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The hotel formerly known as the Holiday Inn Express on Club House Drive in Shelbyville, now operating as the Ritz Inn and Suites, was sold at auction Thursday for just less than $3 million.
The Federal Deposit Insurance Corporation had taken the hotel into receivership last month because its former owners, JMG Hospitality LLC, owed more than $2 million in defaulted loans and also had been delinquent on its property taxes.
The bids opened at $1.5 million, and prospective buyers had to put down at least 10 percent of the purchase price and close the deal by Jan. 7. Each of 13 potential bidders had to be registered.
The auction, held at the hotel by Accelerated Marketing Group headquartered in Atlanta, was not a public auction but was targeted toward select prospective buyers, said Tom Karris, regional director for AMG.
"We have 13 registered bidders here today, from all over the country, including Kentucky, Georgia and Texas, all with a cashier's check for a hundred-thousand dollars,” he said. "Somebody's going to get a great deal."
The building was sold in less than 15 minutes, to Jay Dholakia of Louisville for $2.77 million. The total purchase price, which included a 6 percent buyer's premium, came to $2,936,200.
Dhonakia, who said he owns no other properties, said he hopes to be able to bring the hotel back into the Holiday Inn family.
"I have to talk to Holiday Inn and see how that will go," he said.
The hotel, which, with 88 rooms, was once Shelby County’s largest, had been through much turmoil this year. It had been closed by the state because of delinquent taxes, was cutoff by pubic utilities for nonpayment of bills, been through ownership changes among business partners, saw its franchise withdrawn by Holiday Inn for nonpayment of fees and endured miscellaneous other problems.
Tourism Director Charlie Kramer, who was present at the auction, said bringing the hotel back into the Holiday Inn franchise would be very important to the success of the inn.
"Being opened again under a branded name is essential," he said. "It's been running as a no brand; it doesn't have any reservation systems. If they're branded, they're tied into the reservation system of that brand. They're not getting anything here now but walk-ins. Holiday Inn has one of the best reservation systems, both nationally and internationally."
Although Kramer said he thought the hotel went for less than what he would have thought, Dhonakia had the opposite reaction.
"The bidding went a little higher than I thought it would, but overall, I am happy with it," he said.
Kramer said that in addition to the purchase price, one has to factor in the cost of renovations, which could be very costly.
"He may have to spend a sizeable amount to do whatever rehab has to be done," he said. "Just putting another sign up can cost another 35-40 grand."
Kramer added that when and if the new owner gets the hotel back under a recognized name, then the tourism commission can work with him.
"What we do, as soon as they're up and operating under a new brand or a rebrand, they go back on our Web site [www.shelbyky.com]," he said.
Kramer said another reason he hopes the inn reverts to Holiday Inn is that he already has a lot of literature from when the inn was going under that name.
"We're hoping that they stay Holiday Inn because it's already in our brochures, and we have a year's supply of those, and that would be helpful to us," he said.