Owners of Oyo Hotel in Tumwater file bankruptcy. The Port objects to part of that filing
A bankruptcy proceeding for the company that operates two hotels in Thurston County has revealed a lease signed between the business and the state Department of Health that the Port of Olympia objects to, court records show.
The port’s objection once again raises questions about whether the hotels will ever be used as a form of housing outside its intended purpose.
The company Han Joe Ro LLC, which does business as the Oyo Hotel and Comfort Inn on port-owned land in Tumwater, filed Chapter 11 bankruptcy in May in U.S. Bankruptcy Court for the Western District of Washington.
Chami Ro, a member of the limited liability company, declined to comment on Monday.
A Chapter 11 filing typically means the business seeks to reorganize and remain in business. Han Joe Ro’s filing shows the business has assets of between $1 million and $10 million, but also liabilities that fall somewhere between $1 million and $10 million.
The Port of Olympia hinted at problems in March when a port official said the Oyo Hotel was in foreclosure. About that time, the port had heard from Han Joe Ro’s lender that they were moving towards foreclosure, said Lisa Parks, the port’s executive services director, on Monday.
The port was notified by the bank because they are the underlying owners of the property, she said.
Han Joe Ro filed bankruptcy on May 12. The legal process played out over the ensuing months until October when the port discovered a lease for the Comfort Inn property at 1620 74th Ave. SW. The Oyo Hotel is at 1600 74th Ave. SW.
The lease, copies of which are included in the bankruptcy filing, show that Han Joe Ro and the state Department of Health came to terms in late April on a five-year agreement for the Comfort Inn to be used as a COVID-19 quarantine facility. That lease was then amended in August to provide “temporary housing” for individuals “arising out of a public health emergency related to emerging Infectious disease/other special pathogen.”
The port says the DOH lease is in breach of the ground lease the port has had with Han Joe Ro since October 2000.
“That agreement is a violation of HJR’s ground lease (with the port), which limits use to ‘construction and operation of a nationally franchised motel,’ and raises substantive concerns regarding downstream effects,” said Port of Olympia Attorney Christopher Pierce-Wright in an email included in the bankruptcy filing.
The downstream concerns have to do with the Federal Aviation Administration and its oversight of the Olympia Regional Airport and the immediate area, including the hotel properties.
The port has received $28 million in airport-related grants since 1993, the port’s objection reads.
“Debtor’s breach carries with it significant risk to grant revenues the port receives from the FAA for updates, maintenance, and improvements to the airport. FAA grants include regulations and restrictions on the use of the property surrounding the airport, including prohibiting residential use of the subject property,” the documents read.
The port has been here before.
In 2021, Ro and the Housing Authority of Thurston County struck a tentative $3.3 million deal to convert the Oyo Hotel into housing for 58 low-income seniors, The Olympian reported.
But because the hotel sits on property owned by the port and adjacent to Olympia Regional Airport, it is encumbered by FAA rules that restrict land near airports from being used for “residential” purposes, according to The Olympian.
The port later hired a consultant that produced a report on whether the hotel properties could be released from FAA oversight. The report concluded the port could do this, so long as certain standards are met, said port Executive Director Sam Gibboney on Monday.
One such standard: Show that the property is no longer necessary for airport operations. Gibboney believes the port could successfully argue that point, but in other areas, it’s not as easy, she said.
Another standard: If there is a transaction for the hotel properties, will the economic benefit be equal to or greater than civil aviation? Gibboney acknowledged that’s a little harder to quantify.
However, she added that the Housing Authority of Thurston County remains interested in the property.
As for the lease terms between Han Joe Ro and the Department of Health, the bankruptcy filing shows that the business was to be paid around $100,000 a month for use of the Comfort Inn property. In light of the bankruptcy, is that money still being paid?
A spokeswoman for the state Department of Enterprise Services, which signed off on the lease, was looking into the matter on Monday.
Gibboney added that although Han Jo Roe has filed bankruptcy, they continue to make lease payments to the port.
“They are not in arrears with us,” she said.
This story was originally published November 8, 2022 at 5:00 AM.
