Chapter 11

For several years a nice hotel on the outskirts of Neosho had been struggling. At one time it was a Ramada Inn. It had 80 rooms, a large lobby, cocktail lounge and large restaurant with an indoor pool and hot tub. In short, it was a typical Ramada full service hotel. It didn't do well enough to keep the Ramada name so a local name change occurred but, for some reason, the hotel continued to slide into failure. Eventually the owner closed the hotel and tried to keep the cocktail lounge and restaurant going but eventually, they, too, closed. The building and nearly a city block lot went up for sale.

Many times as Garrett and Kathy drove past the beautiful brick building (which still looked great on the outside) he would comment about the potential of the old building. One day he said, "I don't understand why someone doesn't buy that old building and convert it to apartments and retail space. They could put a convenience store and gas station in on the corner and use the lobby for the station. I think a small limited restaurant and bar would be a killer moneymaker, too. I mean, you have a captive audience from the apartments. Hell, you could even leave, say, 20 rooms for rent as a motel and if they didn't rent you could always convert them to apartments as well. Sixty rooms out of the 80 converted to apartments, say, ten two bedroom apartments and 20 one bedroom apartments would leave the 20 rooms to rent either by the week or as hotel rooms.

"Being conservative, the apartment rentals if the building was fully rented would come to about $17,000 a month. It would be hard to tell what income you could generate from the bar, restaurant, convenience store, and fuel sales but I am sure it would be pretty good. If the owner didn't want to operate the businesses himself he could put a reasonable rental on the space and, say, take a percentage of the gross or profits. I really think that would be doable."

After he stopped talking, Kathy said, "Well, it seems to me as if either you are the only one with that vision for the building or there is something that stops others from doing it. It has been on the market much too long for some reason. I think you need to put your money where your mouth is, or at least check on the possibility."

They were stopped at the traffic light beside the building when the conversation took place. Kathy grabbed her note pad and a pen and wrote the phone number of the agent down. As Garrett pulled away from the now green light Kathy made the call to the listing agent. When she told him what she was calling about, you could hear the change in his voice. He almost begged her to meet him there. He said he could be there immediately if she could.

Kathy looked over at Garrett and said, "Honey, the agent says he can come meet us at the hotel right now if you want to do it. He sounds really anxious here."

Garrett sighed and said, "I suppose we could. We have all day and our errands won't take long. Ok, but I still think something is wrong or the building would have sold before now. We need to be damn careful with this."

Garrett and Kathy found out the hotel was in an estate and the executor was anxious to get it sold so they could finish closing out the estate. It was listed for $1.3 million, marked down from $2.7 million. When he heard that, Garrett grinned at Kathy and said, "Well, that is a little steep but I might be interested if things work out. Of course, we need to do our due diligence and I need to go over the building carefully to see what repairs and upgrades are necessary. Could we have the keys or do you want to be with us while we inspect the premises in more detail?"

"Well, I thought that was what we were doing here today?"

"No, today we are looking at the property to see if we MIGHT be interested in it. I think it is safe to say we are but I need to know how much more I will have to spend to get it in rentable condition if we purchase the building."

"Well, how long do you think that will take?"

"I'm not really sure. I think I can have my inspection completed in three or four days if I have access to the building."

"Oh, I can't spend that much time here with you. I'm sorry but that just isn't possible."

"Well then, I suggest you find someone to stay with us during the inspection, let us in unsupervised, or we will have to pass on the deal. I sure don't want to buy a pig in a poke here. I have no idea what condition things are in if I can't give the building a thorough inspection. I am exceedingly reluctant to make any kind of offer until I know the condition of the building. Of course any offer would be contingent on the seller presenting a clear title and either repairing serious defects or making a cash allowance for them."

"What would it take for you to make an offer right now? My seller is really interested in selling this building. As I stated earlier, this building is in an estate and must be sold so the executor can close out the estate. The seller is extremely motivated."

"Let my wife and I talk for a few minutes and we'll see. I'm not promising anything. You do realize we are just inspecting the premises for our employer? If we recommend a purchase, the purchase will be made by RKM Properties, LLC if we do the deal?"

"That's no problem. Why don't I just walk over here and let you two talk for a few minutes? If it would help, I would be glad to discuss this building with someone in the office of RKM Properties."

"No, that won't be necessary. We have authority to negotiate and sign contracts for the business."

Kathy watched the agent walk off then turned to Garrett. She said, "What's on your mind? You surely aren't thinking about making an offer until we look in every room and see what condition they are in. We don't even know if the heating and air work or the condition of the roof or anything. All we know right now is the public areas of the building aren't trashed."

"Well, we know a little more than that. I walked into the rest rooms near the bar and café and they're pretty run down. They'll need a complete make over. The décor of the restaurant and bar is pitiful as is the lobby. The pool area has an unfinished plain concrete floor with painted cinder block walls. I don't see any evidence of roof leaks in the public areas. I think we need to make an ultra low ball offer, then if it's refused we threaten to walk away again if we can't get in to do an in depth inspection."