLC was handed control of the hotel by a judge's order issued Wednesday after a hearing in a foreclosure proceeding in Iowa District Court for Linn County on Tuesday. The owner of the hotel, a unit of Kronos Hotels and Resorts of Atlanta, did not appear at the hearing.

Hospitality Receiver is better known as Prism Hotels & Resorts, the company that took over management of the hotel in mid-October under an agreement with Kronos.

The foreclosure proceeding is likely to be completed next spring, said Joe Harris, the Cedar Rapids attorney who filed the foreclosure action for the lender. At that time, Kronos would no longer be the owner of the property. Harris expects the lender to entertain offers for the hotel from interested buyers at that time.

Harris said the order by Judge David Remley "converts their (Prism's) capacity from a hired management company to a receiver." Courts typically appoint receivers either to liquidate a struggling business or to manage it until a court proceeding is completed, Harris said. Prism will serve in the latter capacity. The court order gives it broad-ranging powers, including control of the hotel's records, cash flow, employee compensation, tax returns and contracts.

The inability of Atlantabased Kronos to adequately fund operation of the Crowne Plaza had become a serious problem for the city's largest lodging property, which is also the only downtown convention hotel.

Employee paychecks had repeatedly bounced and health insurance had lapsed. Maintenance issues were not addressed promptly, and the hotel's restaurant and pool closed.

Bounced paychecks and stripped franchises have been reported at several other hotels owned by Kronos, which was founded by Malaysian entrepreneur Charles Morais.

The appointment of a management company to take over the company was sought by CWCapital Asset Management, a loan servicer for Wells Fargo Bank. Wells Fargo is the trustee for the holders of the hotel's secured debt.

Peter Mathon, an Atlanta public relations specialist who has served as Kronos' spokesman, declined to comment, saying he no longer works with Kronos. Attempts to reach Kronos officials at the company's headquarters were unsuccessful.

Employees have said Prism has brought in new management and has been meeting payroll.

Wednesday's order by Remley offers few clues as to the financial health of the hotel. It indicates the receiver will be paid at least $4,500 per month in management fees and accounting fees, not including a receivership fee of $1,500 for the first month and $1,000 for the second month. The money will come from the hotel's income, but if that income is insufficient, the shortfall will be paid by CWCapital Asset Management.

-- Contact the writer: (319) 398-8317 or david.dewitte@gazcomm.com

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