"The Host -- Auction & Cold Wars update" Topic

Latest I've heard is that further negotiations fell through so The Host did not sell.

Also means Cold Wars is still on and still at The Host.

…unless anyone with better info can amend.

Not sure we can assume that because the sell fell through that The Host will not close. So yes would like to get more current information. I am sure this will turn into a long thread.

If it's at the host I'll go and put on a game. If it's anywhere else, I don't put on games at conventions I haven't recon'd first. Bob and Cleo tell me FCC is an awful venue for GM's so I'll have to take a recon of there or any where.

It's not the BOD's fault that the Host is going belly up. Nor is it the conventions or the gamers, but I won't crawl through a heating vent to unload and load.

Otto

Until some official word is released by HMGS I wouldn't count on too much at this time!

Even though in their last update from about two weeks ago they were still planning on CW being at the Host as scheduled.

The last update mentioned that although the auction did not result in a sale, the bidders and the Host were continuing to talk. Very often this does end up in a sale being concluded.

What we don't know is whether a buyer will be a renovator or a redeveloper. Apparently there is a major zoning issue limiting any possible development of the property for alternate uses. Re-zoning, however, just takes a developer with deep pockets and the willingness of local officials to be bought.

Actually I asked on the HMGS forum and got the above info. However, the responder was not an HMGS board member, so I agree we cannot be 100% sure.

YogiBearMinis, your last statement is sadly all too true.

Yikes, what a mess. So the owner wants to dump the place, but no one wants to pay their price. So what will be left of staff there and what shape will the place be in? And the owner could still sell the day before the con starts.

Not sure what the options are but it might be better to move away from the uncertainty, especially for Fall In. Even if a new owner renovates (whatever that might mean), large sections could be closed to accommodate that work. I think it best HMGS take charge of its own destiny here and not rely on the good intentions of an owner who wants to cut its losses and move on.

Good call, Historygamer.

It's understandable that we are all focused on CW, but FI is also in danger and perhaps in some ways more than CW if (big word there) a deal doesn't go through by March.

Absent a new owner voiding the HMGS contract, isn't HMGS contractually obligated for a set number of Cold Wars and Fall In cons at the Host?

According to the local paper, there is no possibility of the largest portion of the property – the golf course – being rezoned from the current agricultural use. The only part that can be redeveloped is the current property that the hotel and facility is on. That is the reason the property is worth so little as a majority can not be developed unless one wants to turn the golf course into a farm.

Based on my knowledge of situations where property changes hands, neither party would be obligated to the other without agreement by both parties which means HMGSE could walk away. Just the fact that the Host was put up for sale nullifies the contracts as the owner has shown no intention in fulfilling their end.

There are good people trying to obtain an outcome that results in a convention. I just hope that business sense prevails over emotional sense by all those who have a say in the decisions that need to be made.

I hope CW 2016 goes on as scheduled at the Host.

I hope the members of the HMGS BOD are talking directly with the ownership, so as to make decisions in the future regarding future conventions. Especially as the Host Management seem to be kept in the dark nearly as much as the rest of us are being kept.

I'm sure the members of the BOD have the future upper most in their minds, and are actively working with the best interests of HMGS in mind. After all, that's what they were elected to do. They have had a real monkey wrench tossed at them, so they need to deal with it now, and in the future!

I think the owners intent is clear, regardless of what they say. Given their tax bill, shape of the facilities, and occupancy rate, bankruptcy would not be out of the question.

If the place isn't a complete dump (ahem) by CW, great, but for goodness sake make plans to move and protect FI now.

As to rezoning, it might be amazing to see how quickly the local politicians change their minds if the place were to close. In fact, this might be their way of forcing some action to happen, including bankruptcy and resale at a lower price.

hg,

While I agree the intent of the current owners is a desire to cut their losses ASAP, especially if they can find a buyer willing to meet their best offer. I believe the current owners also have a very unfriendly relationship with the local officials due to having not yet paid their property taxes (even though that is still under review I believe), and the over all state of the facilities with it's numerous and fairly serious violations and maintenance level. Heck, even the golf course is getting very poor ratings with the likes of "Golfer's Digest", and other such golfing info sites!

Only the members of the BOD are truly aware of their contractual obligations with the Host as regards CW. At this late date though it may be best to let CW go on as planned barring any other unforeseen calamity. If only for the reason that, moving at this late date may be more of a PITA then staying at the Host will be!

At the same time they definitely need to find a new home for both CW and FI! Don't make it a one time, or temporary solution, but a definite move to another location that best meets the needs of HMGS for the future! I don't know where that facility is, but do the move once and be done with it at least till the needs to move again arise some day in the future!

As to the rezoning idea, it's very unlikely to happen in our lifetimes as the open land has more value then any development that could be built upon it! Especially at the rate the county has lost farmland over the last several years!

But it's not "farmland.
It's a third rate golf course.
As for preserving farmland, that train long left the station.

"Yikes, what a mess. So the owner wants to dump the place, but no one wants to pay their price. So what will be left of staff there and what shape will the place be in? And the owner could still sell the day before the con starts.

Not sure what the options are but it might be better to move away from the uncertainty, especially for Fall In. Even if a new owner renovates (whatever that might mean), large sections could be closed to accommodate that work. I think it best HMGS take charge of its own destiny here and not rely on the good intentions of an owner who wants to cut its losses and move on."

Let the record show that History Gamer and I are in full accord on this point. Even if the Host limps along in this twilight zone of uncertainty what confidence should anyone have that the condition of the Host in March will be anywhere near acceptable? I don't and as is pointed out the owners could declare bankruptcy a week or a day before the convention is supposed to start, resulting in a huge diaster.

Although not a lawyer I have dealt with them on many occasions and the good ones will always tell you any contract can be renegotiated if conditions change…and I've got to believe the events of the recent months provide ample evidence that conditions have changed.

My advice, lawyer up, engage the owner, and take proactive actions that are in the long term best interest of the organization. That could result in walking away from the contract and either finding another venue or in the worst case situation, just cancel CW16 and concentrate on future conventions.

At this point, my bet is that Cold Wars is safe no matter what, because a certain amount of paperwork, etc., will drag things out; the fear is not so much that they would close The Host before March because of construction/demolition work as it is the possibility they just up and close so as to save money during the sale process, leaving it empty.

I would put money down on Fall-In not happening at the Host, whether we want it there or not. I imagine the Board is scrambling to find options for that, but is waiting a little while longer to sign anything or say anything publicly to see what happens with the Host.

Have to agree with pancerni and HG on this. The uncertainty as to the Host's status alone should be grounds to move CW for a single year (or permanently, if the location and price works). The other option would be to cancel the con and concentrate on the long term. Regardless, the Host's management has made it clear they want out. And that leaves us (and anyone else with a contract) in the lurch.

My understanding is that the BoD has a 'Plan B' in place and are waiting for the next shoe to drop re: the Host. Hopefully, that shoe will drop soon.

I seriously doubt HMGS can get anywhere trying to get out of the contract due to the effort to sell the property. Lawyers fees alone would make it not worth the cost VS simply breaking the contract. You can not pre-emptively claim the host is unacceptable, not without a huge lawyers fee that once again almost certainly would cost more than simply breaking the contract.

I have to disagree with some of your argument Dynaman. HMGS can claim bad faith with the Host if the current management is not forth coming with how they are going to proceed with current commitments.

Also, what is the damage in attendance and the con's reputation if the place is even worse off than this past November?

Attendance was falling at CW prior to the great snow of '15. How much of that decline is due to the state of the Host? I don't know but it sure can't help.

I do have to wonder what the record is for buckets at the Host. :-)

Maybe the Host could use those as a draw. Place discount coupons for food and rooms in little boats floating in certain buckets. Make it like a scavenger hunt.

All the Host has to say is that since the sale did not go through they will continue as usual. PROVING anything different would require a large legal fee.

As an aside, I was on a jury for a lawsuit once, found in favor of the plantiff, defendants lawyer looked crestfallen when we the foreman announced that, his eyes (and the defendants) lit right back up when the foreman announced the settlement we agreed on. Moral of the story, winning is one thing, making it worth the money to sue in the first place is something entirely different.

"All the Host has to say is that since the sale did not go through they will continue as usual."

Yes. Usual buckets, usual skanky rooms (not just hotel rooms), usual bad HVAC, usual poor lighting, usual water problems…

"PROVING anything different would require a large legal fee."

Or just a camera and visit there. :-)

I would suggest that the changes in the reservation proceedure…no phone reservations, prepayment, etc. constitutes a significant change in proceedure that is inconsistent with the proceedures in place when the contracts were signed and most importantly puts the membership at a clear disadvantage.

No way would I pay in advance. I am used to hotel earls that offer best prices for paying in advance and no cancellations…not for me….health, weather, traveling companions…too many variables.

Especially when the business has self-identified it wants out of the business.

Just because it didn't sell, doesn't necessarily mean the going concern will continue as usual.

I a assuming we represent a nice revenue stream to the hotel. But, do they have enough business in January, February and the first half of March to make economic sense?

I can only hope, but won't stay there!

Sure hope the show goes on for CW, but I do not plan to stay there (heck I have not stayed there for 12+ years anyway). I was hoping to be able to stay at the new Fairfield Inn & Suites for Fall In, but having it in at the Host in November is not likely…………

The upside is that "if" the Host is eventually sold and "if" it is refurbished, it might yet prove a long term solution for HMGS. Lots of "ifs" there, but one can hope. Of course, it would take many months to redo the place and it would likely be unavailable for a while.

Happy New Year to everyone! :-)

Yes, one can always hope.

A bankruptcy filing might actually improve the outlook, as in all likelihood the property would continue to operate under BK protection, and any sales would take longer as they would require court approval.

not if its a chapter 7 filing. Then it is just as likely it would cease operations immediately.

I suspect one of the things that kills the Host are the taxes, especially on so much land that likely produces little revenue. No hiding from the tax man, even in bankruptcy.

I doubt they'd file for chapter 7. What purpose would that serve? They just had an auction, and one done in BK would probably yield less and be subject to higher fees and costs. Unless there is a large mortgage on the property (larger than the recent high bid) a chapter 7 would serve no purpose at all.

who here can say with any certainty…what they might do and why. Perhaps just Messrs. Mednick and Wachtell.

the purpose would be to quickly shed/liquidate the business, and if creditors are out there, they could force it. It doesn't look likely from the standpoint of their line of business.

I "think" they are legitimately done riding this property into the ground and want to get off. making it the next person's headache to develop.

Given they tried the auction route…that signals me they really really really wanted to shed this property. So, not getting what they wanted and having depreciated the assets on their books where there was no more advantage to keeping it…factor in the old, decrepit, crumbling plant, labor costs, hospitality, maintenance costs, taxes [they've tried to contest their valuation],the 34% occupancy rate [see them offer rooms at $57 USD night online, we're paying what $110 USD?…what chumps!]…yeah.

To me they aren't done trying to abandon this ship.

Since they are in the business of: "Milestone Capital Corporation is an entity through which the Principals of Milestone seek to develop opportunities for hotel acquisitions, dispositions, and strategic financing on behalf of its investors."

I don't have any insight into the larger corporations finances or plans. other than they currently list 12 properties in their portfolio [having sold 10 other hotels in the past 10 years or so] and these commercial projects under development:

" Milestone Development Group is currently engaged in the development of commercial centers in Grantville, PA, LaGrange, KY, and Gatlinburg, TN that will accommodate end users such as Hampton Inn, Homewood Suites, Hilton Garden Inn, Walgreens, branded restaurants, banks, and other commercial users."

In the world of corporate machinations and taxes, I am a noob. But I would never count ANY possible action out. Not after the past 7-8 years in real estate and the unholy confluence of government, the financial industry and real estate development.

Likely? What purpose? well just because you and I can not fathom it, doesn't mean there isn't a chance nor a reason. It depends on the financial goals of the firm, and Chapter 7 is just "one" way to respond to their situation.

YMMV.

If the Host is sold and refurbished, expect a pretty steap price hike – the new owners will want to recoup the investment sooner rather than later.

No doubt that like many home owners the place is not worth what they paid for it some years ago.

Only a fraction of the land is zoned commercial, so the majority of the land is worthless, unless you want to start a farm there.

The cost or renovating has to be way more expensive than tearing down and starting over (given the loss or revenue while renovating a 1966 structure).

The property is not worth the valued taxes, as demonstrated by the recent failed auction.

It is truly a white elephant.

Expect the convention to cost more wherever it ends up.

TRU

Again, I'll just note that there is NO reason for a chapter 7 bankruptcy UNLESS there are mortgages and liens on the property that exceed the sale price. While that is possible, from what I've seen posted, I don't think it is the case. There is certainly no reason to think they would get more money in a bankruptcy auction (and some reason to expect less), so rather than file a chapter 7, they would have simply taken the best offer in the auction even though it did not meet the reserve price.

As I said, unless the liens on the property exceed the net sale price.

I guess we don't know?
Regards
Russ Dunaway

"Only a fraction of the land is zoned commercial, so the majority of the land is worthless, unless you want to start a farm there…The property is not worth the valued taxes, as demonstrated by the recent failed auction.
It is truly a white elephant."

Not so fast cowboy…zoning is a function of the governing legislative body…it can be changed. That amount of land along that corridor has value no matter what it's currently zoned. Depending on the laws of PA, one of the criteria for justifying a rezoning is the changing nature of the adjacent land. Anyone who has attended conventions at the Host over the years can testify that the Lincoln Highway corridor has become much more developed over the years. Just the construction of the shopping center adjacent to the Host is evidence of changing conditions. Not knowing anything about the environmental challenges of the entire site I think a good case could be made to develop the entire site at a higher use…housing and retail.

The biggest challenge to the property is access and impacts on the Lincoln Highway but the property has access to secondary roads on either side, so traffic could be dispersed…and if the property offered access to the adjacent properties along the Highway and gave them an alternative means of access, that would sweeten the pot for the DOT and City.

It would be a challenge but if the market were there for additional commercial and higher density housing, it could be done…but the market question is a big "if".

I have seen bankruptcy filings used by the company to put pressure on local governments, using the threat of a bankruptcy judge rather than the local state judge to decide matters. Zoning is a local government function, but a savvy bankruptcy lawyer could threaten the local government with a lawsuit filed IN bankruptcy court against the local government for denying their re-zoning request. I have seen that work before.

I was basing my post on the comment made by the local official who said they would not consider rezoning the property. I think that was a dumb statement given the changing and very developed nature of Rt. 30 in the area, but he may have said that for a reason too.

I have no idea if the owners paid cash or financed the property, but if they paid $12 USDm and the most current offer at $8.7 USDm, then I would say they are upside down on their investment.

Wait--golf courses are "agricultural"?

Upside down? Not necessarily. It's a commercial asset…not a personal home. Unlike our homes, you can depreciate this asset for business/tax benefits. They have had years of depreciating the property…who knows what it's book value is.
Also, this company owns 12 other properties, and is developing three new ones, including a mixed use of shopping, hotels near a casino near Harrisburg.
Sometimes it may be advantageous to offset revenue, growing asset values with writing off losses of another property for the overall benefit of the investors.

Yes, upside down in the same sense that they paid more for it than the market deems it is worth now. No, not a home but a fair comparison.

I think the recent market auction showed you what the place is deemed worth by others.

Let's hope their other propertys are run better than this one.

Looking at the local zoning maps, I would not expect to see any changes in the near future. The County and localities have been working to preserve the farmland and Amish way of life through zoning. Here is a link to the zoning map in question: PDF link

A quick look shows that the host land zoned commercial extends as far from Rt 30 as the outlet center and neighboring shopping center.

Also looking at a satellite view of the area, demonstrates the extent of the farm land and how they aim to protect it. link

Maybe they will keep the Host open for Cold Wars if we all agree to dress like Amish for the convention

rmcaras,

Honestly, I have no idea what you are talking about in that last post, but none of it has much bearing a on Chapter 7 filing. Yes, the property has been depreciated for 12 years, but that is only on buildings and fixtures, not land. So, let's say the assessments are one-third land, meaning an $8,000,000 USD value on the buildings (and it is probably less). A 39 year depreciation schedule means about 30% of that would have been written off, or $2.4 USD million. Since it looks like they're going to get a figure more than $2.4 USDM below their acquisition cost, which means their basis in the property isn't really an issue. A bad investment maybe, but nothing a BK would improve.

Whatever losses the company suffered would be more or less unchanged by a BK, and of course they would rather not lose money at all. Unless they need the BK court to invalidate liens on the property in excess of the net proceeds of sale, there is little a chapter 7 could do. A chapter 11 yes..I could see a number of options with that, including facilitating renovation financing, but not a 7.

As for the other properties, they are almost certainly owned by their own separate corporate or LLC entities, with no "cross-pollination" of liabilities. So whether the parent owns 12 or 1200 properties is largely irrelevant.

As for those discussing zoning, a municipality that has taken a firm stand as this one has can be very difficult to deal with. It is extremely unlikely they would give some new owner a substantial rezoning, though it is possible some kind of deal would be made such as increased density on the front portion in return for placing the rear portion in a land trust of some kind. Still, none of that addresses the fact that no other use is likely to be as valuable as hotel/motel, which is a very high value designation. I think a lot of people are vastly overstating the value of a tract of land for housing.

We're also glossing over tons of factors, like sewer capacity and ingress/egress points (the property has relatively small frontage for its size).

As for litigation, an owner can certainly take the town to court and try to force a rezoning or variance. But that is typically very expensive and time consuming, and most communities will gladly spend taxpayer dollars on lawyers until a property owner cries uncle and gives up. And nobody…NOBODY…is going to buy that land on a gamble that they will get a rezoning or win a lawsuit. And it doesn't look like the sellers want a contingent contract that might close in five years.

It's kind of a mess, and without an idea of the hotel's cash flow it is hard to make predictions. Everyone assumes they are losing money on an ongoing basis, but that's not necessarily true. They could just be looking to bail now because they've put off major work as long as they can. Or they could be losing buckets of money on an operating basis and shut the place down if they can't sell it. We just can't know

One slight correction. Buildings and improvements can be depreciated over 15 years instead of 39, so the buildings could be getting close to zero for on the books value.

I've pretty much assumed that operations generated some profits or at least broke even, and that the owners were holding out until they could get their price. They seem to have misjudged this.

I would have expected operations to be shut down if they were losing money. As civildisobedience notes, the lack of maintenance may finally be catching up to them. It's interesting the sale comes relatively close after they were shut down temporarily for health code violations, last September.

Rmcaras was right too, in that investors often deliberately take a loss to offset profits for tax purposes. Tax laws often result in non-intuitive decision making.