Bank financing Landmark Hotel sees tough times

The bank financing construction of the $30 million luxury hotel on the Downtown Mall has had a rough year.

At the end of the third quarter of 2008, Silverton Bank disclosed that slightly more than half of its portfolio was invested in construction or real estate. Of these loans, 17 percent were in nonaccrual status — meaning they were 90 days or more in default.

At the beginning of the year, only 4 percent of the bank’s loans were in nonaccrual status, according to an analysis by SNL Financial, a Charlottesville-based business analysis firm.

“I don’t want to say Silverton Bank is in a bad state,” said John Foff, a senior analyst with SNL, on Thursday. “But these numbers are pretty high. That’s not a good sign.”

Construction of the nine-story, 100-room Landmark Hotel may be on the verge of stopping. The hotel’s owner, Halsey Minor, said a subsidiary of Silverton Bank has fallen behind on loan payments and the project’s construction workers have consequently not been paid since September.

Minor expects construction to halt by the end of the week. The hotel’s developer, Lee Danielson, has disputed Minor’s view and has said that the project’s financing is fine and that construction will continue.

The project’s financial woes, Minor said, arose because Silverton Bank’s subsidiary, Specialty Finance Group, failed to deliver its full loan commitment to the project. Under the agreement, Minor said, he would pay $7 million and the bank would lend $24 million. So far, he said, the bank has paid only $4 million. Last Friday, he added, the bank missed a deadline for a $1.1 million payment.

Cristi Kirisits, a Silverton Bank spokeswoman, has declined to comment on the specifics of the Landmark Hotel loan, but has said that Silverton intends to honor all its obligations.

Kirisits also declined to comment on the less-than-rosy assessment of Silverton Bank by SNL Financial.

“We’re not going to discuss our Q3 numbers at this time,” she said Thursday.

Charlottesville business and economic development officials expressed optimism Thursday that the Landmark Hotel would survive and open not too long after its planned completion date of July 2009.

“I’m pretty optimistic,” said Bob Stroh, co-chairman of the Downtown Business Association of Charlottesville. “It would be a total shock if it didn’t get back on track soon.”

Stroh said the project enjoys the backing of the business community as well as the city. It has too much momentum, he said, to be derailed.

“I don’t believe it. Maybe I’m naive, but I don’t believe it,” he said. “If it has a delay, I doubt it will be a very long one. And I expect we’re all going to be applauding rather loudly when it opens.”