South MS city promises millions to hotel developer with troubled history in Alabama

A hotelier with bad debt and broken promises in Alabama has been welcomed to the city of Ocean Springs with prospects for government funding.

Anand Patel of Mobile wants to develop a four-story hotel on property at Pine and Government streets that has long been contaminated with chemicals from an old optics manufacturing plant. He wants to buy the property from the current owner, German-based Leica Microsystems Inc., and would have to clean it up as part of the deal.

But federal court records show he has not always honored his business contracts in Alabama, or even obligations imposed on him by federal judges. Four cases, filed in 2015 and 2016 against Patel and associates, detail a loan default, failure to pay franchise fees on hotels and major fire-code violations at one of the hotels.

Patel and his companies in Alabama have been sued over debts totaling around $3 million. How much of that debt remains unpaid is unclear. Patel told the Sun Herald he is working to clear up the debt.

Patel said that he is lining up other investors for the Ocean Springs project and a management company to run the hotel.

Ocean Springs Mayor Kenny Holloway said he was unaware of the legal travails Patel has faced. He said the city did not choose Patel as a partner. Patel’s deal is with a private property owner, Holloway pointed out. The city did not approach him; he came to the city with consultants to share his plans.

Even though city officials are trying to raise a total of up to $5 million to see the hotel built, no public money will be lost if it doesn’t happen, Holloway said.

“The city isn’t really out anything with this guy if he doesn’t do what he says he’s going to do,” the mayor said. He said Patel is planning to bring in a four-star hotel, which is what downtown needs, as opposed to a big-box chain.

Ocean Springs officials support hotel funding

The city of Ocean Springs has taken numerous steps to work with Patel.

To pave the way for development and government funding, the Board of Aldermen has created an urban renewal area that includes 4.8 acres where the hotel would be located. The city has agreed to borrow up to $5 million to reimburse Patel’s company, OSMS Development LLC, for installation of utilities, roads, drainage, parking and other improvements, plus remediation of chemical contamination on the site, city records show.

Jackson County also has pledged a portion of property taxes to help cover the $5 million loan. The city and county would not reimburse Patel the money unless the hotel is built and the improvements are completed, city documents say..

The Ocean Springs Redevelopment Authority, which oversees urban renewal, recently voted to request a $3 million grant from the state Legislature’s Gulf Coast Restoration Fund to help with costs of the hotel conference center, according to the grant application. Any money the city borrows for infrastructure improvements would be reduced by the amount of any federal or state grant money received.

Mayor Holloway has emphasized the need for a hotel in Ocean Springs with a convention or conference center.

He said the city received a list of Patel’s hotels, projects he’s completed and projects he’s working on from Donovan Scruggs, a planner and consultant working with Patel. Scruggs did not respond to voice mail messages from the Sun Herald.

“We did not know that he had these issues in his background,” Holloway said. “It has not come up. But the city is not at risk for doing anything until this guy proves he can do what he says he’s going to do. If he can’t do it, we don’t have an agreement with him.”

A resident questioned city leaders about Patel’s OSMS Development during a Board of Aldermen meeting on Aug. 6., right before aldermen voted to reimburse OSMS $5 million for improvements on the hotel site.

Margo Posten, who lives near the hotel property, pointed out that OSMS Development listed a nonexistent address in Ocean Springs on its incorporation papers. A business address for Anand Patel in Mobile, she said, was a post office box.

‘In my mind, that’s not a legitimate business person,” Posten said. “I’m just wondering what due diligence has the city done in order to go into business with this OSMS developer that you’re thinking about giving $5 million to.”

Posten spoke during citizens’ comments, when the board and mayor listen without any obligation to respond.

The board then voted, 4-2, to enter the development agreement with OSMS Development. Aldermen Robert Blackman, Rickey Authement, Ken Papania and Michael Impey supported the agreement, with Bobby Cox and Kevin Wade opposed. Alderwoman Jennifer Burgess was absent.

Sale of Alabama hotel ordered

Patel is back and forth between Ocean Springs and Mobile, where he was in federal court last week with his father, Raman Patel. The Patels chose not to contest a federal judge’s decision ordering the sale of a hotel property in Brewton to help satisfy one of their debts that totals $724,947. Patel and his father, also a party to the civil dispute, did not contest the sale.

Their attorney said in court that the hotel was a Days Inn that the Patels are no longer operating. The attorney, Jene Owens Jr., said he had just been informed that Patel’s father may live there.

Anand Patel told a Sun Herald reporter after the hearing that he’s still working to close on the Ocean Springs property but some issues have come up over the chemical contamination. He said that he would be “100% responsible” for cleaning up the property if the sale goes through.

And he denied that he was involved in the Alabama case that brought him to court, although he is a defendant in the case and responsible for the debt.

“These aren’t my problems,” he said before his lawyer advised him to stop talking.

Patel did speak with the Sun Herald a couple of days later and, on Wednesday, sounded more confident the Ocean Springs hotel deal would work out. He wrote in an email:

“The purchase transaction is on solid footing and will be finalized very soon. We anticipate beginning construction on the upscale hotel, which will include restaurants, coffee shop, banquet space, outdoor event space, spa, fitness center and pool.

“This development will provide upwards of 500 construction and permanent jobs. The resort-style hotel will be community oriented, engaging in a wide array of local events. We truly feel this development will be an extension of the charm, attraction and vibrance of Ocean Springs.”

Lawsuits over hotels detailed

The development Patel proposes will cost around $60 million, he said. Patel told the Sun Herald that a management company — not him — will run the four-star property. He was not prepared to announce a partnership with a hotel brand.

The cases filed against Patel in Alabama involve a Ramada Inn and Days Inn in Brewton, and a Quality Inn in Atmore.

Ramada Worldwide Inc. filed one of the lawsuits over delinquent franchise fees, noting the hotel had also failed a quality assurance inspection and had fire-code violations.

A second lawsuit over the Ramada in Brewton, filed by Fidelity Bank, detailed 45 fire code violations. Only 19 of 90 rooms were “tenable,” the lawsuit said, and power had been turned off to half the building over fire-safety concerns because of a dilapidated roof.

Patel told the Sun Herald that the hotel was in an older building. He later said in his email: “The Ramada issues with fire safety was (sp) an ongoing compliance matter caused mainly by an outdated structure with aging equipment. We strongly feel no lives were ever in danger and there were ZERO incidents related to safety or fire at this property.“

The Ramada was sold at auction for about $40,000 in 2016 to help satisfy a judgment of more than $2 million over a loan default of almost $1.9 million by Patel and Key Hotels of Brewton.

The judge in that case, William H. Steele, found in November 2015 that Patel had acted in “bad faith.” In a blistering opinion, the judge wrote, in part:

“In effect, then, Key Hotels and Patel have stalled all meaningful progress in this case for nearly ten months.

“They have failed and refused to work with their own attorneys. They have disregarded multiple court orders, despite clear warning as to the consequences of such a course of action. They have, at a minimum, been less than candid in court filings about their intentions and business prospects for the hotel property.”

In another case, a judge found the Patels and Key Hotels continued to display a Quality Inn sign and other Quality trademarked items for several years after Choice Hotels International Inc. canceled a franchise agreement for failure to pay franchise fees on the hotel in Atmore.

The judge ordered the Patels to stop using the Quality Inn marks and ordered the seizure of any signs or other Quality merchandise on the property, The judge awarded damages of $139,755 against Patel and his company.

This story was originally published August 28, 2024 at 11:23 AM.

Anita Lee

Sun Herald

601-909-0638

Anita, a Mississippi native, graduated with a journalism degree from the University of Southern Mississippi and previously worked at the Jackson Daily News and Virginian-Pilot, joining the Sun Herald in 1987. She specializes in in-depth coverage of government, public corruption, transparency and courts. She has won state, regional and national journalism awards, most notably contributing to Hurricane Katrina coverage awarded the 2006 Pulitzer Prize in Public Service. Support my work with a digital subscription