Mel Trotter buys former Slims building
Mel Trotter Ministries hasn’t decided what it will do with 243 Commerce Ave. SW, a one-story building it recently purchased from Bank of America. The 8,500-square-foot building is next door to the ministry at 225 Commerce Ave. SW.
“At this point, we don’t have a specific plan. We’re in the process of doing some strategic planning and evaluating the needs in the community. We know there are needs for some things that we’re not able to do with the current facility, so this will allow us to expand and meet some other needs,” said Steve May, Mel Trotter CFO.
“But we aren’t clear on what those are. We want to move forward without really making a hard decision on what it’s going to be used for, but it will definitely be used for ministry,” he added.
May said the structure has been cleaned and secured, and will be used for storage for the time being. “At this point, we don’t plan to make any renovations to the building,” he said.
Mel Trotter reportedly bought the building for $450,000 after Rahm Properties LLC of Caledonia lost it to foreclosure. According to Kent County records, Rahm bought it for $600,000 in 2007 and the building’s 2011 State Equalized Value was $340,300. The building is probably best known as home to River City Slims, a blues bar and restaurant that opened in September 2007 and closed in January 2009.
Mark Ansara of Colliers International West Michigan represented Mel Trotter in the transaction, while Amicus Management Inc. did the same for Bank of America as the court-appointed receiver. Amicus, which specializes in business management and asset disposition through court-appointed receiverships, is also selling the building’s liquor license, which went into escrow in June 2011.
“We prefer to operate businesses, but we will also take possession of and manage the disposition of assets through litigation,” said Dan Yeomans, who founded the company in 2005 and is president of Amicus Management. He added about 90 percent of Amicus’ business is handling distressed assets.
“We sold $34 million in distressed assets last year and dispersed another $30 million to creditors and vendors in terms of cash that was generated through the businesses,” said Yeomans, who has worked in the field since 1993.
At roughly the same time Amicus helped sell the Commerce building, the firm took over the managerial duties of five hotels that went into receivership. Two are in Hudsonville: the Super 8 on Corporate Grove Drive and the Quality Inn on Highland Drive. Two others are in Houghton Lake and one is in Benton Harbor. The properties were owned by an Oakbrook, Ill., couple who defaulted on debt and tax payments that totaled about $13 million.
All five are open for business under Amicus’ management, and Yeomans said the foreclosure of these properties isn’t an isolated case. “The industry itself is distressed and experiencing much of the same problems that you’re seeing in other industries and other commercial real estate, and it’s similar to the market’s timing. Market timing is a big deal,” he said.
By that, Yeomans meant if someone bought a hotel in, say, 2007, its value is now 30 to 40 percent less than when it was purchased. When the economy went into recession, consumers spent less and the price of gasoline rose, which cut travel. As a result, the hospitality industry saw its room rates and occupancy levels fall.
“When occupancy goes down, what owners have to do is look for other ways to stay alive. They cut costs, defer maintenance and end up doing what we kind of call ‘vendor financing,’ or increasing their outstanding payables. And they hang on for as long as they can. Some can make it, but some can’t,” said Yeomans.
Realpoint, a securities ratings firm owned by Morningstar Inc., reported in November that more than $21 billion in commercial mortgage-backed securities on 232 hotels across the country is coming due this year and need to be refinanced. Robert Sonnenbick, a hotel developer and chairman of Sonnenbick Development Co, told Bloomberg Commercial Real Estate only a third of those mortgages would be refinanced and the rest would be taken over by lenders.
Yeomans said thousands of hotels have gone into receivership throughout the country over the past few years, and there are quite a few firms that are now specializing in hospitality management. “That’s how I got started in this business in 1993, by taking over hotels and managing hotels and similar properties, such as marinas, in receivership. Hotels started doing better in 1995, but they started coming through the pipeline again in a heavy capacity in about 2009,” he said.
“If you’re the JW Marriott downtown, it’s not going to matter. You can weather the storm. (But) the limited-service properties along the highway have had their average daily rates, in many cases, cut in half just because you don’t have as many tourists.”
Amicus Management is not marketing the sale of the five hotels it took over but is managing the properties’ operations. Yeomans said selling a distressed hotel isn’t as simple as selling other types of commercial buildings, like the one Mel Trotter bought. One positive is that, normally, the location has commercial appeal. On the other hand, the amount of maintenance that has been deferred, the occupancy rate, and the number of franchises that are able to fly their flags there are just a few of the many elements involved in the sale of a hotel.
“It is more complicated (than selling other types of commercial buildings) because you don’t have a fixed revenue. Your revenue depends upon the economy, the price of gas, the weather, the market, your tourism business and your motor-coach business,” said Yeomans. “Having a property dependent on the weather can be a challenge.”