Business

Hotel Fresno hurt by credit crunch

The owner of the historic but dilapidated Hotel Fresno says the nation's credit crunch is affecting his ability to finance the building's renovation and fears city officials will again push for demolition.

So he's gone to court in an attempt to extend development timelines instituted by the city or remove the threat of demolition.

"With the demolition provision, it's even harder to get financing," said Mark R. Hartney, the Los Angeles attorney representing Mehran Rom Baghgegian, the Pasadena developer.

The city attorney's office opposes the move, saying the threat of demolition provides incentive.

"Should the court strike the demolition portion ... it will have taken away the key provision that has motivated the abatement and repairs to the Hotel Fresno," Deputy City Attorney Charlotte M. Hylton said in court documents.

The two sides met last week in a Fresno County Superior Courtroom, where Judge Donald Franson Jr. heard arguments and said he would rule later.

Baghgegian has invested $2.5 million into the hotel he bought last year and wants to renovate into loft spaces for people to live or work in and retail shops. The project is estimated to cost $12 million.

He said the property, which is on the city's historic register, is vastly improved. He hauled away 15 tons of debris, cleaned out all the asbestos, repaired the roof and spent $900,000 in architectural, engineering and planning fees, according to court documents.

Baghgegian also renovated the Virginia Hotel in Fresno, but has not been able to secure a construction loan for Hotel Fresno. A potential lender, First Regional Bank of Torrance, pulled back after the financial markets tumbled, he said.

The developer said he hopes Wells Fargo will come through but doesn't know when or what the terms of the loan would be.

As a result, he has missed a city-ordered compliance date on Hotel Fresno of June 21, when he was either to have financing in place or made all the required repairs.

Baghgegian is obligated to abide by a court settlement between city officials and the former owner, Investors Credit Corp., which was sued in 2005 for not making repairs fast enough. The settlement includes a timeline for progress.

Hartney, Baghgegian's attorney, said that, under those provisions, the city could start the demolition process in December, although there has been no indication it will do so.

"Demolition is the death penalty of real estate. It should be preserved for worst-case scenario," he said. "There is no need to have the threat of demolition. We want to have time to let the market adjust."

The city attorney's office said the hotel has been a nuisance for more than two decades and is attempting to protect the public.

"If work does not continue ... the building could begin deteriorating further and additional unsafe conditions could emerge or the current conditions could worsen," city officials said.

Hylton said the City Council would decide whether to proceed with demolition, but could appoint a receiver for the building or consider other options.

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