A motion recently filed in Texarkana, Texas, bankruptcy court seeks approval to sell the Arkansas Convention Center for more than $6.5 million.
Texarkana Hotels LLC, which is owned by Hiren Patel, a medical doctor who used to practice in Texarkana, filed a motion Feb. 10 seeking authorization from a bankruptcy judge to sell the property to James Naples of Texarkana for $6,550,000 in cash. Texarkana Hotels filed for bankruptcy last year in the wake of MidSouth Bank's efforts to foreclose on the property to recoup millions in unpaid debt.
The motion filed on Texarkana Hotels' behalf by Dallas lawyer Bill Payne, seeks to convey tax benefit agreements from the city of Texarkana, Ark., and the city's Advertising and Promotion Commission. The tax benefits, negotiated at the time of construction of the convention center and an adjacent water park, could be worth millions over a period of years.
The city and A&P Commission filed objections to a conveyance of the tax benefit agreements in January when plans to sell the convention center to the highest bidder were announced. The objections complain that the original agreements negotiated with Patel and Texarkana Hotels in 2009 contained language stating that the tax benefits can't be conveyed without the approval of the city. The objections also point to a legislative audit performed by state officials which found in 2014 that at least some of the tax benefits, including a dramatically reduced price for water, violate Arkansas law.
The motion to sell the Arkansas Convention Center to Naples acknowledges the pending objections. The motion asks the court to approve conveyance of the tax benefit agreements to Naples but states that, "such an approval is not a condition to closing. Moreover, any decision by the court to not approve assumption ad assignment (of the tax benefit agreements) does not result in a decrease or reduction of the purchase price."
A hearing to address the city's and commission's objections hasn't been scheduled.
If Naples does purchase the Arkansas Convention Center, he won't be able to operate it under the Holiday Inn brand unless he enters into a new licensing agreement with Holiday Hospitality Franchising, according to the motion.
Another Patel-owned company, Krishna Associates, recently sold a Texarkana, Texas, hotel to Naples with approval from the same bankruptcy court from which Texarkana Hotels seeks approval to sell the Arkansas Convention Center. Naples purchased Country Inn & Suites in Texarkana, Texas, for $2.9 million.
MidSouth Bank, which holds the notes on the Arkansas Convention Center and Country Inn & Suites, has filed a petition in bankruptcy court alleging Patel should remain personally liable for any outstanding debt not satisfied by property sales. Patel and his wife personally guaranteed the loans and without a discharge from a bankruptcy proceeding, could be held liable for unsatisfied debt.
MidSouth's petition, filed in August 2016, accuses Patel of transferring large sums of money and real estate titles into the names of family members prior to the bankruptcy filings and while the Patel-owned companies were regularly missing monthly payments to the bank. Docket entries from November in that case note that a hearing is scheduled for August of this year.