Has the Harrington Inn lost another buyer?

Another buyer of the Harrington Inn in Port Huron may have walked away from the property since a potential deal emerged in December.

But the finality of that status remains unclear after recent finagling in court to unhitch a $3.4 million albatross of debt from any future sale, as well as steps from the city to preserve an incentive for developers.

A second auction for the historic hotel, 1026 Military St., was originally set for December when word got around to Port Huron officials that a purchase was in the works.

Days later, representatives from Global Integrity Investments reached out to the Times Herald — their plans explained to be to restore the hotel property to its former glory.

When reached by phone Thursday, Nick Love, director of acquisitions for the Texas-based firm, confirmed they had to “walk away” from the purchase a couple of months ago.

He did not get specific but cited dealings “with the current owner and just a bunch of pain that way, so unfortunately, we had to pass on it.”

Despite the statement, Port Huron City Manager James Freed, who had quickly notified City Council of an imminent purchase at the end of last year, said he thought there remained too much interest in the property for it to sit long, whoever the buyer.

“We are confident a deal is going to emerge quickly,” he said Thursday.

Meanwhile, the city is slated to remove a partial tax break on the property, which was originally set under the current owner.

Purchased for redevelopment by California attorney Jeff Katofsky under Hip Hip Huron! in 2018, City Council originally signed off on establishing a nine-year abatement on the property under the Obsolete Property Rehabilitation Act.

An OPRA certification exempts the developer from paying additional taxes based on higher property assessments for up to 12 years, and council members will consider the nine-year exemption at Monday’s meeting.

“We are simply doing this to preserve the incentive for a future buyer,” Freed said. “Once the clock runs out, we can never restart it. Therefore, we are revoking to pause the time.”

As of Thursday, Hip Hip Huron! was delinquent by just over $240,000 in taxes in fee for the year 2022, according to the register of deeds. Its 2023 taxes were paid last July.

Removing the albatross and finding a new bidder?

The Harrington joined two of his St. Clair Inn properties — the inn property and another St. Clair parcel across the street — in receivership in 2022 amid litigation from mortgage lenders to recoup millions in debt on all three.

One firm vacated oversight of the assets a year ago, and a new firm — SCMI Associates LLC, identified as an operating affiliate of GF Hotels and Resorts in court records — was appointed the acting receiver.

Soon after, under a supporting court order, SCMI hired Berkadia to market and sell the Harrington.

Initially, the profits of any sale had to come into the receivership managing Katofsky’s debts, and any buyer would have to assume a $3.4 million debt originally assessed on the Harrington to pay for environmental upgrades through a PACE, or property assessed clean energy, loan program.

Katofsky had joined the program close to seven years ago.

But city officials have said PACE improvements, like LED lighting, insulation, window fixtures, or high-efficiency heating and cooling, were never carried out.

A first auction was held for the Harrington earlier in 2023, originally going to the Florida-based MAQ Financial LLC for $9,500 plus a $25,000 platform fee and the debt from PACE.

That purchase did not move forward, and by the time the 1026 Military site was listed for auction once again in December, Berkadia was listing it as “unencumbered of PACE.” Additionally, according to court records, Katy Crocker, senior vice president of legal and transactions at Petros PACE Finance LLC, wrote in a Dec. 7 message to an associate at Berkadia Real Estate Advisors that the PACE assessment levied on the property could be removed as an exception to a future owner’s policy of title insurance.

Still, it wasn’t until earlier this month that removing the PACE condition was OK’d in St. Clair County Circuit Court.

During a March 11 motion hearing, Kelli Baker, an attorney for SCMI, said they had a “change in circumstance” since his original order approving the Harrington’s sale.

Though she did not specifically name MAQ Financial, Global Integrity, or other potential purchases, she said an early buyer “did not decide to go forward with the sale.”

“There was a subsequent backup purchaser, and several parties that made offers at the time of the auction,” Baker said. “It was a backup party that wanted to sign a PA and did sign a PA but did not want to assume the Petros PACE loan. That buyer has now gone away, as well.”

Instead, she asked Judge Michael West to allow the broker, the receiver, and Petros PACE “to go through the list of backup bidders and find a bidder to proceed forward.” Any proceeds from the sale would go to PACE and the loan discharged with no proceeds into the receivership.

“It seems to make sense to me. Being a local, I’ve kind of been following the Harrington Inn and the Harrington Inn project for a number of years,” West said March 11. “It’s unfortunate the way things are going but the value that’s represented by the PACE loan is never going to be recovered through a sale of those assets. It’s just not going to happen, and I guess it takes time for people to accept that reality.”

Contact Jackie Smith at (810) 989-6270 or jssmith@gannett.com.

This article originally appeared on Port Huron Times Herald: Has the Harrington Inn lost another buyer?