St. Marys Council authorizes release of revolving-loan mortgage to enable sale of downtown hotel

St. Marys City Council voted to permit the Community Improvement Corporation (CIC) to release a mortgage on a downtown hotel so the CIC can complete a sale to a buyer offering $350,000.

City and CIC officials told the council the measure is intended to avoid a likely foreclosure sale, to recover portions of liens on the property, and to put the building back into private ownership and rehabilitation. "I was given the goals from, I think, council and administration that our goal was to get the building rehabilitated," a CIC representative said, adding that "I want to emphasize continually what we're talking about here is not city funds." The council suspended its rules and approved the measure by voice vote (all yeses).

The hotel—owned by Riverview Partnership while in default—has been marketed at $350,000. The buyer submitted a letter of intent and a $3,500 down payment; CIC staff said the buyer appears likely to use local financing. To permit closing, CIC asked the council to release the city's mortgage on the revolving loan fund so CIC, which holds an option on the property, can take title and then immediately transfer the property to the buyer. The CIC representative said the option price to take title would be $100 and that CIC would not retain ownership beyond the transfer.

Officials described a complex lien and claim structure. A mechanical contractor (Roto-Rooter) spent nearly $50,000 on water repairs and filed a mechanics lien; Huntington Bank holds a senior mortgage with roughly a six-figure balance; the city holds a revolving-loan mortgage originally for about $400,000 (not city general-fund dollars). CIC staff said the expected distribution from a $350,000 sale would repay several creditors in part and return "approximately $125,000" to the revolving loan fund; CIC and the city expect to be paid in full on two smaller claims tied to storefront repairs (about $24,000).

The CIC representative told council the building fell into disrepair over years and the owner, who had led renovations decades earlier, died last November. He said the CIC and city sought to avoid appointing a receiver or letting the property go to a sheriff's sale, which likely would have produced little or no recovery for creditors and required expensive litigation or bidding.

Tenants and building-condition issues were central to the discussion. The property had previously received low-income housing tax-credit financing, which created covenants restricting certain units. CIC staff said the Ohio housing authority working with the buyer "are going to release the covenants on ... all but unoccupied units," while a small number of occupied units (the staff estimated perhaps seven) will remain subject to restrictions for roughly three more years. A downtown property consultant who identified herself as Caitlin from the Armory said she prepared a scope of work for the building and estimated "the scope of work is at roughly $360,000 excluding the elevator and any HVACs." She added the sprinkler system is present and that a sprinkler inspection in 2023 showed the system is serviceable; a monitoring-service restoration and smaller repairs will be required.

Council members pressed for details on how much of the original revolving-loan balance might be lost. One council member called the revolving fund "block grant money" used for small-business loans and urged maximizing recovery; staff responded the $400,000 original mortgage has been partially repaid over time and that the proposed sale is the best available option to recover some funds while avoiding larger future costs. The CIC representative said some creditors agreed to accept reduced payouts to enable the sale: he cited Huntington taking a reduced amount and Roto-Rooter accepting roughly half of its claim.

Staff and members also highlighted major unknown repair costs that could affect future use—most notably the building's elevator. The CIC representative said an elevator replacement or major repair could be a six-figure expense and that the buyer and future owner would need to address that cost. The representative and the consultant both described significant interior work, storage-room clutter and vandalism in many vacant units, and needed HVAC and other repairs.

By council action, staff may now finalize releases from other lienholders, pay taxes and commissions at closing, and allow CIC to complete the closing and immediate transfer to the buyer. The CIC representative said the closing is expected in the next few weeks, contingent on receiving releases from Huntington Bank and Roto-Rooter and assurance the buyer's financing is secured.

The council's approval does not place the property in city ownership; officials said the CIC will exercise its option only when the resale to the identified buyer is assured. Council discussion and the motion to suspend the rules were recorded as a unanimous voice vote.