Bankruptcy proceedings for a company that operates two hotels in Thurston County revealed a signed lease between the company and the state Department of Health that the Port of Olympia opposes, according to the court records.
And the port’s objection once again raises the question of whether hotels will ever be used as a form of accommodation outside of their destination.
Han Joe Ro LLC, which operates as Oyo Hotel and Comfort Inn on land owned by the Port of Tumwater, filed for Chapter 11 bankruptcy in May in the U.S. Western District Bankruptcy Court from Washington.
Chami Ro, a member of the limited liability company, declined to comment on Monday.
A Chapter 11 filing usually means the company is looking to reorganize and stay in business. Han Joe Ro’s file shows that the company has assets between $1 million and $10 million, but also liabilities that are between $1 million and $10 million.
The Port of Olympia hinted at trouble in March when a port official said the Oyo Hotel was in foreclosure. Around that time, the port had heard from Han Joe Ro’s lender that it was headed for foreclosure, Lisa Parks, the port’s director of executive services, said Monday.
The port was notified by the bank because they are the underlying owners of the property, she said.
Han Joe Ro filed for bankruptcy on May 12. The legal process unfolded over the following months until October, when the port discovered a lease for the Comfort Inn property at 1620 74th Ave. SW. The Oyo Hotel is located at 1600 74th Ave. SW.
The lease, copies of which are included in the bankruptcy filing, shows that Han Joe Ro and the state Department of Health agreed in late April to a five-year deal for the Comfort Inn to be used as a COVID-19 quarantine facility. . This lease was later amended in August to provide “temporary accommodation” for people “resulting from a public health emergency related to an emerging infectious disease/other special pathogen”.
The port says the DOH lease is in violation of the ground lease the port has had with Han Joe Ro since October 2000.
“This agreement is a violation of HJR’s ground lease (with the Port), which limits the use to ‘the construction and operation of a nationwide franchise motel’ and raises substantive concerns about the effects downstream,” Port of Olympia attorney Christopher Pierce-Wright said in an email included in the bankruptcy filing.
Downstream concerns relate to the Federal Aviation Administration and its oversight of Olympia Regional Airport and the immediate area, including hotel properties.
The port has received $28 million in airport-related subsidies since 1993, the port’s objection says.
“The debtor’s breach carries a significant risk of awarding revenue the port receives from the FAA for airport updates, maintenance and improvements. The FAA grants include regulations and restrictions on the use of property surrounding the airport, including prohibiting residential use of the subject property.
The port has already come here.
In 2021, Ro and the Thurston County Housing Authority reached a $3.3 million tentative deal to convert the Oyo building into housing for 58 low-income seniors, The Olympian reported.
But because the hotel is on port-owned property adjacent to Olympia Regional Airport, it’s encumbered by FAA rules that prevent land near airports from being used for “residential” purposes. “, according to The Olympian.
The port then hired a consultant who produced a report on whether the hotel properties could be released from FAA oversight. The report concluded the port could do so, provided certain standards were met, port executive director Sam Gibboney said Monday.
One of these standards: Show that the property is no longer necessary for airport operations. Gibboney thinks the port could make that point successfully, but in other areas it’s not as easy, she said.
Another standard: if there is a transaction for hotel properties, will the economic benefit be equal to or greater than civil aviation? Gibboney acknowledged that it’s a little harder to quantify.
However, she added that the Thurston County Housing Authority remains interested in the property.
As for the lease terms between Han Joe Ro and the Department of Health, the bankruptcy filing shows the company was to be paid approximately $100,000 per month for use of the Comfort Inn property. Given the bankruptcy, is this money still paid out?
A spokeswoman for the state’s Department of Business Services, which signed the lease, looked into the matter on Monday. The Olympian expects to update this story.
Port executive director Gibboney added that although Han Jo Roe has filed for bankruptcy, they continue to pay port rents.
“They have no arrears with us,” she said.