One of Chicago’s Largest Hotels Heads for Ownership Change After Foreclosure Judgment
Chicago’s second-largest hotel may have a new owner after its lender received a foreclosure judgment for defaulting on more than $333 million early in the pandemic, one of the biggest examples of distress in the American hospitality industry during the health crisis.
A Cook County judge last week issued the order against longtime New York-based Palmer House Hilton hotel owner Thor Equities, according to a court document.
The judgment in favor of Wells Fargo Bank is a key moment in the case, which has been one of the largest foreclosure lawsuits involving hotels nationwide during the pandemic and one of the largest defaults in payment for a Chicago property for years.
It sets up a potential sale of the 1,641-room hotel in the Loop business district at a time when downtown Chicago hotels are rebounding — but a few years before they fully recover from the storms. effects of the pandemic. The only hotel in town with more rooms is the 2,032-room Hyatt Regency Chicago.
Wells Fargo, the trustee of the investors in a commercial mortgage-backed securities loan on the sprawling hotel at 17 E. Monroe St., isn’t saying what’s next.
Wells Fargo could make a credit offer on the property as part of a sheriff’s foreclosure sale, which would allow the bank to foreclose on the property and then put it on the market for sale, the proceeds of which would be used to pay – or partially to pay – the investors in the securitized debt.
That appears to be the plan, according to a CoStar loan report, which says Wells Fargo is expected to take control of the hotel in July and sell it in August.
A spokeswoman for Wells Fargo and one of the bank’s lawyers, David Neff of Perkins Coie, declined to comment on the judgment. A spokeswoman for Thor declined to comment on the Palmer House foreclosure lawsuit.
Business travel and group demand began to show a strong recovery in April after two years of poor performance, according to a CoStar report on the Chicago hotel market. These travel segments remain well below pre-pandemic levels, but revenue per available room — a key industry metric — is expected to rise nearly 50% from 2021, the report said.
Chicago isn’t expected to return to pre-COVID revenue levels per available room until 2024, and that recovery is “highly dependent on the full return of groups and business travelers,” according to the CoStar analysis.
Thor has owned the hotel since 2005, and over the years he explored potential sales on several occasions before running into loan problems a few months into the pandemic.
Thor also has a $94 million loan on the hotel, the value of which is likely wiped out, and a $62 million loan for a retail and parking portion of the building, which Thor also does. facing foreclosure, according to Crain’s Chicago Business, which previously reported the foreclosure judgment.
The hotel was valued at $328 million in March, down from its estimated value of $560 million when Thor refinanced the Palmer House in 2018, according to loan reports.
Wells Fargo filed a foreclosure lawsuit for nearly $338 million in August 2020, an amount that also included late fees and other costs.
The suit alleged that Thor stopped making monthly loan payments in April 2020, just after COVID-19 began. The loan matured in June 2020, giving Thor little chance of replacing the CMBS loan with new debt, as the US hospitality industry was generating little revenue when much of the economy was shut down.
In another Loop foreclosure lawsuit involving Wells Fargo as a lender, the bank last week took possession of the JW Marriott Chicago hotel with a bid of around $251 million, after former owner Estein USA defaulted on its loan on the 610-room hotel in Chicago.
Thor is a longtime investor in Chicago-area real estate, including several investments in the Fulton Market neighborhood. Among these is an office building at 800 W. Fulton where Deere & Co., based in Moline, Ill., plans to open its first office in Chicago, with the intention of hiring 300 technicians.
The New York firm is also accelerating its first industrial development in the Midwest northwest of Chicago, in Schaumburg, Illinois.