Lender buys Bel-Aire Hotel at sheriff's sale as $9.4 million in loans go unrecovered

After foreclosing on the Bel-Aire Hotel's unpaid loans of more than $9 million, the lender has taken over ownership of the shuttered landmark property near Presque Isle State Park in Millcreek Township.

Whether the lender is able to sell the Bel-Aire and recoup its investment is an open question, adding to the uncertainty surrounding the future of the once vibrant complex.

The lender, HDDA LLC, of New York City, purchased the Bel-Aire at a sheriff's sale on Friday at the Erie County Courthouse. HDDA submitted the only bid — $468,306 in costs and taxes. Bidding started at that amount.

HDDA's purchase, known as a credit bid, means that it took on the full amount of the outstanding loans that led HDDA to foreclose on the Bel-Aire and force the sheriff's sale. The foreclosed amount was $9.4 million, according to court records. The records show the COVID-19 pandemic caused some of the Bel-Aire's financial problems.

HDDA will lose money if it fails to sell the Bel-Aire for more than $9.4 million on the open market. A lawyer for HDDA, Matthew Simons, of Pittsburgh, made the bid on behalf of HDDA at the sheriff's sale. He declined to comment on what HDDA plans to do with the property.

The lack of bidders was not unexpected. A successful bidder would have needed to offer an amount in the millions of dollars for HDDA to drop out of the bidding process and let another owner claim the property.

Schwab family, founders of Bel-Aire, no longer have deed

With its purchase at the sheriff's sale, HDDA took over the deed for the 131-room Bel-Aire from its original owner, Kertra Ltd., which also borrowed the $9.4 million from HDDA. Kertra's president is Fairview resident Kerry Schwab.

The Schwab family had owned the Bel-Aire for 60 years, and the complex's hotel and restaurant long were popular among out-of-towners and Erie residents alike.

The Bel-Aire has been closed since May. HDDA, which specializes in hotel real estate, filed for foreclosure in March 2021 due to Kertra's nonpayment of three loans plus interest totaling $7.7 million, with the largest of the three at $6.1 million, including interest, according to court records. The overdue amount turned into a judgment that grew to $9.4 million.

Instead of executing on the judgment right away and forcing a sheriff's sale, HDDA had a court-approved receiver take over operations and management of the property from Kertra. Erie County Judge Daniel Brabender on April 6, 2021, approved the appointment of the receiver — the Maryland-based Marshall Hotels & Resorts Inc., a third-party hotel management business.

Pandemic damaged Bel-Aire's business

In petitioning Brabender to approve a receiver for the Bel-Aire in 2021, HDDA said in a filing that "a receiver is desperately needed to manage and maintain the Mortgaged Property and to collect all rents, issues and profits. Numerous issues, including but not limited to the effect of COVID on the hospitality industry, necessitate the appointment of a receiver on an expedited basis."

The receiver ran the Bel-Aire and unsuccessfully tried to sell it on the open market. When no sale occurred, the Bel-Aire closed in May and HDDA pursued the sheriff's sale.

The Bel-Aire is at 2800 W. Eighth St., just east of Peninsula Drive and just south of the entrance to Presque Isle State Park. The Bel-Aire sits on 5.35 acres, and the complex encompasses 89,263 square feet. It includes an indoor pool, a restaurant, known as Maxi's, and rooms inside and outside the main hotel.

The demise of the Bel-Aire comes as Millcreek Township is advancing an effort to improve the area near West Eighth Street and Peninsula Drive to transform it into a gateway to Presque Isle State Park.

The Bel-Aire has changed its affiliations over the years. It was once affiliated with Clarion and most recently was affiliated with Wyndham, the owner of Ramada. The Bel-Aire remained an independently owned property during the affiliations with the national hotel chains.

In late 2018 and early 2019, the Bel-Aire, then the Bel-Aire Clarion hotel, underwent $2 million in renovations. The pandemic hit about a year after the renovations were finished, and the Bel-Aire's financial problems intensified.

Contact Ed Palattella at epalattella@timesnews.com. Follow him on Twitter @ETNpalattella.

This article originally appeared on Erie Times-News: Lender buys Bel-Aire Hotel at sheriff's sale, gets Erie-area icon's debt