Eldridge Hotel files for protection from creditors

The Eldridge Hotel has filed for bankruptcy protection, the latest move in a battle to keep the downtown landmark open amid claims from tax collectors and creditors.

The hotel’s ownership group, Eldridge House Investors L.P., filed for Chapter 11 bankruptcy protection on Monday. Rob Phillips, the hotel’s general manager, said Tuesday that the filing was intended to give the business time to straighten out its finances. He said the hotel, 701 Mass., would remain open during the bankruptcy process.

“This is just a sign of the times in the hospitality industry,” Phillips said. “It started off two years ago with 9-11, but it is just about over. It’s about to rebound, and that’s the honest-to-God’s truth.”

According to the filing in the Kansas City, Kan., district of federal bankruptcy court, the business has debts between $1 million and $10 million. Phillips declined to be more specific.

The filing will stall attempts by creditors to collect debts from the hotel, which is on the National Register of Historic Places. In the past seven months, the business has been raided twice by officials from the Kansas Department of Revenue for collection of back taxes.

The business was first raided in June, when it was learned the hotel owed $108,982 in unpaid guest, sales and Kansas withholding taxes.

According to the filing, state officials seized about $31,000 in cash from the business and its bank accounts, but it is not clear how much the hotel still owes in back taxes.

In September, Baldwin-based Mid-America Bank began foreclosure proceedings on the hotel after it missed a $1.3 million loan payment. As of September, the hotel also owed about $160,000 in back taxes to the Internal Revenue Service. The building has an appraised value of $1.8 million, according to the Douglas County Appraiser’s Office.

State tax officials raided the hotel again in early November, when revenue agents and law enforcement officers entered the Eldridge and took an estimated $1,200 in cash toward back taxes.

Phillips said he believed the hotel could be saved from closure. He said he was in discussions with parties about obtaining financing to keep the hotel operational. He declined to name them.

And despite the continuing financial trouble, Phillips said he was not interested in selling the 48-room hotel.

“Rob Phillips will not be exiting the business,” he said.

Dale Miller, a Lawrence resident who is a minority shareholder in the investment group that owns the hotel, said he was uncertain what to make of the bankruptcy filing.

“You just have to evaluate whether it can go forward the way it is now or whether it can’t, and that’s what this process will do,” Miller said.

After the foreclosure was filed, Miller said a sale may have to be considered.

Attempts to reach representatives with Mid-America Bank and the Kansas Department of Revenue were unsuccessful.