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December 04, 2012 | 03:16 PMThe owners of the Cove of Lake Geneva have changed their management company and replaced three of the five members of its ownership association board of directors.
Jim Patrician, the new board president, said he believes those changes signal the end of the hotel's darkest days.
The Cove, the four-story, 223-suite condominium hotel (sometimes called a condo-tel) at 111 Center St., Lake Geneva, is still in receivership, but Patrician said the new board is ready to work with attorney Michael Polsky, the court-appointed receiver, to restore the hotel to financial health.
The hotel's primary attraction is its location - within sight of Geneva Lake, close to Big Foot Beach State Park and close to the Geneva National Golf Club.
The suites offer kitchens, flat-panel cable televisions, bathrooms with jetted tubs and balconies.
"We're going to be able to recover because of the location," Patrician said. "The hard part is behind us."
The board replaced three members, including former board president Cathy Hurlbut at a Nov. 1 meeting. Hurlbut and the other two removed board members, Ed Golin and Jerry Ignatius, treasurer, later all tendered their resignations, Patrician said.
Geneva Hospitality LLC was removed as the Cove's manager by the court-appointed receiver after a Nov. 14 hearing before Walworth County Judge John Race.
The change in management was requested by the receiver, PNC Bank and a group of condominium owners . Geneva Hospitality had managed the Cove for at least 10 years, Patrician said.
While it's been an eventful five months for the hotel owners, Patrician said the guests at the 16-year-old luxury hotel should experience no loss of quality in service.
"For the guests, you would not know anything is going on behind the scenes," he said. "We don't think the guest experience has changed."
He said the new management company has retained most of the hotel employees.
The new management company is IDM (Inn Development & Management) LLC of Madison.
Patrician said Hostmark was first named to replace Geneva Hospitality, but that company already manages the Abbey Resort & Spa, Fontana, and didn't want to manage two hotels in the same market, and IDM was brought in as a replacement.
Patrician said the owners are far more confident of IDM's management than they were of Geneva Hospitality.
"I've heard positive things about them," he said of IDM.
Patrician has owned a room at the Cove since 2002. He is also a condominium owner at the Abbey in Fontana, and had served on the Abbey's condominium association's board of directors until recently.
Patrician is an employee benefit adviser who owns his own company in Schaumburg, Ill. He lives in Algonquin, Ill.
Under the condominium hotel arrangement, the rooms are bought and owned by individual investors or groups of investors who receive a percentage of the room rentals.
The condominium hotel is run by a management company which hires the employees, takes the reservations, collects rents from guests and dues from association members and controls the finances of the hotel.
Patrician said he bought a condominium at the Cove first because it looked like a good investment and second because he thought it would be a great place for his family to vacation during the summer.
He said he believed that his investment in the Cove was secure enough that he could allow it to run itself.
That changed, however, in the past few years.
"This is an unfortunate situation when you try to become a passive investor in the Lake Geneva area and the economy goes bad," Patrician said.
Patrician said he and about 10 other room owners decided about a year ago that could no longer be passive investors in the Cove and took an active interest in their investments and the hotel's finances.
Patrician said starting last year he became suspicious that things were not going well for the Cove because its revenues were lower than average for the area.
He said he was able directly compare the Cove's revenues with the Abbey's annual income.
"Revenues (at the Cove) were going down significantly," Patrician said.
Patrician said the biggest problem is that the owners didn't have a handle on the hotel's finances.
When the economy was going well, that wasn't a problem, he said.
But then bills started coming due and Geneva Hospitality was in court with a number of plaintiffs, including the state Department of Revenue and state Department of Workforce Development claiming the management company owed back taxes.
Patrician said a significant number of owners showed for the Cove's business meeting in January 2012 and again for a general owners meeting in June.
He said a lot of questions were asked about the hotel's finances.
"We were assured everything was OK," Patrician said.
But he also said the hotel management and the condominium board did not respond immediately to requests for information.
And, he said, neither he nor the other owners could get a full list of owners.
According to the transcript from the Nov. 14 hearing, Geneva Hospitality lost its sellers permit in 2009 and operated the entire month of September without insurance coverage.
"It was management that was a huge drag on the hotel," Patrician said.
PNC Bank filed a claim against the Cove on July 16 in Walworth County Court, alleging that payment for two loans, one for $1.65 million made to the Cove in 2007 and an even earlier loan for $250,000, were overdue.
The bank also asked the court to put the property into receivership because it feared the hotel was on the brink of insolvency.
Judge John Race put the hotel into receivership Sept. 27.
Meanwhile, during the past two weeks, room owners at the hotel have filed complaints against Geneva Hospitality with the Lake Geneva Police Department.
Police Chief Michael Rasmussen said he couldn't comment on the complaints because his department is just starting its investigation.