Comeback Plan for Hotel Syracuse Looks to be Dead

Company's option to tower wing expires. Sale of assets may be next.

Thursday, September 30, 2004

By Frederic Pierce, Staff writer

A plan to bring the tower wing of the Hotel Syracuse back to life as an independent, 190-room hotel appears to be dead, Syracuse's economic development director said.

A Rhode Island company's option to purchase the 21-year-old addition to the historic hotel expired in August, shortly after the bank that owns the hotel backed away from a deal approved by the U.S. Bankruptcy Court in Utica.

"As far as I know, that deal is dead," Economic Development Director David Michel said Wednesday.

City officials had hoped the deal with The Procaccianti Group of Cranston, R.I., would go through even after a deal to transfer ownership of the hotel's original, 1924 building to the city appeared to fall through this summer.

That seemed less likely than ever last Friday when the federal trustee overseeing the Hotel Syracuse's bankruptcy filed for permission to auction off all three of the downtown landmark's properties and liquidate its assets.

Assistant U.S. Trustee Guy Van Baalen filed in federal bankruptcy court Friday to immediately change the hotel's Chapter 11 status to Chapter 7, which often precedes the sale of a defunct business' assets to pay its creditors.

Van Baalen's motion said negotiations between the city and First Bank of Oak Park over $1 million in back taxes and the transfer of the property have been unsuccessful.

It noted that even though the hotel closed May 28, it continues to incur costs, which could reduce the amount of money available for creditors.

City officials, however, don't think an auction will come to pass.

Lawyers for Syracuse and the bank are still talking, Michel said. City lawyers have told him that the bank would take possession of the building itself before it allowed it to go to auction.

Although the bank was the only bidder at a 2002 auction of the property and assumed control to cover millions of dollars in mortgage payments it was owed, it never formally closed on the building.

The situation looked like it was nearing resolution this summer when Bankruptcy Judge Stephen Gerling approved a complicated deal that would have transferred the historic part of the hotel to a non-profit arm of the city, give the city its back taxes and reward the bank with a multi-million-dollar tax write-off.

A New Orleans company was set to pour $90 million into the rundown hotel building and transform it into a four-star hotel catering to Onondaga County's nearby convention center.

As part of the deal, Procaccianti - which had been managing the Hotel Syracuse for the bank - was prepared to buy the tower and open it independently next spring. Two months ago, the Syracuse Industrial Development Agency voted to give the project tax breaks if the developers went forward.

Restaurateur Michael Ghabarou, meanwhile, had been trying to buy the third hotel property, the old Addis building on Salina Street, and turn it into a food court similar to the one he used to run at the nearby Galleries of Syracuse.

All those plans seemed to unravel, however, when the bank asked Gerling to be let out of the deal in July. The bank's accountants had advised against it after discovering that the lucrative tax break officials thought the bank would receive would not work the way they thought.

"I expected that would happen," Council President Bea Gonzalez said after learning that the Procaccianti proposal is unlikely to happen. "I didn't expect any good news to come out of the hotel once the original deal fell through."

Procaccianti had planned to invest $13.2 million in the 1983 structure, and open a new hotel with a lobby and entrance on South Salina Street.

That hotel would be run independently of the original, 600-room Hotel Syracuse and cater to a more middle-income clientele. The group had talked with Hampton Inns and other national hotel chains about a brand affiliation, but nothing had been settled on.

Ghabarou Wednesday said he still hopes to move forward, regardless of what happens to the rest of the Hotel Syracuse complex.

2004 The Post-Standard.