PORT TOWNSEND — The owner of the Clam Cannery Hotel considers a bankruptcy hearing set for June 10 as another road bump, not the end of the line.
Kevin Harris plans to continue development of the property at 111 Quincy St. through his business, Quincy Street at the Waterfront LLC.
But the bank that holds the $1.8 million loan for Harris and his business plans to argue that U.S. Bankruptcy Court Judge Marc Barreca should allow it to proceed with foreclosure because Harris doesn’t have any equity in the property.
Columbia Bank, which took over the loan when originator American Marine Bank was shut down by federal regulators, maintains in court documents that any reorganization would not provide it adequate security.
“We are deep in the middle of working out issues with the bank,” Harris said Wednesday.
“The bottom line is I have adversarial proceedings against the bank, and we don’t see eye to eye.”
Harris’ attorneys had filed a reorganization plan in April that Columbia Bank rejected.
At the time, Harris proposed to pay the bank $2.05 million, though the bank maintains it is owed $2.07 million, including $35,000 in attorneys’ fees and $20,000 in appraisal fees.
An appraisal of the property put the value at $1.4 million, so Columbia Bank’s attorneys are arguing that because Harris has no equity in the property, it shouldn’t be part of Quincy Street’s reorganization plan.
Harris said under Chapter 11 bankruptcy protection, he can continue to operate the Clam Cannery Hotel, which means he is able to continue paying the bank.
He said he has booked eight weddings for the historic venue.
The hotel’s website — www.ClamCannery.com — lists a two-night cost of from $2,650 to $4,800 for weddings.
Individual rooms cost $495 for two nights during the summer peak season.
Weekends throughout the summer appear to be booked up, according to the website’s list of available rooms.
“It looks like a good year,” Harris said.
“Obviously, the whole economy is in a state of flux, but what’s best? Allowing it to operate versus the alternative — having the property not being used?”
Harris’ attorneys had until today to file their response to Columbia Bank’s effort to convince the bankruptcy court to allow it to proceed with foreclosure. Documents filed with the bankruptcy court May 10 by Columbia Bank’s attorneys lists numerous times Harris has sought and been granted loan modifications over the past eight years.
The original loan was for $990,000, made through the now-defunct American Marine Bank.
Columbia Bank provided a second loan for $1.8 million in October 2007 that was used to pay off the first loan and provide additional financing to complete the renovation of the Clam Cannery building.
In April 2009, that second loan came due in full. At the time, Harris had planned to sell the hotel suites as condominiums.
“With the national financial collapse in the fall of 2008, it was clear that if the property were developed as condominiums, they would not sell, or if they did, they would not sell at a price sufficient to retire the bank debt,” wrote Jeffrey M. Hawkinson of the law firm Pepple Johnson Cantu and Schmidt PLLC, which is representing Columbia Bank.
The loan was then modified in late April 2009, allowing Harris to develop the property as a hotel rather than for condominiums.
Six successive loan modifications then followed over the course of the next eight months, culminating in a loan maturity date of March 1, 2010.
When Harris failed to pay the loan by that date, Columbia Bank began foreclosure.
That effort was stymied when he filed for bankruptcy just before the property would’ve been sold at a trustee’s sale.
“I want the property to succeed because I obviously care,” Harris said.
“Eleven years of my life are tied up in the property. It’s not just that I don’t want to lose everything.”
He said he hopes the bankruptcy court will allow him to continue operating the Clam Cannery Hotel and reject Columbia Bank’s efforts to go to foreclosure.
He said succeeding in renovating the Clam Cannery would signal other developers in Port Townsend that it would be worth their time and investment to renovate other historic buildings.
“If it makes no sense to save an historic building, who’s going to do it?” he said.
Harris continues to make plans to renovate the historic Quincy Street Dock, immediately adjacent to the Clam Cannery.
He said he has obtained the necessary permissions from local and federal authorities, save one or two, to restore the dock and build boat slips, including a landing dock for seaplanes.
He said the city of Port Townsend’s improvements between Quincy and Monroe streets on the waterfront combined with his hotel and dock development would revitalize the downtown core.
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Philip L. Watness is a freelance writer and photographer living in Port Townsend. He can be reached at whatnews@olypen.com.
