Red Lion Inn South up for auction May 2

High-stakes bidders from across the country will be in Springfield May 2 for the auction of the Red Lion Inn South at 3370 E. Battlefield.

The hotel's ownership group, Hotel Partners II, voluntarily filed Chapter 11 bankruptcy Jan. 23 with intent to liquidate.

Hotel Partners II is a Kansas general partnership with seven principals across the country. Two of the seven partners, Dean Lessley and Frank Emery, are from Springfield. Lessley is the hotel's majority owner and managing partner.

The auction

Lessley said he expects the hotel to sell for between $2 million and its appraised value of $7.59 million. Joe Roberts, MAI, of Springfield's Roberts & Asso-ciates appraised the property in June 2001.

Conducting the auction is Chicago-based Sheldon Good & Company Auc-tions LLC, which has sold $8 billion in property in 37,000 sales since 1965.

The sale will likely change the hotel's flag for the fourth time in as many years. Since 1999, it has gone from a Courtyard by Marriott, to a GuestHouse Interna-tional Inn, to the Red Lion Inn by Hilton.

Lessley said according to Sheldon Good representatives, three other major hotel chains are looking to purchase the facility. Choice Hotels International, Cendant Corporation and La Quinta Inns are among about 40 interested parties, he said.

"(Sheldon Good is) promoting this auction on a national scale," Lessley said.

Advertisements have been placed in the Wall Street Journal, national hotel trade publications and major metropolitan daily newspapers in a five-state area.

Lessley added that the auction agreement states that each prospective buyer must bring a cashier's check for $85,000 to bid, and the deal must close within 30 days.

"There could be as many as 100, 120 people here bidding on this thing," he said. "Right now (Sheldon Good) seem to be very pleased with the interest they've gotten."

The Red Lion South assets consist of a 121-room hotel comprising 54,863 gross square feet, including a business center, fitness room, guest laundry, outdoor heated pool and an asphalt parking lot. The sale will also include all the fixtures and furnishings of the hotel.

The hotel sits on 3.17 acres of property at the southeast corner of the Battle-field Road and Highway 65 Bypass. Property tours are being conducted for interested prospects, Lessley said.

Under the terms of the auction's agreement, Sheldon Good's commission will be 6 percent of the first $4 million, 5 percent of the next $4 million and 4 percent of the remaining gross sale price.

Background

The hotel now known as the Red Lion Inn South began as a Courtyard by Marriott in 1994, when it was built by Lessley Development Companies.

Hotel revenue peaked during the three-year span of 1996 to 1998, when it averaged nearly $1.8 million in net room revenue under the Courtyard flag. During that time it was in the top 10 percent of its market segment nationwide, and it was named one of the nation's top 10 Courtyards based on profitability per room, Lessley said.

However, following two brand changes, sharp declines culminated with a net operating loss of $51,000 in 2001.

Lessley said the hotel underwent two complete brand conversions which on average cost $150,000 each in a two-year span.

The first was a change to a Guest-House International Inn in February 1999, a move inspired by the cost of flying the Mariott flag: Marriott required payments of 12.5 percent of gross revenue versus an industry standard of 6 percent to 8 percent, Lessley said.

A few months after the hotel joined the GuestHouse International franchise, GuestHouse sold to Atlanta's Suburban Lodges of America a competitor of Extended Stay America.

During the GuestHouse International affiliation, the hotel averaged an abysmal 1 percent to 2 percent occupancy, Lessley said.

Subsequently, a second flagship change was in order, Lessley said, and in July 2001 the hotel affiliated with Red Lion Hotels Inc., a subsidiary of Beverly Hills-based Hilton Hotels Corporation.

Months later, Red Lion announced its sale to West Coast Hospitality of Spo-kane, Wash., a company that had no presence in the Midwest prior to the Red Lion acquisition.

"I guess you might say we got sold down the river twice," Lessley said. "It's been a tough row to hoe."

Other members of Hotel Partners II are Bill and Barbara Pulizos, of St. Louis, Norris and Ginger Blair of Wichita, Kan., Glenna Weiland Bradley of Springfield, Ill., Steven Nienke, of Peck, Kan. and Shelia Allison, of southern California.

The Red Lion Inn North, 1610 E. Ev-ergreen, is owned by a different partnership, Hotel Partners IV, which shares some of the same principals as Hotel Partners II, but Lessley said the northside property is performing better than the south location and will retain the Red Lion flag.