After years of neglect and owing millions, beachfront Newport Shilo Inn is back on the auction block

By JEFF MANNING and SHAYLA ESCUDERO/Lincoln Chronicle

One of Newport’s largest and most controversial hotels is for sale.

The Shilo Inns Newport Oceanfront Hotel, which earned a reputation for not paying its taxes and is now operating with part of the facility closed due to fire code violations, has been put up for a court-ordered sale in the wake of the parent company’s financial collapse.

The deadline for submitting bids was 5 p.m. Thursday.

With 179 rooms, the Shilo is one of the larger hotels in Newport. It is located just feet from the beach in the Nye Beach neighborhood that is filled with motels and vacation rentals popular with tourists.

“This asset offers an exceptional opportunity to acquire a legacy hotel with tremendous upside,” said Jordan Schack, a broker with Hilco Real Estate Sales. “With its premier location and multiple revenue drivers, the Shilo Inns is well-positioned to become a dominant hospitality anchor on Oregon’s Central Coast.”

But the Shilo in Newport is also old – it was built in 1966 – and dated.

In a sales brochure for the property, Schack said the hotel has “significant value-add potential” to a buyer willing to make “operational enhancements, capital improvements or full-scale redevelopment.”

In other words, the Newport Shilo needs a lot of work.

The Shilo is sandwiched between the Hallmark Resort to the south and the Elizabeth to the north, both of which have been recently updated. At the Shilo, the parking lots are often mostly empty. An “Unsafe Building” warning has been posted by the local fire department in the windows of its tallest building.

Newport city councilor CM Hall has lived in the Nye Beach neighborhood for 10 years, slowly watching the Shilo’s buildings fall into disrepair from the window of her home.

“They aren’t prioritizing the property and it is so evident when you walk around there,” Hall said. “I walk along the property every day and I’m disappointed that they have this premium real estate that isn’t being invested in.”

In May, the Newport Fire Department ordered the largest of the Shilo buildings vacated immediately due to fire code violations. The department notified Shilo officials last year that the fire suppression system in the building needed to be repaired or replaced.

“They didn’t comply so we shut it down,” said Rob Murphy, Newport’s fire chief.

Part of once large Northwest chain

The Newport Shilo was part of a larger chain of hotels founded by Portland entrepreneur Mark Hemstreet.

Hemstreet’s “affordable excellence” slogan and his concentration on middle-brow accommodations for the middle class struck a chord with customers. At its peak, Shilo was operating more than 40 hotels, according to court documents. Some of them, like those in Newport and Seaside, boasted prime locations.

“This was an exceptional brand – it had the potential to be the next Hilton or Marriott,” said Brian Resendez, a prominent hotel broker in Portland.

But with the arrival of new competition it became more difficult to make money. Hemstreet, who could not be reached for comment, has blamed his financial ills on 9/11, the Great Recession of 2008-10 and the Covid pandemic that started in 2019, all of which impacted the hospitality industry.

More problematic however, is that Hemstreet developed a reputation for not paying his bills. Resendez says he was one of many creditors who tried and failed to collect from Hemstreet.

“He is incredibly good at keeping his lenders and investors at bay,” Resendez said.

By last fall, lenders alleged that Shilo Inn Newport LLC — Hemstreet formed different limited liability companies for each hotel — owed $6.5 million in principal, interest, late fees and other costs.

The Shilo Inn has also not paid transient lodging taxes to the city of Newport in more than a year, owing hundreds of thousands of dollars to the city.

In 2019, the city of Salem filed a lawsuit against Shilo Inn for over $143,000 in unpaid room taxes. That same year, the city of Warrenton settled after Shilo failed to pay over $90,000 in room taxes. In 2023, Shiloh Inn owed Klamath County over $100,000 in unpaid room taxes.

The Lincoln Chronicle requested the city of Newport’s records of Shilo Inn’s default in lodging tax payments but was denied due to possible litigation. But the city has not yet gone to court over the issue.

Despite its condition, the Shilo Inn is one of the most affordable places to stay in Newport, so Hall says she is grateful that it fills a niche for transient workers. But that isn’t enough to make up for the disappointments, she said.

“It’s time for someone else to come in and take over those buildings,” Hall said.

Hemstreet’s long and losing effort to elude his creditors reached a major turning point in June 2023 when a Multnomah County circuit court judge ruled that Hemstreet and Shilo Management must repay $3.3 million to Cathay Bank of Los Angeles. The court also appointed a receiver to take possession of several Shilo hotels, including Newport.

Why the receiver is choosing now to sell the Newport Shilo is unclear. The attorney for the receiver declined to say anything to the Chronicle about the sale.

This isn’t the first time Shilo’s lenders have tried to sell the Newport hotel. Last fall, those lenders declared Hemstreet in default on loans and personal taxes totaling $14.1 million and scheduled an old-fashioned foreclosure auction on the steps of the Lincoln County courthouse.

No one bid.

Whoever buys it will have a formidable challenge competing agaiinst the more polished hotels clustered in Newport’s Nye Beach district. The Hotel Sylvia and the Allred, neighbors of the Shilo, have both recently finished major renovations.

”We definitely have two downtowns – the Bayfront and Nye Beach,” said Lauren Pahl, marketing manager at the Newport Chamber of Commerce. “And those hotels are a big part of Nye Beach’s popularity.”

• Jeff Manning is a former investigative reporter for The Oregonian who now writes for various Northwest publications and can be reached at jeffmanning62@gmail.com
• Shayla Escudero covers Lincoln County government, education, Newport, housing and social services for Lincoln Chronicle and can be reached at Shayla@LincolnChronicle.org