An Oct. 2 inspection of The Velvet Cloak Inn on Hillsborough Street found the building to have bare electrical connections, an inoperable fire alarm and a nonfunctioning sprinkler system. Inspectors also determined that construction work was occurring at the hotel without the proper permits and inspections.

Two social functions that were scheduled to be held at the inn on Oct. 2 had to be moved elsewhere. One was moved to the Holiday Inn Brownstone Hotel down the street.

The owner, Raleigh developer David M. Smoot, is working with an architect to coordinate repairs and rectify the unsafe conditions, according to Smoot and the city.

Smoot purchased the Velvet Cloak and two parking lots, one adjacent to and one across from the hotel, in 2004 for about $3.2 million. The hotel, which was built in 1963 by Raleigh developer J.W. York, has been a popular venue for political events, weddings and lodging for people visiting NCSU two blocks away.

A number of celebrities have also stayed at the Velvet Cloak over the years, including Bob Dylan.

Smoot refurbished the hotel and began trying to sell half of the inn's 170 rooms as condominiums, the Velvet Cloak Villas. The condos were to be interspersed among the hotel units and owners would be able to lease them back to the hotel when they were not being used.

At least 39 of the villas have been sold, according to property records.

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