Dr. Hiren D. Patel’s investments in a convention center and hotels on both sides of Texarkana have turned into one financial headache after another.
- The internist’s hotel on the Texas side of the state line filed for Chapter 11 bankruptcy reorganization in November.
- At the end of March, Patel filed Chapter 11 bankruptcy for his Texarkana Hotels LLC, which owns the combination Arkansas Convention Center and Holiday Inn on the Arkansas side.
- On April 1, Patel and his wife, Nila Patel, who live in Texarkana, Texas, filed for personal bankruptcy reorganization. In the detailed bankruptcy report filed last week, the couple listed $26.3 million in debts, most of it in the form of personal guarantees on loans to their businesses. The couple listed $1.3 million in assets.
“Dr. Patel should have stayed in his medical field,” said Ruth Penney-Bell, mayor of Texarkana, Arkansas.
Penney-Bell and other officials are keeping a close eye on the Chapter 11 bankruptcy filing of Texarkana Hotels. The 27,000-SF, $18 million Holiday Inn and convention center have been under a cloud of controversy since the project opened in 2013, about a year after a convention center on the Texas side of the city.
Texarkana Hotels’ bankruptcy halted a foreclosure of the combination convention center and hotel initiated by Midsouth Bank of Lafayette, Louisiana, which said Patel’s company defaulted on $10 million in loans on the Arkansas side alone. The bank also is seeking payment from the Patels because they personally guaranteed the debts.
Exactly what caused the financial trouble for the convention center is a mystery to city officials.
“It’s functional and they’re booking events,” Penney-Bell said. “We have not been privy to much else. [Patel’s] attorneys have been vigilant in fending off people who would wish to ask him questions.”
Patel did not return a message left on his cellphone or at the Country Inn & Suites of Texarkana, Texas, which he owns through Krishna Associates LLC. Krishna filed its bankruptcy on Nov. 3, listing $5.3 million in debts and $3.2 million in assets. Patel’s bankruptcy attorney, Bill F. Payne of Paris, Texas, also didn’t respond to several calls or an email.
Both Texarkanas, which have a total population of about 60,000, might not be able to support all the hotels and convention centers that have emerged in the past several years.
“This is a classic case of too much room supply and not enough customers to fill rooms or Convention Centers,” Jack Daugherty, principal of the Daugherty Property Group, wrote in an email to Arkansas Business. “Texarkana hotel market has been very tough the last five-six years, 12 new hotels and two Convention Centers have opened in that period.”
Daugherty’s company operates the Texarkana Convention Center and adjacent Hilton Garden Inn, which is on the Texas side of the state line. The Texarkana Convention Center opened in October 2012, about a year before Patel’s Arkansas Convention Center.
Dennis Young, a former state representative and community activist, told Arkansas Business last week that having two convention centers in Texarkana “was a terrible idea.”
“We’ve been living with this nightmare for nearly five years,” Young said. “And it looks like we’re going to have to continue because we have no recourse at this time, nor will we.”
Between 2009 and 2012, Harold Boldt, who was city manager of Texarkana, Arkansas, at that time, persuaded city directors to approve several deals and incentives so Patel would develop the convention center project and a water park, which he operates under Holiday Springs Water Park LLC. That company is not in bankruptcy.
In 2014, a legislative audit found several violations of state law in the city’s handling of the development, but no criminal charges were brought.
Still, the city continues to pay Patel for operating the convention center. It paid Patel more than $468,000 in 2014 and 2015, according to TyRhonda Henderson, the city’s finance director.
Boldt, who agreed to resign in March 2013 with a $162,000 severance package, was rehired later that year. He served the city until June 2015. Boldt could not be reached for comment.
Doctor and Hotelier
Born in India in 1976, Patel received his medical degree from a college in India in 1999. He did his residency at NYU Lutheran Medical Center in Brooklyn, New York.
Patel received his license to practice medicine in Texas in 2004 and began working at the Collom & Carney Clinic in Texarkana, Texas, in November 2005. He left in August, according to a receptionist at the clinic. Patel’s bankruptcy filing shows he is now working as a medical doctor for Emcare Corp. in Dallas and has gross income of $37,100 a month. His wife is not working.
In December 2010, Patel opened Country Inn & Suites on the Texas side. Patel, through Krishna Associates, had borrowed $3.14 million from Midsouth Bank for the hotel project.
The 81-room hotel offers an indoor pool and meeting space for up to 40 people.
“We are thrilled to be joining Country Inn & Suites, Carlson Hotels and their family of brands during these exciting times,” Patel said in a news release at the time. “We are confident that the consistency, value and leadership of this brand and the Carlson Hotels system will result in a successful future for this hotel.”
But that confidence was misplaced.
Between 2013 and Halloween 2015, the hotel lost $528,000, according to its filing in U.S. Bankruptcy Court in the Eastern District of Texas.
2015 was a rough year for the hotel. It missed payments to Midsouth, which pounced on the Patels for defaulting on the loan and sued them.
The bank also wanted to foreclose on the hotel. Krishna filed for bankruptcy protection on Nov. 3, which stopped the foreclosure proceeding.
The bank’s attorney, Scott Ritcheson of Tyler, Texas, criticized Patel’s management of the hotel in court filings.
“There have been multiple managers used to manage the property in a piecemeal fashion,” he said. “Dr. Patel is not reasonably available to provide oversight and direction to [the hotel’s] operations and this ‘part-time’ and ‘piecemeal’ management style has not succeeded in the five years since the hotel began operations.”
Ritcheson said that the hotel can’t further reduce the expenses and expect to keep the business open.
Mayor Penney-Bell also questioned Patel’s management skills.
“I mean, somebody has to be responsible. He’s taken off now to Dallas,” she said. “I know as a former property owner myself, you don’t leave your properties and entrust it to someone else. … You keep an eye on things.”
Krishna’s bankruptcy case remains open.
County Inn & Suites was just the start. On the Arkansas side of Texarkana, Patel’s Arkansas Convention Center and hotel were at the center of scrutiny and financial problems.
In a lawsuit filed in Miller County Circuit Court on Oct. 30, Midsouth Bank accused Patel of defaulting on loans totaling $10 million secured by the Arkansas Convention Center and associated Holiday Inn.
Midsouth sued Texarkana Hotels and also named the Patels as defendants because they had personally guaranteed the loans.
Texarkana Hotels’ bankruptcy filing didn’t list its income or loss for the past two years, but it showed that its revenue was $2.46 million in 2015, up from $1.85 million in 2014, its first full year of operation.
The foreclosure suit took Texarkana, Arkansas, city officials by surprise.
“We were always under the impression that things were going just fine,” said City Manager Kenny Haskin. “As far as we know, the owner was reporting to us that all was well.”
The city had high hopes for the convention center, which “offers luxurious accommodations, along with flexible meeting and gathering rooms to meet your every need,” according to its website. “Whether your event includes ten people or hundreds of people, Arkansas Convention Center will be the premier location to make the event memorable.”
The groundwork for the project began in 2006, when the city acquired property.
Boldt, the city manager at the time, approached Daugherty, whose Daugherty Property Group owns several hotels in the area. Boldt offered him a chance to build the project and said the city would shower him with incentives if Daugherty agreed to build the project. But Daugherty walked away.
And Daugherty’s comments years later telegraphed the problems the Arkansas Convention Center would face.
“Unfortunately it did not work with our property and our business model for that location,” Daugherty told Arkansas Business in 2012. “It just didn’t work from a business standpoint for us.”
Daugherty, meanwhile, went forward with his convention center project on the Texas side of Texarkana. The $24 million, 25,000-SF convention center with an attached Hilton Garden Inn with 154 rooms opened in October 2012.
Boldt wasn’t deterred because Daugherty’s Texas project was moving forward before the convention center on the Arkansas side could. Boldt continued to dangle incentives and city funds to realize the project, which included a water park just off Interstate 30.
Between Oct. 30, 2009, and Sept. 23, 2013, the city spent $8.4 million on the hotel, convention center and water park project, according to an April 2014 transcript of the Legislative Joint Auditing Committee. The committee held a hearing as a result of the Division of Legislative Audit’s finding of several unusual transactions that Boldt had approved in connection with the project.
“These included the City paying significantly more per square foot than the investor paid for real estate, the City committing to make annual contributions and refund all [Advertising & Promotion Commission] taxes to the hotel and water park for several years, the City waiving building permit fees, and the City reducing water rates for the water park and committing to negotiate for reduced rates in the future,” the audit said.
“However, there was no indication that the City Manager benefitted personally from these transactions, which were approved by the Board and/or A&P Commission.”
Boldt said in a response to the audit he thought he had the authority to act in the interest of “economic development.”
“I have worked diligently during my tenure as City Manager to make Texarkana, Arkansas, a better place to live for our citizens,” Boldt wrote.
Legislative Audit’s finding that he did not personally benefit from the transactions “goes to show that it was never about me, but the City as a whole,” he said in the letter.
Haskin, the current city manager, said that he expects the convention center will remain open during the bankruptcy reorganization. “We’re just cautiously optimistic about the end game,” said Haskin. “In that whatever’s worked out between the owner and the bank that it would be in the best interest of the city.”