Posted on Wed, Sep. 08, 2010

Construction on the Hampton Inn in Arroyo Grande remains at a standstill, and the project’s general contractor says more than 20 contractors and vendors have not been paid in more than a year.

In a letter to local and state elected officials, Brad Anderson of Brad Anderson Construction Inc. wrote the contractors are owed more than $2 million.

The Arroyo Grande City Council approved the 103-room hotel project at West Branch Street and Camino Mercado in 2005. It would be one of the city’s largest hotels, along with the Premier Inn and Casa Grande Best Western.

Construction started in December 2006, said Mike Ross, president of MJ Ross Construction Inc., which cleared the land and installed underground utilities for the project. He said his company is still owed about $45,000.

“It’s too bad, it’s so close to being finished,” Ross said.

The project is about 90 to 95 percent complete, Anderson said. All that remains is setting up some furniture, carpeting the lobby area and possibly sprucing up the landscaping.

The hotel project has had financial troubles for two years, including its major lender, Imperial Capital of San Diego, being declared insolvent and taken over by the Federal Deposit Insurance Corp. in December.

In early June, Los Angeles-based City National Bank, which then took over the hotel loan, was granted a receiver by the San Luis Obispo Superior Court to finish the hotel. But no work has been completed, Anderson said Wednesday.

City National Bank said in a statement e-mailed Wednesday to The Tribune, “It’s important to understand that our company did not make this loan. We obtained it when we acquired a failed bank last year.

“The borrower, a development company that defaulted on its loan, is responsible for paying the contractors. This is an unfortunate situation for everyone, and we have made a number of good-faith efforts to help resolve it.”

In a letter sent to Anderson on Aug. 31, Senior Vice President and Senior Counsel Mike Zandpour wrote that City National Bank officials at an April meeting indicated they would consider resuming funding to complete the project if the borrower, Arroyo Hotel LLC, paid interest owed on the loan since September 2009.

Representatives of the hotel development company could not be reached for comment.

Anderson said that interest totals about $600,000, and noted in a Sept. 3 response to Zandpour that the owner had paid interest for at least two years prior to that date, while the loan was still held by Imperial Capital.

Zandpour wrote that at the April meeting, the borrower indicated it was unwilling to pay what was owed.

At that time, Arroyo Hotel LLC had filed an action against Imperial Capital Bank alleging that improper lending practices had been used.

The hotel is now in foreclosure proceedings, according to those involved.

In a previous interview with The Tribune, local attorney John Hodges said he is worried foreclosure would prevent the contractors from getting paid.

Anderson said he’s received some feedback to his original letter, including from the staff of Rep. Lois Capps, D-Santa Barbara, Rep. Kevin McCarthy, R-Bakersfield, and Lt. Gov. Abel Maldonado.

— Cynthia Lambert