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Residents fight for ownership of Raleigh's Velvet Cloak Inn

The few people still living in a faded Raleigh hotel accuse its owners of running a sham condo business and are waging a legal fight to get their money back.

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RALEIGH, N.C. — The few people still living in a faded Raleigh hotel accuse its owners of running a sham condo business and are waging a legal fight to get their money back.

The Velvet Cloak Inn, on Hillsborough Street between downtown and the North Carolina State University campus, was once among Raleigh's grandest hotels, attracting celebrities and dignitaries.

The hotel has fallen on hard times in recent years, however. David Smoot and his family purchased the property in 2005 and converted the rooms to condominiums.

Matthew Norman, an 83-year-old painter, bought a unit in the building in 2007 for $80,000. He said the owners promised a restaurant, concierge service and security in the building.

None of that ever materialized – Norman said recently that he doesn't even have air conditioning or mail delivery.

"I'm still paying a mortgage, and I'm still paying a homeowners fee for all the services I don't receive," he said. "I don’t have any money. I’m living hand to mouth on Social Security.”

Residents blame the rundown condition of the Velvet Cloak on the Smoots, who have been trying in recent years to buy back the units from the residents. The residents say the family wants to sell the building to an upscale hotel developer.

Attempts to reach the Smoots for comment have been unsuccessful.

Emidio Felicione says David Smoot told him a couple of years ago that real estate prices had plummeted and that he would buy Felicione's condo for a quarter of what he paid for it.

"Seven years ago, I paid $80,000, and this is a very hot real estate area and you're offering me $23,000?" Felicione said, recalling his shock.

The residents contend that the condo setup was bogus because they never were given an ownership stake in the building's common areas and there were never any meetings of a condo owners' board.

Reginald Savage said the North Carolina Commissioner of Banks ordered him to stop making mortgage payments to the Smoots because no one in the family was licensed to finance his mortgage on his unit. The family is now trying to foreclose on him, he said.

"It’s run by individuals who have no idea how to run a hotel,” Savage said.

In addition to state banking authorities, the North Carolina Real Estate Commission is investigating the Smoots. The commission's legal counsel says that, if any wrongdoing is found, the family could lose any real estate licenses they possess.

Norman, Felicione and Savage are among a handful of holdouts who refuse to sell their units. They want to regain control of their property so, if the Velvet Cloak is sold, they can negotiate with the new owner themselves on prices for their units.

"They can't sell until everybody's out," Felicione said. "They scared about 15 or 16 other people out with various threats."

He added that it would take "the sheriff coming and handcuffing me and taking me to jail" for him to leave the building.

"I’d like to see these older places preserved, if they can be, and this one is worth preserving, in my opinion,” Norman said.



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