"Going Once...Going Twice...HOST up for Auction" Topic

Just to clarify this, a contract for an event has nothing to do with the property itself. Only legal documents that establish liens on a property remain in place if the property is transferred. Thus, a mortgage would have to be paid off or it would remain an encumbrance on the property. Likewise with any property taxes due.

Additionally, any kind of judgment against the owning entity would also interfere with a transfer of title. So, say if HMGS had sued the Host, won, and received a judgment that has not been paid, that would also encumber the property.

Since none of that applies here, the owning entity is free to sell the property whenever it chooses. That may result in its inability to perform under a contract such as the one with HMGS, and that could result in potential liability. But HMGS's recourse would be to litigate, which would be extremely costly and something they likely would not do.

Further, we're assuming the entity has any assets against which to collect, in the unlikely event HMGS sued and won. I doubt the Host has been a successful investment, so it is entirely possible all the proceeds from the sale would go to pay mortgages, back taxes, expenses, etc. Even if there were fund left over, no doubt the owning entity (likely a single-purpose corporation or LLC) would pay those funds to its owners, leaving HMGS facing more court action to claw the monies back.

As a practical matter, that means that even if HMGS has a contract, it is of little value in practical terms. But the HMGS person who posted on here said there were terms in the contract for canceling the event, with various penalties attached. So and outright breach of contract, which in no way means HMGS would collect anything, is not even likely. And if there is a penalty, it is relatively unlikely that HMGS would be able to collect. The former owners might pay the amount due, or negotiate some reduced settlement. Or they might tell HMGS to get lost, since it is very unlikely they would sue to collect whatever was due.

So, in practical terms, HMGS's contract is no bar whatsoever to selling the Host. The best they can hope for is the entity honors the cancellation terms and pays the penalty fee, but that is far from a certain outcome.

Another problem is timing. HMGS needs to find an alternate location if it looks like the contract might be canceled. Time is already short, and that will become a bigger problem with each passing day. It is not at all unlikely that HMGS will be forced to invoke a termination clause, in order to commit to an alternate site, in which case it may very well find itself liable for a termination fee. They could certainly argue that the sale compelled them to secure and alternate site, but again, it comes down to who is willing to spend money on legal fees.

FYI, not a lawyer, nor do I claim to be, but I've been a real estate developer for 30 years, and I've seen dozens of things like this. So read it or don't, believe it or don't. I really don't care, but that is how these things work

Well put…

It's been 40 years since I graduated from law school and I haven't done real estate law for over 35 years, but I think civil has it about right.

Alternate locations

What are the alternate or backup locations?

I would expect that since there have been at least four convention site searches done within the past decade or two(move from previous location of the Host to the Host;search done moving Historicon to the BCC;search done when decided not to go to BCC and went to Valley Forge;search done when moved from Valley Forge to Fredricksberg), that there should already be a know/expected alternate location to be presented.

If what people appear to be expecting happens, then Cold War and Fall In for 2016 and 2017 may need to be moved to an alternate or backup location.

I would expect with all of the convention site searches, that an alternate or backup sites would already be known.

Louis J. Desy Jr.

Maybe now those "searches" will have a bit more urgency.

Bidding starts tomorrow.

Bought in 2005 for $12.5 USD million. Bidding starts at $2.7 USD million ten years later. Ouch.

Be curious to see how it turns out.

HMGS Indy, anyone? LOL.

So if the Host is lost, then HMGS needs to find a facility that is completely available in three months. Good luck with that plan. :-(

No kidding. Scrambling to find a replacement in 3 months if the worse case scenario happens is not something that anyone should have to endure.

Now's your chance to bid it up:

link

I don't see any takers thus far. But the auction is young: two days remain.

Wow, not worth $2.7 USDm?

I'm sure if it doesn't sell they'll get right on all those problems and have them fixed by March. :-)

Well said, Civil D, as usual.

You can tell who has been through the commercial debtor-creditor process before based on their comments here. You obviously know the routine.

One good thing for HMGS is that the recent election added some BOD members with decades of business and real estate experience on their respective resumes. The BOD also has some "friends" they can call on for additional advice, all of which has been put to good use behind the scenes since the Host auction was announced.

Perhaps we'll have a better idea of the way forward by the end of the week. "Reserve Not Met" may become the new battle cry for HMGS.

Like I said, we'll see.

Bid status at 10:15pm, Dec 14th

There is an opening bid at the $2.7 USD million minimum in the first ten hours of the bidding being open.

The reserve has not been meet, and the bid increments are $500 USDK, so the next bid would have to be $3.2 USD million or higher.

Louis J. Desy Jr.

47Ronin,

Thanks. Yes, I have been through it numerous times.

As for those wondering about the lack of bids, that means nothing. I'd wager most or all interested parties will withhold their bids until near the end of the auction. Why advertise anything to competitors.

As for HMGS, I haven't been reluctant to criticize the HMGS BOD in the past, but in this case, there isn't much they could have done to prevent this, and they are in a very disadvantageous position right now. Hopefully, if the Host sells and the new owner does not wish to honor the contract, they will advise HMGS immediately, allowing the maximum time to find a new home for the event.

But I seriously doubt that will happen. The auction is likely without contingencies, but that doesn't mean a closing will occur immediately. It is just before Christmas and yearend, which very possibly means a final closing might not occur before February. And it is very possible nothing will happen in that intervening time, leaving HMGS still in contract, and possibly having to pull out themselves.

This is a mess. No doubt the BoD is scrambling to find alternate venues with an opening in the right time frame, but what happens when they find one but haven't gotten a cancellation from the Host's owners?

CD- Good analysis. Did some digging on the auction site (slow day today) and it appears its unencumbered ("fee simple" is the term stated). (Not being versed in the ins and outs of this sort of thing, that would have more meaning to you than me).

And working through the various scenarios is enough to give one a migraine. For the sake of the BoD's sanity (and anyone else with contracts in place), I certainly hope something definitive comes out quickly.

In the meantime, we wait….

It is possible that the seller or the buyer would want to close before yearend (or to close after yearend) for a variety of reasons. It is certainly possible a deal could close this month, but even for a no-contingencies auction purchase, that would be quick.

Any closing would render HMGS' contract useless in the sense that the obligated party no longer would own the property. We can hope that any new owner would very quickly either declare it is operating the hotel and honoring the contracts or that it is not.

Auction status 11am Tuesday, Dec 15

Current bid at $3.2 USD million, so someone did raise the minimum opening bid in the minimum increment, so there are at least two bidders. The reserve has not been meet yet.

There are 25 hours to go. While holding off to the very end for bidding can work on bidding, anyone doing that runs the risk of having problems getting their bid in, in time.

Louis J. Desy Jr.

I'm holding off on my bid until the last minute, but I can't pay until my Social Security check comes in.

No Ninja bidding Winston. This is not ebay you know!

Here is another obvious question that may or may not have been answered in this thread. Is the Host currently open for business during the auction?

The current bid is still at $3.2 USD million.

Here is another obvious question that may or may not have been answered in this thread. Is the Host currently open for business during the auction

You should call – and see what they say? (717) 299-5500

Actually, it is like Ebay. Some bidder may "snipe" at the end of the auction.

As for possible alternate locations on short notice, Valley Forge is on my short list. The MFCA Show has been there both before and after the casino renovation. For details, please go to mfcashow.com.

Enjoy watching the auction clock run down.

VFCC seems the most likely candidate, though it is either open or not. At least that isn't wedding season. Regardless of the sale, if there is no penalty for moving FI, the BOD should be looking at that just as hard right now.

Enjoy watching the auction clock run down.

Indeed, it's fascinating in a morbid sort of way. If it sold right now, it would go for one-fourth (!!) of what the current owners paid for it, less than a decade ago.

If it sold right now, it would go for one-fourth (!!) of what the current owners paid for it, less than a decade ago.

That can't be a good omen.

I would suspect that the land that the golf course is on is the major asset. The land not the buildings is the value. Not being from that area, I am not sure if what the current land is valued at.

As of this post, the bid is 4.2 million and the reserve hasn't been met. That's ALLOT of little men…

I never understood the point of a reserve in an auction. If there is a minimum you would take, wouldn't you start the bidding there?

> I never understood the point of a reserve in an auction. If there is a minimum you would take, wouldn't you start the bidding there?

Psychology – listing a lower opening price makes people bid who otherwise would not have bid if the minimum were the reserve price. Once one person bids others will tend to up their bids.

Louis,

No one bidding on a multimillion dollar real estate auction is going to bid early because they're afraid they won't get their bid in on time. This is business, not some fool trying to buy some crap on ebay.

Putting a reserve in an auction like this is a way for the seller to preserve some optionality. They can always choose to accept a bid that's lower than the reserve price but don't have too. There's always a chance a third party approaches the seller and offers a price that's a better outcome.

A reserve usually also insures that there are multiple bidders working the price up to that level, so it increases the chance that a bidding war will break out and increase the price even further.

$5.2 USD million right now.

Up to $5.2 USD million now.

When is the auction deadline?

Getting the bid in on time

My understanding from reading the terms of the auction, is that if the reserve is meet, and the auction is over, the high bidder gets to buy the property as long as they complete the closing process.

IF someone really, really, really wants to buy the Host, they would be taking a risk of waiting to the last hour or so to get their bid in.

While this is not an ebay auction, why run the risk of something happening with the internet or web site and being unable to put a bid in on time, and then have to beg to be allowed to have their offer accepted?

There have been situations where online stuff has not worked and people were not able to get something submitted by a deadline due to problems with computers or problems over the internet.

Louis J. Desy Jr.

Putting a reserve in an auction like this is a way for the seller to preserve some optionality. They can always choose to accept a bid that's lower than the reserve price but don't have too. There's always a chance a third party approaches the seller and offers a price that's a better outcome.

This makes the most sense at least. The psychology bit however is a strange one since you still have to make up a lot of ground just to get to the reserve level.

The initial bid was $2.7 USDM. I'll assume (a BIG guess) that the reserve is twice that. So $5.4 USDM. Anything much higher than that and the seller is just cutting his own throat.

Louis,

You would wait until the last minute so other bidders cannot react as effectively to your bid. And I still don't understand why you think waiting risks not getting a bid in.

Current bid $7.75 USD million and antisnipping feature

The auction is in the last few minutes and the final bid keeps getting raised.

There is an 'antisnipping feature' in that if a bid is entered within the last few minutes, the clock gets reset to 3:30 on the countdown.

The minimum raise if $50 USDK, and the reserve has not been meet yet.

Louis J. Desy Jr.

Bidding ended at $8.3 USD million without reserve being met

Louis J. Desy Jr.

What happens next?

1: The Host continues on as before with no sale. I do not think that is likely since they are probably losing all kinds of money each month and may not be able to keep operating for much longer with an occupancy rate of only 35%.

2: The Host takes the $8.3 USD million from the high bidder, even though they did not meet the reserve. I think this is the most likely option as to what is going to happen, since I do not expect the Host's situation will improve as time goes on.

3: The Host files for bankruptcy. I do not think that is likely, since a bankruptcy auction will probably do no better than the auction they just had.

Louis J. Desy Jr.

Louis,

The high bidder may also contact the seller and negotiate a higher price. The high bidder may have been willing to go high enough that he would have eventually made the reserve (of course he does not know what that is), but was not forced to bid higher by the other bidders.

For HMGS, today was "The Longest Day."

But it's still not over.

As was mentioned above by various commentators, anything from a post-auction direct sale to a bankruptcy is still possible.

Stay tuned.

Raising the bid

I don't think the high bidder will raise his bid since there is no pressing reason for them to do that. If this was 2005 or 2006, while the real estate boom going on, then I could see 'panic buying' taking place and a bidder raising their price to get the property.

As an example of panic buying, during that time period, one of my friends attended a auction for a foreclosure on a property that had a $1.8 USD million loan against it. Not only did that price get bid, but the winner had to go an additional $300 USDK over that to win the bid against other bidders, and that was in spite of the fact they were planning on tearing down the existing building and putting something else on the land.
There were also situations that I heard about in my area, where some people bought $500 USDK homes with income that was no where near where they could pay the mortgage. But it would take at least six months to foreclose, so the $500 USDK home would get sold at auction for $550 USDK, and even after $20 USDK or $30 USDK in fees and penalty interest, the buyer would net a profit of $20 USDK as a 'punishment' for buying a property that they could not afford.

The problem is that the Host appears to be losing money every month, and will get financially weaker as time goes on. While someday things may improve, I think it will be far too late to save the Host. The fact that no one bid up to or near the original purchase price plus improvements that were made, says that no one really wants the property; any buying will only buy if it is a good price.

Louis J. Desy Jr.

I suspect the Host's problems are one of an aged facility that can't compete for the every day tourists who stay in new hotels in the area. I don't think time is a factor for the Host – I think their time ran out, as did HMGS's.

I am not sure the Host lost money til recently. If you're not putting any money back into capital improvements, yet you're still filling the place on a lot of weekends, that money has to go somewhere. Even after Historicon left, that same weekend the place was sold out til the last few years. I think the owners milked the place dry most of the 11 years they owned it and figure its time to move on.

Ok. It was me. Not only did I get a hotel on Route 30, I also got the Reading Railroad and Park Place.

"Ok. It was me. Not only did I get a hotel on Route 30, I also got the Reading Railroad and Park Place."

OK. Go to Doghouse. Go directly to Doghouse. Do not pass gas, I mean do not pass GO. Do not collect $8.3 USD-million.

And turn all your wargaming supplies over to the Community Chest.