Some residents of the Hotel Petaluma and business tenants below it are nervous about their future after discovering this week that the property's owner has defaulted on his loan and is being sued by his lender.
Marin developer Robert Miller bought the historic downtown hotel, at the corner of Washington and Kentucky streets, for $6.1 million in November 2007.
As of Jan. 1, the hotel had an assessed value of just under $5 million, according to county property records. It was unclear how much Miller owes on the property.
Miller could not be reached for comment Thursday.
Miller has purchased and restored several historic buildings in Northern California, including a handful in Petaluma. In 2003, he won a preservation award from Heritage Homes of Petaluma for his work on the old school administration building on Fifth and B streets. He also renovated a 15,000-square-foot 1920 auto and retail building along Petaluma Boulevard North.
Public records available Thursday gave no indication any of the other properties were in financial trouble.
While the extent of Miller's financial problems are unclear, he is not the only Sonoma County real estate developer to have been hit hard by the economic downturn and depressed real estate values.
Sonoma County developer Orrin Thiessen filed bankruptcy July 15 after falling behind on multiple mortgages. Real estate investor Clem Carinalli and developers Wendell "Del" Nordby and Richard Dowd also have sought bankruptcy protection.
Miller's Hotel Petaluma is home to about 100 residents in its one-bedroom, no-kitchen units, whose rents range from $550 to $750 a month.
Below the hotel is 14,000 square feet of ground-level retail shops. The businesses, including a pub, a nail salon, tattoo parlor, and a record and vitamin shop, overlook one of the busiest corners in Petaluma.
According to court documents and notices given to residents this week, Miller defaulted on his Hotel Petaluma mortgage with Union Bank in Marin County. The bank filed suit against Miller in February in Marin County Superior Court.
On July 19, a Marin County judge removed Miller and appointed a receiver to handle the property and collect rents, pending further court decisions. Hearings are scheduled for October and December.
Property managers hired by the court-appointed receiver told residents living in the 104 units of the residential hotel they would be entering every unit on Thursday for inspections.
Receiver Richard Sweeney didn't return a call seeking comment Thursday. New property manager Ken Weaver refused to comment.
In a note to hotel residents, Miller told tenants he was no longer managing the building.
"Due to circumstances beyond my control at this time, a new management company has been hired to operate the building. This will not affect your current living situation in any way," it said.
Still, some residents, many of whom are lower income, are worried.
"We're all kind of stunned right now," said one resident, who asked that her name not be published for fear of retribution. "It's really scary."
The note said leases are still valid and rent structures will remain the same.
An Irvine-based lawyer for Union Bank didn't return messages seeking comment on Thursday.
Several residents and business owners declined to comment, leery of having their names published.
But tattoo artist Khaljan Bedros, owner of Electric Oni Tattoo below the hotel, is taking the news in stride. He has operated his business for six years and completed a major renovation of his space that won local recognition. He has another three years on his lease.
"I understand the unnerving of it, and it unnerved me for a while until I stopped and thought about the truth of it," he said. "That building is not going anywhere. The only thing that's going to change is who owns it."
Because the hotel is a historic structure, major renovations may be impossible and would be expensive and time-consuming.
"It's always going to be a residential hotel," Bedros said. "The amount of money that it would take to go through a major change, it's not going to happen."
News researchers Teresa Meikle and Janet Balicki contributed to this story.
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