A receiver has been appointed to run the Doral Arrowwood Conference Center and Hotel after the management company threatened to fire all employees and leave the Rye Brook resort, the owners threatened to cease operations, and a bank threatened to foreclose on a $75 million loan.
Kirby D. Payne was appointed as receiver in an emergency hearing Friday before Justice Gretchen Walsh of Westchester Supreme Court.
“My job is to take care of the property,” Payne said this morning in a telephone interview.
Business is continuing as normal, every employee has a job and the resort will not be foreclosed on anytime soon, Payne said.
“No one,” he said, “will notice any difference.”
But the underlying dispute, as depicted in court documents, has been contentious. DCCA LLC, the family company that owns the resort, claims Benchmark Management Co. has ruined Doral’s reputation and “effectively run it into the ground.”
Doral Arrowwood opened in 1983 as a conference center for Citibank. The Kaskel, Blum and Schragis families bought the 114-acre property in 1986, expanded the hotel to 393 rooms and developed its reputation as a premier conference and recreational resort.
The family managed the facility for 30 years, until 2015, when it hired Benchmark, a global hospitality company based in Woodlands, Texas.
The resort had been consistently profitable, the family claims in a lawsuit filed Dec. 24 in state Supreme Court in Manhattan, but under Benchmark’s watch, profits have declined.
The family claims the value of the resort plummeted by more than $20 million in three years. It projected that 2018 would be “the worst year in Doral Arrowwood history,” with a projected gross operating profit of less than $5 million.
Benchmark hired unqualified contractors, according to the lawsuit, neglected routine maintenance, incurred building code violations, took smoke detectors off line, disabled security cameras and failed to pay property taxes. Customers had allegedly complained about moldy showers and smelly rooms. Worn carpet was allegedly repaired with duct tape.
“Doral Arrowwood is under imminent threat of destruction,” the DCCA complaint states. “Its resources are being depleted, its structures are being destroyed and its reputation is being tarnished.”
The family claims Benchmark deliberately mismanaged the property, with the goal of acquiring it at a discounted price.
A Benchmark spokesman did not respond to an email request for comment.
U.S. Bank of Minneapolis was alerted to DCCA’s lawsuit this month.
The bank is trustee for the original 2005 $75 million loan now held by Greenwich Capital Commercial Funding Corp. DCCA had defaulted on the loan, according to court documents, got it modified and extended the maturity date to February 2020.
DCCA represented that it had complied with all terms of the loan, U.S. Bank claims, including notifying the bank about changes in the value and conditions of the property.
The family’s lawsuit against Benchmark was filed before DCCA extended the loan. It shows, according to the bank, that DCCA’s representations in loan documents were “patently false” and that the loan was in default for failure to comply with the terms.
U.S. Bank filed a foreclosure complaint March 13 in Westchester Supreme Court, demanding $58.6 million in unpaid principal, plus interest accruing at the default rate of 11.2 percent. The bank demanded that the property be sold at a public sale.
The next day, the bank asked for an emergency hearing to appoint a receiver to take control of the resort. CWCapital Asset Management LLC, the firm that manages the real estate loan, recommended Payne, an experienced hotel manager who works for HVS Hotel Management.
Payne described the foreclosure lawsuit as a tool to get a receiver appointed, to protect the value of the property.
His job is to pay the bills and take care of the property while DCCA, Benchmark and the lenders sort out their disputes. He is neutral and reports to the judge.
This is a case of technical default, not monetary default, Payne said. The mortgage is being paid.
He said Benchmark is still on the job, but will leave when the family finds a replacement. In Payne’s first few days, carpet has been replaced, halls have been painted, plumbing has been fixed.
The lenders want to protect the value of the resort, he said.
“My big focus is taking care of the hotel customers,” he said. “I’m taking care of the value.”