Historic hotel goes up for sale

Capital Consultants liquidation puts Governor's mortgage out on the table

The Governor Hotel, which will mark its 10th anniversary this week, could be sold before the end of the year.

The reason: The 100-room boutique hotel's $15.6 million mortgage is part of a $183 million Capital Consultants loan and investments portfolio bought at a February auction for $60 million by Goldman Sachs' MTGLQ Investors.

Capital Consultants provided a large share of the money for the renovation that linked the 1909 hotel to the adjacent Princeton Building. The firm is being liquidated by federal regulators after losing $355 million of investors' money.

Capital Consultants founder Jeffrey Grayson, who is under indictment for several federal crimes stemming from the firm's collapse, is cooperating with an ongoing criminal investigation.

'We've been told that as long as we pay our mortgage, we're fine,' said Bruce Hraba of San Mateo, Calif. Hraba owns the hotel along with Rick M. Hendrickson and Ed Derksen, both of Portland.

'I'd be curious to know how many other people in Capital Consultants are current on their loans,' he added.

According to court records, the interest on Capital Consultants' mortgage loans ranged from 10 percent to 16 percent.

'I'm in the hotel business, and I'd just as soon stay in it,' Hraba said. 'The other partners aren't. It's really what's best for the partnership.'

A successful sale of the Governor might involve either a joint venture or an outright purchase, said Hraba, president of Waterford Hotels and Inns Inc., which owns and manages hotels.

Governor General Manager George Forbes called the hotel a successful operation.

'The biggest problem with any hotel in downtown Portland these days is too many rooms,' Forbes said. 'We're just overbuilt. That plus 9-11, although that wasn't the beginning of the downturn. It was a couple of years old at that point.'

'The complication with our property is that it isn't just a hotel, it's an office building also,' Hraba said, referring to the six-story Princeton Building, which includes two floors of hotel rooms.

Office space in the Princeton could be transformed into condos or into more hotel rooms, he said.

The Princeton, which opened in 1923 as an Elks Club that

survived less than a decade,

includes an athletic club and more than 200,000 square feet of meeting space, a very unusual amount for a 100-room hotel, Forbes said.

Both the original hotel building and the meeting rooms, which include some of Portland's most ornately decorated public rooms, boast interesting architectural features, said Forbes, who became hotel manager in 1993.

'It's been a joy to me for all those nine years to be running this great hotel in this great town,' he said.

Forbes said a lot of interest has been expressed in the hotel:

'As general manager, I'm not privy to all the information, but I know there's lots of due diligence going on, lots of visitors looking at the physical condition, all that has to be done before a sale of this magnitude.'

Since 1994, Portland restaurant company McCormick & Schmick Management Group has leased the hotel's food and beverage operation, which includes the popular Jake's Grill restaurant as well as the catering service for the meeting rooms.

In 1996 and 1997, the partnership got several offers for the hotel in the $19 million range, Hraba said, 'but we couldn't work out with Capital Consultants what we wanted to do.'

Still, he said, 'Nobody wants to thank Jeff Grayson these days, but, frankly, if it wasn't for him, the building would have gotten bulldozed. There was no financing available at the time Ñ it put a bunch of union guys back to work and preserved a great little building.'

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