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Cecil Hotel to Stay Residential Under Terms of Settlement to Long-Running Lawsuits

By Eric Richardson
Published: Friday, November 11, 2011, at 02:14PM
Cecil Hotel Eric Richardson / blogdowntown

A taxi loads outside the Cecil Hotel at 640 S. Main.

Three-and-a-half years of back-and-forth lawsuits could soon be coming to an end at the Historic Core's Cecil Hotel, where new ownership has struggled to shake the hostelry's residential history since the building changed hands in 2007.

A settlement conference note from Thursday says that a settlement has been reached that will end suits between two groups of hotel owners, the city's Housing Department and tenants represented by LACAN.

While exact terms of the settlement arrangements are not included, a report filed two weeks ago contains the broad terms of a deal that would maintain affordable housing in at least part of the hotel.

At the heart of the suits is a city ordinance passed in 2008 -- and previously instituted on an interim ordinance in 2006 -- requiring that residential hotels provide replacement housing units for any rooms converted from residential to transient use.

A group of buyers purchased the Cecil for $28.5 million in 2007, believing that they were in the clear to operate the historic building as a tourist hotel.

The city felt otherwise, and put the Cecil on a list of residential hotels covered by the ordinance. The ownership sued the city over that designation on May 5, 2008. As that suit was underway, they embarked on a renovation program at the Cecil, launching the boutique hostel Stay hotel inside soon afterward.

A group of tenants represented by LACAN filed a counter-claim in that suit, alleging that the Cecil's ownership had violated their rights in that renovation and attempted to drive them out of the building.

Meanwhile, one group of ownership sued another in early 2009, alleging that the group led by Colliers Seeley's Fred Cordova had misled them about the state of the property.

Under the settlement, the building itself will go back to the lender, forestalling a foreclosure. The owners will agree to residential hotel status and "to having an agreed upon number of residential units." One person familiar with the talks told blogdowntown that number could be roughly 300 units.

Settlement payments will be made in both the ownership suit and the LACAN counter-claims, though the report does not give either figure.

According to the report, all transactions related to the settlement need to close by December 31. Once the title to the structure has cleared, the lender would be free to seek a buyer.

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