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The Los Alamos National Bank has put the wheels in motion to foreclose on the company that owns and manages the Hilltop House Hotel.
The bank initiated the process against Hilltop House, LLC Oct. 19, but the hotel’s managing partner and at least one of its investors remain hopeful a deal can be struck with the bank to restructure the debt.
The landmark 79-room hotel straddles some of the most high profile commercial property in Los Alamos at the convergence of Trinity and Central Avenue. But the overall economy and increased competition — both on and off the Hill — has left the 40-year-old lodge struggling for survival.
The foreclosure documents were filed in First Judicial District court in Los Alamos County by LANB attorney James R. Jurgens.
The complaint lists the defendants as Hilltop House, LLC, a New Mexico limited liability company; Hilltop House Hotel, Inc., a New Mexico corporation; Ron Selvage and Kimberly Selvage; and the Hilltop House Spa, LLC, a New Mexico limited liability company. They are all listed under the same case number in district court.
Back in September 2005, managing partner Ron Selvage and Hilltop House LLC took out a mortgage of $4.8 million. Selvage had the backing of a team of local investors, who pooled their funds and came up with $600,000.
One of the bigger investors was local businessman Roger Waterman of TRK Management.
“The entities named in the foreclosure have 30 days from the date served to respond,” Waterman said. “Hopefully, the plan we have presented to LANB will be accepted favorably before that time. It’s in everyone’s interest to find a better way to pursue the future of the Hilltop House than foreclosure.”
Selvage said Friday that he has been in contact with the bank and has submitted a proposal to the LANB loan committee to restructure the debt.
When asked about a timetable for when a bank decision may be reached, Selvage said he did not know for sure “but I hope it is sooner rather than later.”
Selvage said the hotel’s financial troubles can be traced to the economic downturn as well as a dwindling number of subcontractors working at the lab. Selvage also said it did not help that the Holiday Inn Express opened for business just down the road in 2010.
According to the filing, Hilltop executed and delivered a promissory note to LANB in the original principal amount of $4,288,55,43 with interest and this was called the “60 Note.”
Hilltop, however, failed to make payments due on the 60 Note when it came due and on Sept. 25, LANB made a demand on Hilltop to cure the default under the 60 Note by Oct. 5. Selvage said the mortgage payment was $26,000 per month. According to the complaint, Hilltop failed to cure the default.
Then on Oct. 19, LANB invoked the default interest rate of 16 percent per annum for the 60 Note. This made Hilltop in default of its obligations to LANB, which at that time, it was entitled to begin foreclosure proceedings on the mortgage.
The court filing said that as of Oct. 18, the following amounts were owed to LANB under the 60 Note.
• Principal: $4,167,054.35
• Accrued Interest: $49,582.23
• Late charges $7,963.20
• Appraisal fee $5,350
• Title report fee $150.
• In addition, interest from Oct. 19 at $1,829.65 per day.
Also in foreclosure at this point is a promissory note (the 71 Note) in the amount of $35,000 that was executed on Feb. 10 of this year. According to court documents, Hilltop failed to make payment on the 71 Note when it matured. Not only is the principal of $35,000 owed but also approximately another $3,000 in interest and late charges.
The court documents also state that LANB and Hilltop entered into a Capital Escrow Agreement. There is $11,556.35 in the escrow fund and under the foreclosure process LANB has put a lien on that fund. In addition, LANB is looking to recover attorney’s fees and costs incurred in enforcing personal guarantees from Ron and Kimberly Selvage.
“There have been statements made that I have nothing to lose in this deal,” Selvage said. “That is simply not true.
“I did not put any money into the initial investment but I put the deal together and did all the legwork. And that is the agreement we made with the investors to get my percentage of the deal, Selvage said.
Selvage, a former county councilor who also works at Los Alamos National Laboratory said, “I personally guaranteed the $4 million loan to the bank. And Kim and I are on the hook for that.
“If we don’t get a deal with the bank, the investors will lose just their initial investment. I could lose millions of dollars depending on what happens. I desperately want the hotel to succeed.”
LANB president Steve Wells said the bank never discusses specific foreclosure cases but he did say this.
“Having worked at LANB for 28 years I have never seen a foreclosure LANB has been involved in, where we had not worked for months and hours upon hours with the borrower to exhaust all reasonable and logical options before reluctantly arriving at the decision that foreclosure was in the best interests of our depositors, shareholders and bank,” Wells said.
“We take any decision to foreclose as a very serious matter and will always do so with reluctance and careful thought.”
The Hilltop House lost its Best Western designation in June because it did not meet the franchise’s standards.
And general manager Denise Smith is leaving her job at the hotel Nov. 16.
“Our goal is to keep the doors open forever,” Selvage said.
Selvage said under a worst-case scenario and no agreement is reached to restructure the debt with the bank, the doors to the hotel would probably close early next year.