Crowne Plaza hotel owner files for Chapter 11 bankruptcy

Crowne Plaza hotel owner files for Chapter 11 bankruptcy
The operators of Crowne Plaza Grand Rapids have filed for Chapter 11 bankruptcy.

CASCADE CHARTER TOWNSHIP — The operators of Crowne Plaza Grand Rapids, a 320-room hotel near the Gerald R. Ford International Airport, have filed for Chapter 11 bankruptcy, MiBiz has learned. 

Two related companies that operate the hotel, California-based Chhatrala Grand Rapids LLC and Bhogal Enterprises LLC, made separate bankruptcy filings on Sept. 16 in the U.S. Bankruptcy Court for the Western District of Michigan. In the filings, they claim their financial issues are related to the cost of improvements required by the hotel’s franchisor, England-based InterContinental Hotels Group PLC.

“The Debtors’ financial issues are primarily a factor of the cost of improvements required by the Debtors’ franchisor, including that the Debtors use certain expensive contractors, and Debtors’ inability to fund these improvements. The inability to fund improvements has capped the amounts the Debtors can charge for rooms, and has impaired the Debtors’ ability to service their debt,” according to court filings from the companies. 

In court filings, Chhatrala estimated it has between $0 and $50,000 in assets, but $10 million to $50 million in liabilities, while Bhogal said it had between $0 and $50,000 in assets and $100,001 and $500,000 in liabilities. 

Chhatrala lists Access Point Financial LLC as having a secured claim of more than $15.2 million for the hotel property and its fixtures, while Shiva Management Inc. holds a secured claim of nearly $2.1 million for a second position mortgage and a promissory note. 

According to court filings from Access Point, Chhatrala is in default on the debts to Shiva, which initiated a foreclosure process on the company. 

Local unsecured creditors include: Cascade Charter Township ($48,309), Kent County Treasurer ($23,827), Quality Air Heating & Cooling ($8,021) and Cascade Rental Center ($4,464).

Bhogal Enterprises lists InterContinental Hotel Group as its sole creditor with a $148,063 unsecured claim. 

Chhatrala and Bhogal are represented by Southfield-based law firm Steinberg Shapiro & Clark

Crowne Plaza General Manager Karl Knieling told MiBiz the employees of the hotel are still being paid. He referred other questions to the owner’s attorneys.

After the case was initiated, the U.S. Trustee, a state court-appointed receiver and the largest creditor for the hotel pushed back on the bankruptcy filing, asking that the case remain in state court with the company in receivership, among other objections.

In August, the 17th Circuit Court of Michigan appointed Grand Rapids-based Amicus Management Inc. as receiver in possession of Chhatrala after the hotel’s owner failed to make mortgage payments.

Amicus Management, the court-appointed receiver, alleges in a Sept. 17 memo filed in the Bankruptcy Court that Chhatrala filed for bankruptcy in order to halt a state court action that would have exposed the firm’s mismanagement of the property. 

Creditor Access Point, which is represented by Grand Rapids-based Keller & Almassian PLC, on Sept. 17 motioned for the Bankruptcy Court to dismiss the filing by Bhogal, saying it favored the company remaining under state court-appointed receivership because it believes the “Debtor cannot reorganize.” 

“The Bankruptcy court should not be a temporary safe space for those who wish to delay liquidation of collateral when there is no possible chance of reorganization, simply because the owners are afraid of receivership. State Court Receiverships are effective when reorganization is impossible,” according to the memo from Access Point Financial. 

Access Point also alleges Bhogal’s owners, Bhavneet and Surinder Bhogal, used a corporate bank account for personal expenditures, including purchasing a luxury vehicle, paying private school tuition in California and relinquishing hotel operations to a hotel management company, Marshall Hotels. 

State court-appointed receiver Amicus Management alleges in filings that Chhatrala failed to transfer sufficient funds from the hotel’s revenue account, held with Bank of America, to its operational account for the hotel, which was held with PNC Bank.

In a Sept. 17 affidavit, Amicus CEO Dan Yeomans estimated Chhatrala owes more than $650,000 in payables comprised of franchise fees to InterContinental, personal property taxes, local Convention and Visitors Bureau taxes and fees for elevator services.

Yeomans further stated that Chhatrala is at risk of losing its affiliation with InterContinental after the hotel’s failure to implement a $14 million property improvement plan.

Chhatrala, which acquired the hotel in 2017, claims the financial issues are related to the cost of the improvement plan. The company also said while it planned to transfer its assets to Bhogal Enterprises, that deal was not entirely completed before it filed for bankruptcy.

“While a transfer of the franchise agreement from Chhatrala to Bhogal was effected prior to the commencement of these proceedings, and additional bank accounts were opened in the name of Bhogal, a complete transfer was not effected prior to the filing of these cases,” according to the filing.

Chhatrala and Bhogal have filed motions to combine the cases, saying in a motion that “there is no functional difference between the Debtors.”

Calls to legal representatives for Chhatrala, Bhogal Enterprises and Access Point; Amicus Management; and the U.S. Trustee in the case were not immediately returned.