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Holiday Inn Express faces foreclosure

Published: Tuesday, July 30, 2013 11:03 a.m. CDT • Updated: Tuesday, July 30, 2013 11:16 a.m. CDT

In 2006, Newton Investments LLC borrowed $2.49 million for the downtown Holiday Inn Express in Newton. There hasn’t been a payment on the loan since March.

The loan’s holder, Zions First National Bank, has given Newton Investments a foreclosure notice. The notice claims that the hotel has failed to make more than $80,000 in payments this year. Currently, $1.75 million remains unpaid on the loan.

The petition calls for a foreclosure on the loan due to the lack of monthly payments. Also, the suit states that the hotel is in risk of losing its Holiday Inn franchise because it has failed to meet benchmark quality scores and customer experience scores.

“Upon information and belief, due to the above reasons, Newton Investments may lose the franchise from Holiday Inn on the Holiday Inn Express at any time, which would have an immediate and drastic impact on the value of the Holiday Inn Express and Zions’ probable and protectable interest in the Holiday Inn Express,” the foreclosure petition states.

The petition asks that a receiver be given the operation of Holiday Inn Express and cites low customer quality and experience scores. Ray Gulhar, one of the owners of Newton Investments, said they will contest the receivership and hopes that Newton Investments can maintain operation of the hotel.

Judy Johnson, manager of the hotel since 2006, said other local reports about the hotel have mischaracterized customer experience ratings at the hotel. The hotel is a frequent place to stay for people who travel to Newton on race weekends.

“They just like it here,” she said. “They say it’s homey and warm.”

Johnson said she believes the hotel is better than the scores alleged in the foreclosure notice, as well.

“Sometimes we get docked, basically for things that are beyond our control,” Johnson said. “Somebody could give us a seven because it was too far off the interstate. We can’t really move the hotel because it’s Thursday night and they’re coming in Friday.”

Johnson also said they received a low score on a survey because one customer was woken up by a garbage truck picking up trash. According Holiday Inn’s score, for the month of a July a score of 82 marks the hotel as a reputable hotel. The highest ranking is elite.

“Our scores are going up,” Gulhar said. “We’re really optimistic we will pass the score. We are not losing the flag.”

Gulhar said he was told that Zions First National Bank is unloading all of their loans with hotels, and they no longer want to invest in hotels.

“The bank is hurting us,” Gulhar said. “Because they want to protect their note and leave the hotel business, but that was a very inequitable way for the bank to do it.”

In regards to defaulting on their loan, Gulhar said that occupancy rates during the winter months in Iowa always suffer, and they have always lost revenue. Gulhar said this is why the bank has missed payments in the loan.

“It’s not unusual in Iowa,” he said. “Winter is very bad in Iowa. It is very flat. Revenue drops for all the hotels — not just us. So it’s normal to get behind for a few months then you catch up in the spring.”

The property is currently valued at $1.12 million and has previously gone through foreclosure in 2001.

“We are the borrower, they are the lender,” Gulhar said. “They have the upperhand on us, and they want to dictate the rules, and that’s fine. Technically, we were in default, and they’re using that against us.”

Staff writer Dave Hon may be contacted at (641) 792-3121, ext. 425, or at dhon@newtondailynews.com.

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