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New Arlington Hotel Ownership Arrives in Hot Springs with New ControversyLock Icon

6 min read

(This story has been updated since its original publication. See below.)

If Al Rajabi didn’t realize he was taking on a mammoth fixer-upper in immediate need of attention before buying the Arlington Resort Hotel & Spa, he should now.

Two months into buying the largest hotel in Arkansas, Rajabi is feeling the public pressure to address issues long ignored by the Arlington’s longtime owners.

Under the leadership of the late Monty Scott, the family ownership group was incapable or unwilling to bring financial resources to bear to fully renovate the grand old hotel.

Hot Springs boosters hope Rajabi will open a new and improved chapter in the legacy of the iconic 478-room hotel, as he has with other properties. But they wonder as the San Antonio developer has shown his contentious side in dealing with city officials.

“I know most people just want them to work it out,” said Liz Robbins, executive director of the Garland County Historical Society. “The Arlington needs to keep going, and it would be a disaster for downtown Hot Springs if it didn’t.”

Approaching its 93rd year in November, the Arlington is badly in need of a major facelift to bring it into the 21st century with a blend of historic charm and updated amenities.

Rajabi embraced the challenge while still getting his arms around a $30 million-$40 million, maybe $50 million project. The 404,679-SF Arlington represents his biggest endeavor to date in terms of size and cost, and his work on other hotel deals indicates that Rajabi can deliver.

However, aesthetic concerns at the Arlington have escalated into public safety concerns and put Rajabi on the clock to prevent upper-story masonry from falling on pedestrians.

A month after his July purchase, Hot Springs officials formally notified him that exterior repairs had to be completed on the state’s largest hotel by Nov. 8 or it would be closed as a hazard to public safety.

City officials have assured Rajabi they would’ve taken this step regardless of who owned the property. But the testy hotel developer responded as if the notice was a threat from an ungrateful city spurning his intention to restore the luster to a treasured landmark.

His talk of a retaliatory lawsuit sent Mayor Pat McCabe and City Manager David Frasher into bunker mode. A scheduled interview with McCabe didn’t happen, and a day later, both declined comment. Rajabi didn’t respond to requests for an interview.

Hot Springs officials and civic leaders aren’t sure what to make of Rajabi’s petulant behavior, noting he was well aware of the serious issues awaiting expensive solutions before he purchased the historic hotel.

Rajabi’s stormy rhetoric isn’t the first time civic leaders have had to contend with his hardball talk.

“He’s arrogant,” Suzanne Schauman said of Rajabi, who was involved in a hotel development in Bandera, Texas, where she is mayor. (See Rajabi Leaves Texas Project After Dispute With City Officials.)

Rajabi might rub people the wrong way, but Hot Springs officials should be used to that after dealing with Monty Scott for more than 30 years. Scott’s family had owned the Arlington since 1954, and he led the company from 1982 until his death in 2016. In public, Scott spoke favorably of a major revamping of city building codes in 2012. Privately, he bristled at the changes that would impact the Arlington.

The upgraded code gave the city more muscle to force property owners to take better care of their buildings. In Scott’s case, it forced him to begin dealing with longstanding issues of fundamental maintenance deferred far too long.

Cynthia Stone, outgoing executive director of The Arc of Arkansas, said Scott was starting to get his mind around the possibilities of making a serious renovation happen at the Arlington. She said he reached out to tap her knowledge of tax credits.

“He was just thinking about it and beginning to listen when he died,” Stone said. “He had contacted me to find out more about how historic tax credits work.”

The funding formula to bankroll restoration of the Arlington is expected to consist of a mixture of tax credits, grants, subsidized loans and conventional financing.

Backed by a $5.6 million mortgage carried by the sellers, Rajabi appeared at first glance to not have any skin in the purchase of the Arlington. However, there is more to the acquisition than the $5 million price indicated by real estate documents.

“The sale was actually a little over $7 million,” said a source familiar with the transaction. Bob Martorana, general manager of the Arlington, would neither confirm nor deny the figure.

The difference between the two numbers is ascribed to the value of the furnishings and other non-real estate assets, which aren’t reflected in the deeds.

Rajabi and partner Gene Liguori leveraged their Four Points By Sheraton in midtown Little Rock to set up a $4.1 million line of credit two months in advance of their July 10 purchase of the Arlington. The arrangement provided a ready source of cash that could have been used to bring equity to the table though no one has confirmed it.

According to Martorana, the Arlington’s 180 full- and part-time staff re-ceived a share of the sale proceeds from the Scott family: “Almost $300,000 total” for earned vacation and years of service, he said.

Brash and blustery personalities of past and current ownership aside, Rajabi does have a track record of delivering some impressive hotel projects.

His redo of the Holiday Inn Express & Suites Medical Center North project in San Antonio garnered recognition as a 2015 Renovation Award Winner by InterContinental Hotels Group.

Given to hotels that merit particular recognition of successfully completing major modernization and renovation, the award was handed out to 23 recipients judged to have significantly improved and updated their properties.

Closer to home, his remaking of Little Rock’s Clarion Hotel at 925 S. University Ave. into the Four Points By Sheraton serves as a dynamic calling card.

In 2014, Rajabi took his $5 million foreclosure purchase and turned it into a sparkling overnight destination, now appraised on the Pulaski County tax rolls at $15.8 million.

The 171,509-SF, 263-room renovation project, originally opened in 1976 as a Hilton Inn, is a showcase for what Rajabi can do.

“He has that place looking amazing,” said State Rep. Les Warren of Hot Springs. “That is my destination when I stay in Little Rock. I saw it go downhill and watched him restore it.”

Warren believes the success of the Four Points project is a harbinger of what could be for the Arlington.

“I want to see it restored to its incredible glory days,” he said. “I want to see him take this and hit a homerun. I want to help him succeed.

“Everybody wants the Arlington to stay open. It’s not just an icon for Hot Springs. It’s an icon for Arkansas.”

Update, Sept. 19, 2017:

On Sept. 14, Hot Springs city officials sent a letter modifying its Nov. 8 deadline to close the Arlington if structural safety issues weren’t addressed by its new ownership group, led by Al Rajabi.

The letter, sent to Rajabi’s Little Rock lawyer, John Baker, identified five areas of the Arlington deemed to be unsafe and dangerous:

  1. The north end of the west face on the seventh floor of the central wing.
  2. The east face of the seventh floor of the fountain wing.
  3. The central and fountain towers.
  4. The north corner of the east face of the 11th floor of the central wing.
  5. Right of center on the 11th floor of the front elevation.

Falling brick is the concern of item one, and the rest are related to falling stucco.

The letter established a new timeline by setting a series of deadlines to hire a registered design professional by Oct. 4, to complete an evaluation of the areas of concern by the registered design professional by Oct. 19 and to submit the evaluation findings by Oct. 29 to Mike Scott, city building official.

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