River North and Schaumburg hotels face foreclosure lawsuits
In Schaumburg, a Chicago-based Arbor Lodging Partners and Northbrook-based Middleton Partners company faces a foreclosure lawsuit over a $ 38.7 million loan it took out to fund its 2018 acquisition of the 398-room Marriott Schaumburg, according to records.
The disputes are among a growing number of foreclosure complaints against hotel owners who have been starving for nearly a year as the pandemic stifles demand for travel.
Some banks have retained on taking action to seize hotel properties, hoping that demand will rebound dramatically with the distribution of vaccines and others simply having no interest in taking control of a bleeding property. But the distress has become too great in some cases, especially for hotels that did not thrive before COVID and those where debt on the property was bundled with other loans and sold to investors in commercial mortgage-backed securities. . These CMBS loans involve multiple loans tied together and sold to bondholders, making them much more difficult to restructure than a loan with a single lender.
At the 225-room Felix Hotel, a joint venture comprising Chicago-based developers Oxford Capital Group and Gettys Group defaulted on a $ 47 million loan after failing to make its loan repayments on the River North property since May, according to a foreclosure complaint filed in December. in Cook County Circuit Court and Bloomberg data related to the CMBS mortgage.
Like many downtown hotels, the property’s value has been crushed by the pandemic: it was valued in July at just $ 23.5 million, up from $ 68.6 million when the owners took out the loan. in 2013. This refinancing allowed the owners to withdraw part of their equity. , but COVID has decimated the hotel’s appraised value to just half of what they owe now.
A Cook County judge appointed Matt Tarshis, director of Chicago-based Frontline Real Estate Partners, as receiver in late January to maintain the property, which remains closed during the pandemic.
Tarshis was also appointed receiver of the Holiday Inn Express, formerly Hotel Cass, at 640 N. Wabash Ave., where a separate joint venture comprising Oxford and Gettys was the subject of a complaint for seizure in December of a CMBS loan from $ 23.5 million. Homeowners stopped repaying their loans in May, according to a Bloomberg report.
The 174-room hotel saw a similar drop in estimated value to just $ 12.4 million in July, from $ 36.3 million when the owners took out the loan in 2013, according to Bloomberg. The property was in trouble before the pandemic, with just over $ 1.2 million in free cash flow in 2019, less than annual debt service of almost $ 1.6 million, according to data from Bloomberg.
A spokesperson for the owners of the hotels could not be reached. But a source familiar with property finances said the hotels had signed contracts with the city of Chicago to help house essential workers during the pandemic – similar to those struck at other Oxford hotels last year. – but that the special service LNR Partners rejected the offers. A spokesperson for the NRL could not be reached.
In Schaumburg, a firm of New York lender Ladder Capital requested the foreclosure of the owners of the Marriott Schaumburg after they failed to make the January debt service payment, according to the complaint.
The complaint came three years after the Arbor-White Lodging company bought the property at 50 N. Martingale Road in the northwest suburbs for $ 35.5 million – the biggest deal for a single hotel in Schaumburg in over a decade – and completed a $ 22 million renovation. of the 13-story building at the end of 2019.
A Cook County judge appointed Jeffrey Kolessar of Philadelphia-based GF Hotels & Resorts as the receiver of the property. An Arbor spokesperson could not be reached.
The expanding pool of local hotel foreclosure combinations also includes the 269 rooms Hilton orrington hotel in Evanston, where its New York-based owner plans to move away from the property after defaulting on his $ 40 million property-related loan, according to court records and a Bloomberg report.
Other reports related to CMBS loans indicate more possible foreclosure actions.
At the 523-room Residence Inn / SpringHill Suites in River North, a joint venture between Chicago-based Friedman Properties and Merrillville, Ind. White Lodging stopped paying the 120 CMBS loan. million dollars in property at the start of the pandemic, according to Bloomberg data. show. Special Midland Loan Services is negotiating a possible loan modification while also pursuing a “parallel path” to foreclosure, according to a Bloomberg report.
At the 403-room W Hotel in the Loop, the Tysons, Va.-Based owner Park Hotels & Resorts stopped paying monthly debt in January on a $ 76 million CMBS loan tied to the property, revealed the company last month in an annual report.
It’s unclear what changed that prompted the REIT to stop mortgage payments after making them throughout 2020, although CEO Thomas Baltimore told analysts on a conference call last week. that “the problem with this asset is really unique” and that the company stopped paying the loan to start loan modification discussions with the LNR Partners special service. The loan is due to mature in August 2023, according to Bloomberg data related to the mortgage.
Nonetheless, Park revealed in his annual report that while he “hopes to negotiate an amendment with the lender, there is no guarantee that such a deal will be made.”
The W suspended operations and reported a net cash loss of nearly $ 6.3 million in 2020, according to Bloomberg data. The hotel generated $ 6.6 million in positive free cash flow in 2019, although that number was 40% lower than the property’s net cash flow five years earlier, according to Bloomberg.