The Riverside Hotel in downtown Detroit has been added to lists of Michigan bank foreclosures after Chicago-based lender Mutual Bank foreclosed on the hotel in July.

The hotel, formerly called Pontchartrain, was acquired by Florida-based investment partnership Shubh Hotels Detroit LLC in 2005. The partnership promised to renovate the ailing Pontchartrain and make it into a first-class hotel, but it failed for various reasons.

Hospitality industry analysts said the temporary closure of the Riverside Hotel, which has about 400 rooms, may improve the occupancy rates of other hotels, but on the whole, the foreclosure is not good for the city and the hospitality industry, according to Michael O’Callaghan, a top executive of the Detroit Metro Convention and Visitors Bureau.

Nonetheless, downtown Detroit still has the ability to host large conventions because of the addition of 2,000 new rooms at three casino resort hotels and at the renovated Doubletree Fort Shelby and Westin Book Cadillac hotels.

Before the foreclosure, Shubh Hotels had not paid the salaries of its employees for two months. In late June, the participants and guests of the National Baptists Convention who stayed in the hotel left early because of lack of air conditioning and problems with services.

The problems of the hotel worsened when hotel lender Mutual Bank also suffered the same fate as the hotel. At the end of July, the bank was closed by the Illinois Department of Financial and Professional Regulation Banking Division due to insolvency. The appointed receiver Federal Deposit Insurance Corporation in turn approved the application of Garland, Texas-based United Central Bank to take over Mutual Bank. The Texas bank acquired Mutual Bank’s assets, deposits and loans, including loans provided to the Riverside Hotel.

Lawyer David Findling was appointed receiver for the hotel by the Wayne County Circuit Court. Findling said the hotel needs renovations before it can operate again. He said he hopes United Central Bank puts more funds into the hotel so it can reopen and operate fully. He argued that a fully functioning hotel would get a better sales price than an unoccupied and closed hotel.

Findling also added that a vacant hotel building is not good for the image of the city which is trying its best to recover from the adverse effects of closures in the automobile industry.

According to Chuck Skelton, head of the hotel advisory firm Hospitality Advisors, the 1965-built Riverside Hotel needs around $100 million to modernize it even after a partial upgrade worth $35 million some years ago.