California City’s Largest Hotel on Foreclosed Property Auction

Casa Madrona Hotel and Spa, the largest hotel located in the center of the city of Sausalito in California, is scheduled for sale at a foreclosed property auction on the morning of August 11 at the San Rafael City Hall.

The property, which accounted for almost 50 percent of Sausalito’s hotel tax revenue, will be auctioned off after its owners missed payments on their loan.

The Federal Deposit Insurance Corp. (FDIC) took control of Casa Madrona when its delinquent loan caused the failure of Integrity Bank based in Georgia. Because of the economic contributions of Casa Madrona on the city, officials and merchants are on edge until new owners can be found.

According to industry experts, Casa Madrona accounted for a large share of the real estate market in the city’s downtown area. Sausalito chief financial officer Charlie Francis recounted that Casa Madrona had stopped paying hotel tax or transient occupancy tax since November 2008. The hotel tax is equivalent to 12 percent of total annual room sales.

The hotel, which has 63 rooms, generated nearly $1 million annually since 2006 and accounted for 40 percent of the total hotel tax in the city.

The FDIC took control of the property, which also features a 5,000-square-foot event space and 3,000 square feet spa, early this year due to failure of its owner, MHG Casa Madrona to pay its loan balance of over $24 million.

According to industry experts, the FDIC intervened when the hotel property’s delinquent loan caused the failure of Integrity Bank. The federal agency started the foreclosure process and appointed a Georgia-based asset manager to help in the restitution with Sausalito. The agency also named a hotel management company to manage the daily operations of the hotel property.

As part of the restitution, FDIC paid the city of Sausalito about $125,000 representing unpaid taxes and $5,600 monthly as payment for the use of parking spaces by hotel guests. Since the FDIC took over, the hotel property has started paying its tax weekly as stated under the city policy.

County assessor’s office data showed that the assessed value of the hotel property amounted to $16.6 million. Michael George, general manager of Casa Madrona, hopes that a new owner for the hotel would be named soon so that the property could move forward towards revitalization.

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