City enters JPA on hotel
The South Lake Tahoe City Council voted Tuesday to enter into a joint powers agreement regarding a portion of the state line Embassy Suites Hotel which the city attorney recently discovered was in unincorporated El Dorado County.
The agreement was critical to the hotel owner’s plans to convert half the parcel to time shares to pay off an overdue construction loan.
Also critical to the conversion process was city council approval of an amendment to a moratorium on time shares passed by the council earlier this year.
Council member Margo Osti approved the agenda item, but did so with reservations regarding the developers, KOAR-Tahoe Partners, L.P.
“What concerns me is when KOAR asked for assistance, they said we would be partners,” Osti said. “It was supposed to be a new era of public and private partnership.”
Osti said the city has kept its part of the bargain, but KOAR has not withdrawn its request to have the property reappraised.
A reappraisal of the property value of the hotel would likely be seen as a move toward bankruptcy.
The hotel’s value has decline as much as 20 percent since opening in 1991 when KOAR financed the construction with a bank loan of $53 million.
KOAR has recently seemingly won a victory in El Dorado Superior Court when Judge Patrick Riley issued a preliminary injunction stopping Mitsui Trust & Banking Co., Ltd. from selling the unpaid portion of the loan to a third party.
A trial was set for the summer. As a condition of the loan, Riley ordered KOAR to pay all unpaid interest on the loan which has accrued since the suit was filed in January.
According to Mitsui attorneys, that figure is more than $2 million. KOAR must also provide a bond for $450,000 for Mitsui attorney’s fees which would be given to the attorneys should KOAR loose in trial.
KOAR attorneys have not returned phone calls this week regarding their plans with the hotel and the trial.
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