WHAT IS A RECEIVERSHIP?
A receivership is a state court proceeding governed by state law. When it is not reasonable that either party involved in the litigation of a property should be the operator, a “Receiver” is brought in as an officer of the court, who holds possession of the property and acts in a neutral, intermediary role. The main purpose of the Receiver is to stabilize the property and work quickly and efficiently, formulating a plan and putting it into action in order to protect the asset value of the property.
WHEN IS RECEIVERSHIP A GOOD OPTION?
A Receiver is a valuable tool when time is of the essence and the value of a hotel could be at risk if action is not taken quickly. In most cases, any dip in revenue can have a material effect on a hotel’s value. Receivership can benefit both the lender and the owner/borrower: a good Receiver can bring in new, more competent management, and implement changes quickly that will enhance the profitability and value of the hotel asset.
A DORA RECEIVERSHIP SUCCESS STORY
The Holiday Inn Express, Martinsville, IN
The Holiday Inn Express in Martinsville, Indiana opened during the hotel-building boom in 2008. . .and Dora management took over as Receiver, running the hotel for Home State Bank in 2009, when the economy took a downturn.
A few of the issues this hotel had at the time Dora was appointed Receiver included holes in the ceiling where the sky was visible on the fourth floor, phone lines that didn’t work in the rooms, different styles of case goods throughout the hotel (dressers, nightstands, coffee tables, desks—four different styles, jumbled in the rooms!)—and a completely out of control payroll.
Most receiverships are a 1-year contract, but due to the economy, no one wanted to buy this hotel. Dora kept it in receivership for 4 YEARS.
In that time, all the aforementioned (and some unmentioned) issues were fixed/resolved/repaired, and under Dora management, the hotel was able to increase occupancy year over year.
When Home State Bank did find a buyer for the hotel, the bank actually made a PROFIT on the sale, due to all the work Dora had overseen to improve the property.