The Regency Lodge

The Regency Lodge
William H. Northwall

This is a long and bizarre story of my involvement intractably linked to a distressed hotel where there appeared to be no exit. Jed became the instrument leading to a solution.

The story began about ten years ago, when two slick guys bought a run-down hotel in the Midwest, renovated it and had a huge cost-overrun, then sought a new investor to bail them out. I, being a retired doctor, and not getting enough excitement in the stock market, was seeking to buy into an operating business. The legal’s ensured that before I could lose any money, they had first to lose all theirs, and I got paid the first dollars, and my original investment had to be paid off before they could take a draw.

Right from the get-go, I received no money. I put my accountant on the case and it took him one year just to sort out the books to see where the business stood. Its wasn’t pretty. Then the original owners got into a fight ending in a business divorce, out of which I became a 50% owner with one of them. We had a series of general managers recommended to us by a huge hotel chain we had been associated with. The first was bad, they got worse, and the last was a criminal. Exasperated, my remaining partner said “look, I’m over everyday anyway, why don’t I just assume the general manager’s position, I might not be the greatest manager, but I have my own money at stake, and we could do a lot worse.” I consented. Things then stabilized for a couple of years, then we got cash short. I figured my partner might be charging some car repairs to the hotel, but probably he was doing as good as could be expected. But, after receiving my legally guarantee return on a monthly basis for a couple of years, it just stopped, and my partner’s excuse was that the hotel was out of money. I said “okay then, let’s put it up for sale” and he agreed, but behind the scenes made sure that it never got sold. Meantime the national economy went south, and hotel values plummeted. I need to say at this point the legal’s had me named as managing member of the LLC owning the hotel, and I held all powers except being able to sell without unanimous approval. At this point I was determined to remove this guy from managing the hotel, and after getting reliable numbers to base a value on, put the place up for sale.

My biggest dilemma however, was how to find an interim manager after firing my partner. I got on the Internet, punched in hotel consultants, and got a bunch of sites. I went through them one-by-one. Jed’s Providence Group stood out with the title: specializing in small distressed hotel. That’s mine I said. We e-mailed back and forth, then telephoned back and forth, then being the type that wants to meet face-to-face (and see if a guy operates out of an office or the back seat of a car), I set up a meeting in Boston and spent a day peppering Jed with questions about his hotel background, his experience, and trying to get a handle on his character. I went thinking if he was only 70% as good as he appeared, I would retain him; I left thinking he was better than I had expected. Then I asked for references and he gave me three. I telephone-interviewed them; each with a different but compelling story very positive about Jed.

Here is what transpired. We got permission from my partner to do a week’s over-view of the hotel, in the event that my partner was unable to find an investor to buy me out, and get me out of this business. We then scheduled to meet at the hotel for a week. Jed asked me to find an independent CPA to work for a day looking at the books as due diligence to ensure that were no huge and obvious problems. What showed up? Operationally Jed found numerous awful problems. Financially, it was like opening pandora’s box; still under investigation. After working up a plan, we returned unannounced, fired my partner (with off-duty police watching and helping) and removed him from the building. Jed then immediately notified all employees of the change, and assembled a core-group. In a week he had slashed two-hundred thousand from the payroll.

I wish to end with one vignette: beverage and the lounge was running 48% expenses and it should be 20% or less. He requested all lounge persons to come to an emergency meeting Sunday at noon. One feigned an excuse and said he’s come in later in the week (and was terminated). Two said they were unsure, considering the short notice, but did arrive. All faces in the room looked skeptical. Jed started his presentation. He began explaining that when he tended bar while in college, not knowing any better, he had occasionally given out free drinks to friends. A later boss made if very clear that was stealing, and if caught, would be cause for termination. Now Jed made it very clear that was his policy. No complaints came from the group, but rather stories of how the former partner had a printing press for free drink cards which got handed out by the handful. Then conversation got into details about 42 shot glasses to a bottle, and how to account. The group perked up and started offering helpful ideas. When we adjourned, it was a group of happy employees thankful to now be working under great management.

I have no idea what will happen next, but I am confident that Jed came as a gift from heaven, that he was well bred and educated, that he is the reincarnation of Peter Drucker, and I think we are going to be life-long friends. I give Jed permission to use me as a reference; just tell me a little about yourself and your needs and I will share generously my thoughts with you.

William H. Northwall
December 3, 2009

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